CIC - Insurance Company Operations
Test Questions And Answers
Three types of Insurance Company and Management Stuctures - Answer - 1. Stock Insurance Company
2. Mutual Insurance Company
3. Reciprocal
Stock Insurance Company - Answer - an incorporated insurance company owned by STOCKHOLDERS
the stockholders elect the corporation's board of directors
stockholders may or may not be policy holders
What is the objective of a Stock Insurance Company? - Answer - To make a profit for its stockholders
Profits may be shared by forms of stock dividends or increase in stock value
Characteristics of a Stock Insurance Company - Answer - 1. Capitalization
2. Reach is greater with regard to brand
3. Primary responsibility is to stockholders not policy holders
4. Pressure on top line growth at the expense of profit
Mutual Insurance Company - Answer - incorporated insurance company OWNED by its POLICYHOLDERS
Board of Directors is voted on by the policy holders
What is the objective of a Mutual Insurance Company? - Answer - to provide insurance at or near the
actual cost of doing business
,if there is money left over in the form of profits it may be returned to policy holders as a dividend or
used to reduce future premiums
Characteristics of a Mutual Insurance Company - Answer - 1. No Stockholders
2. Stable
3. Longevity in the market
4. Less pressure on the day-to-day results
Reciprocal - Answer - is a group of individuals or organizations called subscribers who join together into
an association for the purpose of insuring one another
What is the objective of a Reciprocal? - Answer - Subscribers insure one another in an insurance
application of "one for all, and all for one"
Characteristics of a Reciprocal - Answer - 1. Insureds are also the insurers
2. Specific to a niche or a single line of business
3. Less profit less pressure
4. May be more difficult to raise capital
Purpose of Establishing the Board of Directors - Answer - to make certain the investors and/or owners
interests are protected
What are the three Primary Obligations of Board Members? - Answer - 1. Duty of Care - being prudent
and using due diligence (focusing on the facts)
2. Duty of Loyalty - keeping the interests of the company ahead of one's own interest
3. Duty of Obedience - Following by laws, state purpose of company, laws (may include disclosure of
conflict of interest, as required)
Company Culture - Answer - is the distinctive ethos of the organization - its the companies "personality"
, Values Statement - Answer - Commonly held values that define the company's culture and beliefs
Mission Statement - Answer - Short statment of the company's core and overall goal - why does the
company do what it does
The mission statement does: - Answer - 1. Identifies the goal of its operations
2. Communicates purpose and direction to employees, customers, etc.
Two types of Company Culture - Answer - 1. Active Approach - leadership makes it happen - intentional
actions, clearly defined values
2. Passive Approach - happens overtime by employees observing behavior and values, based on the
behavior of management which doesn't always reflect written values
Types of Human Resources Considerations - Answer - 1. Insurance Company Employees
2. Vendors or Third-Party Agreements
3. Blend of Emloypees and Third-Party Agreements
Insurance Company Employees - Answer - - Offers the greatest degree of control with employee status
-Highest fixed cost for salaries and benefits
They key consideration for human resources is - Answer - the trade off of the degree of control VS costs
to hire talented employees
Vendors or Third-Party Agreements - Answer - -Functions Performed
-Economically, the most efficient way when starting an insurance company or adding lines of business
, -Difficult to control the operating philosophy if the insurance company is only one of the several
insurance companies being served
Blend of Employees and Third-Party Agreements - Answer - - Can create greater flexibility in utilizing
existing insurance company expertise and "hiring" where lacking skills
-If multiple third-party agreements are used, the task of managing their activities become more complex
-Some of the duties normally performed by employees may be performed by a MGA
Effective communication is a dialogue - Answer - not a monologue
Internal Communication is - Answer - communication among members of the same organization
External Communication - Answer - communication between the organization and other organizations
or individuals
Internal communication - Answer - - strategic mgmt of information flows to ensure the optimal level of
engagement by all employees
-Communications from mgmt to employees, employees to mgmt, and employees to employees are
harnessed as a means of delivering messages, listening to concerns and motivating employees
-it reinforces the company's mission, vision, values, and culture among employees
One of the 1st considerations an executive team contemplates before its able to begin to look at lines of
business or locations is - Answer - the type and level of risk they are willing to assume including:
-company history
-long-term objectives
-growth mode or stage in growth cycle
Test Questions And Answers
Three types of Insurance Company and Management Stuctures - Answer - 1. Stock Insurance Company
2. Mutual Insurance Company
3. Reciprocal
Stock Insurance Company - Answer - an incorporated insurance company owned by STOCKHOLDERS
the stockholders elect the corporation's board of directors
stockholders may or may not be policy holders
What is the objective of a Stock Insurance Company? - Answer - To make a profit for its stockholders
Profits may be shared by forms of stock dividends or increase in stock value
Characteristics of a Stock Insurance Company - Answer - 1. Capitalization
2. Reach is greater with regard to brand
3. Primary responsibility is to stockholders not policy holders
4. Pressure on top line growth at the expense of profit
Mutual Insurance Company - Answer - incorporated insurance company OWNED by its POLICYHOLDERS
Board of Directors is voted on by the policy holders
What is the objective of a Mutual Insurance Company? - Answer - to provide insurance at or near the
actual cost of doing business
,if there is money left over in the form of profits it may be returned to policy holders as a dividend or
used to reduce future premiums
Characteristics of a Mutual Insurance Company - Answer - 1. No Stockholders
2. Stable
3. Longevity in the market
4. Less pressure on the day-to-day results
Reciprocal - Answer - is a group of individuals or organizations called subscribers who join together into
an association for the purpose of insuring one another
What is the objective of a Reciprocal? - Answer - Subscribers insure one another in an insurance
application of "one for all, and all for one"
Characteristics of a Reciprocal - Answer - 1. Insureds are also the insurers
2. Specific to a niche or a single line of business
3. Less profit less pressure
4. May be more difficult to raise capital
Purpose of Establishing the Board of Directors - Answer - to make certain the investors and/or owners
interests are protected
What are the three Primary Obligations of Board Members? - Answer - 1. Duty of Care - being prudent
and using due diligence (focusing on the facts)
2. Duty of Loyalty - keeping the interests of the company ahead of one's own interest
3. Duty of Obedience - Following by laws, state purpose of company, laws (may include disclosure of
conflict of interest, as required)
Company Culture - Answer - is the distinctive ethos of the organization - its the companies "personality"
, Values Statement - Answer - Commonly held values that define the company's culture and beliefs
Mission Statement - Answer - Short statment of the company's core and overall goal - why does the
company do what it does
The mission statement does: - Answer - 1. Identifies the goal of its operations
2. Communicates purpose and direction to employees, customers, etc.
Two types of Company Culture - Answer - 1. Active Approach - leadership makes it happen - intentional
actions, clearly defined values
2. Passive Approach - happens overtime by employees observing behavior and values, based on the
behavior of management which doesn't always reflect written values
Types of Human Resources Considerations - Answer - 1. Insurance Company Employees
2. Vendors or Third-Party Agreements
3. Blend of Emloypees and Third-Party Agreements
Insurance Company Employees - Answer - - Offers the greatest degree of control with employee status
-Highest fixed cost for salaries and benefits
They key consideration for human resources is - Answer - the trade off of the degree of control VS costs
to hire talented employees
Vendors or Third-Party Agreements - Answer - -Functions Performed
-Economically, the most efficient way when starting an insurance company or adding lines of business
, -Difficult to control the operating philosophy if the insurance company is only one of the several
insurance companies being served
Blend of Employees and Third-Party Agreements - Answer - - Can create greater flexibility in utilizing
existing insurance company expertise and "hiring" where lacking skills
-If multiple third-party agreements are used, the task of managing their activities become more complex
-Some of the duties normally performed by employees may be performed by a MGA
Effective communication is a dialogue - Answer - not a monologue
Internal Communication is - Answer - communication among members of the same organization
External Communication - Answer - communication between the organization and other organizations
or individuals
Internal communication - Answer - - strategic mgmt of information flows to ensure the optimal level of
engagement by all employees
-Communications from mgmt to employees, employees to mgmt, and employees to employees are
harnessed as a means of delivering messages, listening to concerns and motivating employees
-it reinforces the company's mission, vision, values, and culture among employees
One of the 1st considerations an executive team contemplates before its able to begin to look at lines of
business or locations is - Answer - the type and level of risk they are willing to assume including:
-company history
-long-term objectives
-growth mode or stage in growth cycle
