CIC - INSURANCE COMPANY
OPERATIONS EXAM QUESTIONS WITH
CORRECT ANSWERS
The more centralized an organization - Answer-the higher the risk of bureaucracy and
silos, which can lead to no change and stagnation
Five points to whether a company should be single state vs multiple states: - Answer-1.
Influences - saturated markets, state environments
2. Success in one state does not guarantee success in another state
3. Balancing spread of risk vs expanding beyond core competencies
4. Accounting Pressure
5. The wider the geographic area, the more diverse the skill set required
The 5 distribution methods of insurance - Answer-1. Independent Agency System
2. Exclusive Agents
3. Insurance Company Employees/Direct Marketing
4. Online Distribution
5. Hybrid or Conversion
Independent Agency System - Answer-Characteristics:
*represents multiple companies
*Effective when entering into a new territory and expanding within an existing territory
Challenges:
*Competition with multiple insurance companies
*May create additional costs
Exclusive Agents - Answer-Characteristics:
*Represents one company
*No competition with other insurance companies - no others represented
*Requires broad enough offering of products and competitive pricing
Insurance Company Employees/Direct Marketing - Answer-Characteristics:
*Requires a product with broad appeal or preselecting customers
*marketing efforts are focused on those customers
Challenges:
,*Initially can be an expensive channel of distribution, as many costs are fixed - salaries,
advertising, etc.
*Significant time must be spent in property screening prospects
Online Distribution - Answer-Characteristics:
*Excellent at generating price quotes in personal lines but less successful at finishing
the sale
*Excellent for pricing, researching products, and learning about insurance
Challenges:
*Customers may be uncomfortable purchasing insurance online
*Some customers would prefer to close the sale via telephone, or face-to-face
Hybrid or Conversion - Answer-Characteristics:
*Multiple distribution channels
If you are a growing company, in regards to technology you should consider a - Answer-
vendor system with rights/abilities to make future modifications using own personnel to
management system
If you are a start-up company, in regards to technology you should consider a - Answer-
build your own proprietary system
Off the shelf platforms from a vender - Answer-have minimal modifications that have
little flexibility
Insurtech's purpose is to - Answer-design programs that will increase operational
efficiency, collect and analyze real time data, evaluate risk, improve distribution,
implement digital marketing, and connect with loT devices.
InsurTech is best described as - Answer-a start-up business that designs and develops
innovative insurance technology platforms
Compliance - Answer-Insurance company is meeting the regulatory/statutory
requirements that exist in the territories where the company does business
Control - Answer-makes certain the insurance company in every way is following its
own internal policies, practices and procedures
Internal Compliance Audits - Answer-mirror the examinations conducted by regulators
and ensure the insurance company is following its own defined practices and procedure
-Usually conducted by and independent body that audits and reports on how the
company is functioning relative to statutory, regulatory, and internally establish
requirements
, Financial Survey Examination - Answer-Conducted by the state in which the insurance
company resides and ensures the insurance company's financial position is sound and
accurate
Market conduct Examination - Answer-Examination is conducted by each state in which
the insurance company operates and ensures the insurance company's service,
underwriting and claim departments are following the appropriator state's statues and
regulations
Written Premium - Answer-total premium on all policies written by the insurance
company during a specified period of time, regardless of the portions earned
Earned premium - Answer-amount of the premium that has been "used up" during the
term of a policy; for example, if a one- year policy has been in effect six months, half of
the total premium has been earned
Unearned premium - Answer-Amount of premium remaining after deducting the earned
premium from written premium; the portion of a premium representing the unexpired
part of the policy
Paid Losses - Answer-amount actually paid in losses during a specified period of time,
not including estimates of amounts (i.e. reserves) that will be paid in the future for
losses occurring in the specified period
Case Reserve (Claim Reserve) - Answer-amount the claims adjuster or claims
department places on an individual claim that has not yet been paid, no provision for
IBNR reserves
Incurred But Not Reported (IBNR) - Answer-represents the liability for unpaid claims not
reflected in the case reserve estimates for individual losses
*estimated by actuaries on a given risk
The two components of IBNR reserves are: - Answer-1. Pure IBNR
2. Borad or Bulk IBNR
Pure IBNR - Answer-Claims that have occurred but not reported as of the evaluation
date; since the claim has not been reported there is no basis for establishing a reserve
based up
on the specific characteristics of the claim
*claims that have happened but have not been reported to the insurance company
*not all losses that have occurred have been reported
OPERATIONS EXAM QUESTIONS WITH
CORRECT ANSWERS
The more centralized an organization - Answer-the higher the risk of bureaucracy and
silos, which can lead to no change and stagnation
Five points to whether a company should be single state vs multiple states: - Answer-1.
Influences - saturated markets, state environments
2. Success in one state does not guarantee success in another state
3. Balancing spread of risk vs expanding beyond core competencies
4. Accounting Pressure
5. The wider the geographic area, the more diverse the skill set required
The 5 distribution methods of insurance - Answer-1. Independent Agency System
2. Exclusive Agents
3. Insurance Company Employees/Direct Marketing
4. Online Distribution
5. Hybrid or Conversion
Independent Agency System - Answer-Characteristics:
*represents multiple companies
*Effective when entering into a new territory and expanding within an existing territory
Challenges:
*Competition with multiple insurance companies
*May create additional costs
Exclusive Agents - Answer-Characteristics:
*Represents one company
*No competition with other insurance companies - no others represented
*Requires broad enough offering of products and competitive pricing
Insurance Company Employees/Direct Marketing - Answer-Characteristics:
*Requires a product with broad appeal or preselecting customers
*marketing efforts are focused on those customers
Challenges:
,*Initially can be an expensive channel of distribution, as many costs are fixed - salaries,
advertising, etc.
*Significant time must be spent in property screening prospects
Online Distribution - Answer-Characteristics:
*Excellent at generating price quotes in personal lines but less successful at finishing
the sale
*Excellent for pricing, researching products, and learning about insurance
Challenges:
*Customers may be uncomfortable purchasing insurance online
*Some customers would prefer to close the sale via telephone, or face-to-face
Hybrid or Conversion - Answer-Characteristics:
*Multiple distribution channels
If you are a growing company, in regards to technology you should consider a - Answer-
vendor system with rights/abilities to make future modifications using own personnel to
management system
If you are a start-up company, in regards to technology you should consider a - Answer-
build your own proprietary system
Off the shelf platforms from a vender - Answer-have minimal modifications that have
little flexibility
Insurtech's purpose is to - Answer-design programs that will increase operational
efficiency, collect and analyze real time data, evaluate risk, improve distribution,
implement digital marketing, and connect with loT devices.
InsurTech is best described as - Answer-a start-up business that designs and develops
innovative insurance technology platforms
Compliance - Answer-Insurance company is meeting the regulatory/statutory
requirements that exist in the territories where the company does business
Control - Answer-makes certain the insurance company in every way is following its
own internal policies, practices and procedures
Internal Compliance Audits - Answer-mirror the examinations conducted by regulators
and ensure the insurance company is following its own defined practices and procedure
-Usually conducted by and independent body that audits and reports on how the
company is functioning relative to statutory, regulatory, and internally establish
requirements
, Financial Survey Examination - Answer-Conducted by the state in which the insurance
company resides and ensures the insurance company's financial position is sound and
accurate
Market conduct Examination - Answer-Examination is conducted by each state in which
the insurance company operates and ensures the insurance company's service,
underwriting and claim departments are following the appropriator state's statues and
regulations
Written Premium - Answer-total premium on all policies written by the insurance
company during a specified period of time, regardless of the portions earned
Earned premium - Answer-amount of the premium that has been "used up" during the
term of a policy; for example, if a one- year policy has been in effect six months, half of
the total premium has been earned
Unearned premium - Answer-Amount of premium remaining after deducting the earned
premium from written premium; the portion of a premium representing the unexpired
part of the policy
Paid Losses - Answer-amount actually paid in losses during a specified period of time,
not including estimates of amounts (i.e. reserves) that will be paid in the future for
losses occurring in the specified period
Case Reserve (Claim Reserve) - Answer-amount the claims adjuster or claims
department places on an individual claim that has not yet been paid, no provision for
IBNR reserves
Incurred But Not Reported (IBNR) - Answer-represents the liability for unpaid claims not
reflected in the case reserve estimates for individual losses
*estimated by actuaries on a given risk
The two components of IBNR reserves are: - Answer-1. Pure IBNR
2. Borad or Bulk IBNR
Pure IBNR - Answer-Claims that have occurred but not reported as of the evaluation
date; since the claim has not been reported there is no basis for establishing a reserve
based up
on the specific characteristics of the claim
*claims that have happened but have not been reported to the insurance company
*not all losses that have occurred have been reported
