C16 Business of Insurance -
Practice Exam Questions & Correct
Answers
pages 3-3 and 3-13. the economic theory of supply and demand proposes that more resources
will be allocated to a product that increases revenue. The law of supply provides that the higher
the price, then more will be supplied. the law of demand provides that, with all other factors
equal, less will be demanded as the price rises.
For the insurance market, supply is represented by the capacity of the market, or the willingness
of insurers to insure risks. The demand is represented by consumers' need for insurance
coverage. In most cases consumers have some flexibility about the level of insurance they
purchase, but they generally do not have the freedom to choose not to purchase it. this is the
case for automobile insurance, which is mandated by law, and as a result demand remains fairly
constant.
In addition, since auto insurance rate and availability are regulated, supply tends to fluctuate
less, even when prices ar - correct answer ✔✔Explain the economic laws of Supply and
Demand, and explain why these laws do not strictly apply to automobile insurance.
1.Product or service overview: what will be the features, pricing structure, distribution strategy,
positioning, promotions and advertising that will be used to attract customers. the products
need to be responsive to consumer needs. Perhaps the insurer will offer complementary
services and products.
2. A marketing plan must include tracking and evaluating results. this can be done in various
ways, including a tracking number or code, a promotion code, a survey to evaluate customer
satisfaction, evaluation of complaints.
3. Budget and resources description. All marketing budgets are limited, and need someone to
be held accountable for it. - correct answer ✔✔Your employer, Reliable Insurance Brokers, has
asked you to prepare a Marketing Plan. Identify and describe two of the key components you
will include in your plan.
, The investment markets have a significant impact on insurance companies because they hold a
significant amount of capital investments, and rely on investment returns to augment
underwriting profits. The investment markets generally are in a bull market when there is a soft
insurance market. this is because an insurer can afford to compete more on premiums because
they know they will make it up on strong investment returns, and when investment returns
wane, an insurer takes steps to increase its underwriting profit by increasing prices and
tightening up policy terms and requirements, such as loss control.
Also, in economic downturns, insurance purchasers tend to be more cautious of their assets,
and rely more on insurance. - correct answer ✔✔Discuss the impact of the stock market on the
insurance industry.
The Insurance Acts of Canada and the provinces and territories require insurer boards of
directors to include two committees:
1. Audit committee, which is responsible to improve the companies financial reporting process.
2. Conduct Review committee, which is mainly responsible to handle conflict of interest issues,
and prevent self-dealing. - correct answer ✔✔Identify and define the functions of the two
board of director committees mandated by law for all Canadian insurers.
Ultimately an insurer organizes itself in the way that allows it to operate as efficiently as
possible in producing profits, and is dependent on a number of factors:
1. how power and control are distributed
2. how well systems are integrated between departments and others
3. how communication works
4. how well services are coordinated
5. the size of the company - correct answer ✔✔List the main factors that influence how an
insurance company organizes itself.
page 4-23. Outstanding claims reserve or claims liabilities, is an entry on an insurer's balance
sheet and represents the gross claims reserves necessary to settle all claims due to claimants. It
includes reserve estimates from:
Practice Exam Questions & Correct
Answers
pages 3-3 and 3-13. the economic theory of supply and demand proposes that more resources
will be allocated to a product that increases revenue. The law of supply provides that the higher
the price, then more will be supplied. the law of demand provides that, with all other factors
equal, less will be demanded as the price rises.
For the insurance market, supply is represented by the capacity of the market, or the willingness
of insurers to insure risks. The demand is represented by consumers' need for insurance
coverage. In most cases consumers have some flexibility about the level of insurance they
purchase, but they generally do not have the freedom to choose not to purchase it. this is the
case for automobile insurance, which is mandated by law, and as a result demand remains fairly
constant.
In addition, since auto insurance rate and availability are regulated, supply tends to fluctuate
less, even when prices ar - correct answer ✔✔Explain the economic laws of Supply and
Demand, and explain why these laws do not strictly apply to automobile insurance.
1.Product or service overview: what will be the features, pricing structure, distribution strategy,
positioning, promotions and advertising that will be used to attract customers. the products
need to be responsive to consumer needs. Perhaps the insurer will offer complementary
services and products.
2. A marketing plan must include tracking and evaluating results. this can be done in various
ways, including a tracking number or code, a promotion code, a survey to evaluate customer
satisfaction, evaluation of complaints.
3. Budget and resources description. All marketing budgets are limited, and need someone to
be held accountable for it. - correct answer ✔✔Your employer, Reliable Insurance Brokers, has
asked you to prepare a Marketing Plan. Identify and describe two of the key components you
will include in your plan.
, The investment markets have a significant impact on insurance companies because they hold a
significant amount of capital investments, and rely on investment returns to augment
underwriting profits. The investment markets generally are in a bull market when there is a soft
insurance market. this is because an insurer can afford to compete more on premiums because
they know they will make it up on strong investment returns, and when investment returns
wane, an insurer takes steps to increase its underwriting profit by increasing prices and
tightening up policy terms and requirements, such as loss control.
Also, in economic downturns, insurance purchasers tend to be more cautious of their assets,
and rely more on insurance. - correct answer ✔✔Discuss the impact of the stock market on the
insurance industry.
The Insurance Acts of Canada and the provinces and territories require insurer boards of
directors to include two committees:
1. Audit committee, which is responsible to improve the companies financial reporting process.
2. Conduct Review committee, which is mainly responsible to handle conflict of interest issues,
and prevent self-dealing. - correct answer ✔✔Identify and define the functions of the two
board of director committees mandated by law for all Canadian insurers.
Ultimately an insurer organizes itself in the way that allows it to operate as efficiently as
possible in producing profits, and is dependent on a number of factors:
1. how power and control are distributed
2. how well systems are integrated between departments and others
3. how communication works
4. how well services are coordinated
5. the size of the company - correct answer ✔✔List the main factors that influence how an
insurance company organizes itself.
page 4-23. Outstanding claims reserve or claims liabilities, is an entry on an insurer's balance
sheet and represents the gross claims reserves necessary to settle all claims due to claimants. It
includes reserve estimates from:
