CAIB 3 Chapter 1 Study Questions with
Answers
Identify any five activities, in addition to planning, that the professional insurance brokerage
will need to capitalize on in order to take advantages of these opportunities. - ✔✔1. Be
innovative
2. Be price competitive
3. Attract and reward ideal employees
4. Market products to appropriate segments
5. Focus on profitability
The key to success and profitability for any insurance brokerage is planning. The best plans
involve a combination of top-down and bottom-up approaches. Briefly explain the top-down
approach. - ✔✔Management decides on the mission, strategies, and objectives for the
brokerage and instructs the individual business units to achieve the established objectives
Identify an advantage of the top-down approach. - ✔✔Management feels firmly in control and
in charge of the decision-making.
Identify a disadvantage of the top-down approach. - ✔✔The lack of buy-in by employees, who
had no part in developing the plan. It is "managements" plan, not theirs.
Briefly explain the bottom-up approach. - ✔✔The management still provides the mission and
broad strategies, but leaves the development of objectives, goals and activities to the individual
business units.
Identify an advantage of the bottom-up approach. - ✔✔The employees will have fully bought-in
to "their" plan.
, Identify a disadvantage of the bottom-up approach. - ✔✔Management may feel that they lack
control, that the planning process is out of their hands and that the employees may not be
accepting of changes made by management if the plan is not what management expected.
Briefly explain why a combination of both approaches is the best approach. - ✔✔The
combination of both approaches, with open communication throughout the process, is the key
to effective and successful planning. The plan should be developed as a joint effort with both
management and the business units participating, with ample dialogue between them at all
stages of the planning process.
Identify the four characteristics of any plan to ensure it is understood and accepted by all
concerned. - ✔✔1. Simplicity
2. Practicality
3. Severability
4. Flexibility
Explain what is meant by the simplicity of a plan. - ✔✔The plan must be kept simple and the
outcome should be capable of being communicated in a simple way. It should also be capable
of being implemented by employees without extensive training while they continue to do their
day-to-day responsibilities.
Explain what is meant by the practicality of a plan. - ✔✔A plan must be realistic in order for it to
work. Even a well constructed plan will be doomed to failure if it is impossible to implement.
Explain what is meant by the severability of a plan. - ✔✔The finished plan is the collection of its
parts. These parts must be separate and identifiable so that each business unit can see how
they apply to their specific area of responsibility to enable them to create goals and activities to
help achieve the plan.
Explain what is meant by the flexibility of a plan. - ✔✔A good plan must allow for modification,
as it is not realistic to assume that the environment in which the brokerage competes will not
change. changing business conditions, loss of key employees, or change to insurance
Answers
Identify any five activities, in addition to planning, that the professional insurance brokerage
will need to capitalize on in order to take advantages of these opportunities. - ✔✔1. Be
innovative
2. Be price competitive
3. Attract and reward ideal employees
4. Market products to appropriate segments
5. Focus on profitability
The key to success and profitability for any insurance brokerage is planning. The best plans
involve a combination of top-down and bottom-up approaches. Briefly explain the top-down
approach. - ✔✔Management decides on the mission, strategies, and objectives for the
brokerage and instructs the individual business units to achieve the established objectives
Identify an advantage of the top-down approach. - ✔✔Management feels firmly in control and
in charge of the decision-making.
Identify a disadvantage of the top-down approach. - ✔✔The lack of buy-in by employees, who
had no part in developing the plan. It is "managements" plan, not theirs.
Briefly explain the bottom-up approach. - ✔✔The management still provides the mission and
broad strategies, but leaves the development of objectives, goals and activities to the individual
business units.
Identify an advantage of the bottom-up approach. - ✔✔The employees will have fully bought-in
to "their" plan.
, Identify a disadvantage of the bottom-up approach. - ✔✔Management may feel that they lack
control, that the planning process is out of their hands and that the employees may not be
accepting of changes made by management if the plan is not what management expected.
Briefly explain why a combination of both approaches is the best approach. - ✔✔The
combination of both approaches, with open communication throughout the process, is the key
to effective and successful planning. The plan should be developed as a joint effort with both
management and the business units participating, with ample dialogue between them at all
stages of the planning process.
Identify the four characteristics of any plan to ensure it is understood and accepted by all
concerned. - ✔✔1. Simplicity
2. Practicality
3. Severability
4. Flexibility
Explain what is meant by the simplicity of a plan. - ✔✔The plan must be kept simple and the
outcome should be capable of being communicated in a simple way. It should also be capable
of being implemented by employees without extensive training while they continue to do their
day-to-day responsibilities.
Explain what is meant by the practicality of a plan. - ✔✔A plan must be realistic in order for it to
work. Even a well constructed plan will be doomed to failure if it is impossible to implement.
Explain what is meant by the severability of a plan. - ✔✔The finished plan is the collection of its
parts. These parts must be separate and identifiable so that each business unit can see how
they apply to their specific area of responsibility to enable them to create goals and activities to
help achieve the plan.
Explain what is meant by the flexibility of a plan. - ✔✔A good plan must allow for modification,
as it is not realistic to assume that the environment in which the brokerage competes will not
change. changing business conditions, loss of key employees, or change to insurance
