CIC INSURANCE COMPANY TEST PAPER 2025/2026 QUESTIONS
AND ANSWERS GUARANTEE A+
✔✔company risk appetite - ✔✔- how much risk they are willing to assume
- may not have the same risk appetite in all lines of business, jurisdictions, geographic
territories
- management controls involves underwriting authority and claims settlement authority
- willingness and ability to purchase reinsurance (catastrophe and non-catastrophe)
- desired objective of premium to surplus, loss ratios, expense ratios, and combined
ratios (regulation, competition, distribution, rating agencies, economic conditions,
reinsurance)
✔✔constraints that affect product decisions - ✔✔internal constraints
- size, expertise, financial resources, branding, technology
external constraints
- regulation, competition, distribution, rating agencies, economic conditions,
reinsurance, distribution methods
✔✔why does a company select a particular geographical location - ✔✔1. primary
influences
- due diligence on market need
- receptivity by agents to new insurance company
- state environments
2. success in one state does not guarantee success in another state
- some may choose to take the challenges of a difficult state
- when able to navigate the challenges successfully the environment of the state may
then serve as a perceived barrier to entry for competitors
3. balancing spread of risk vs expanding beyond core competencies
4. accounting pressures
- cost of expanding
- how will it be done? (planned expansion over time and through acquisition
5. the wider the geographic area, the more diverse the skill set required
- creates the risk of damaging efficiency
- skill set needed to manage (50 states with a 2 million in premium per state vs single
state with 100 million in premium)
✔✔centralized vs decentralized - ✔✔1. The more decentralized an organization, the
higher the risk that actions will not meet expectations across the organization -
compliance risk
,2. The more centralized the organization, the higher the risk of bureaucracy and silos,
which can lead to inertia and stagnation
3. There will be some variation in actions/behaviors from geographic area to geographic
area - necessary to adequately address specific individual market needs
✔✔methods of distributing insurance products - ✔✔1. independent agency system
- good for entering into a new territory, when expanding strategically within an existing
territory
- challenges include competition with multiple insurance companies represented and
may create additional costs
2. exclusive agents
- good for non competition with other insurance companies and requires broad enough
offering of products and competitive pricing for its agents
- challenges include sales force turnover and may occur when rate action is taken that
severely damages the competitive nature of the product
3. insurance company employees/direct marketing
- characteristics include it requires a product with broad appeal or a means of
preselecting customers and a significant time must be spent in properly screening
prospects
- can also be expensive because many costs are fixed
4. online distribution
- characteristics include It is excellent for pricing, researching products, and learning
about the insurance company
- customers may be uncomfortable purchasing insurance in a fully online process
5. hybrid or conversion
- multiple distribution channels
- decision to adopt a new system from management
✔✔selection considerations - ✔✔- off the shall platform from a vendor with minimal
modifications
- vendor system with rights/abilities to make future modifications using own personnel
- build own proprietary system
✔✔how do you determine needs for technology platforms - ✔✔- the insurance company
may want it to be a competitive advantage
- does the insurance company choose to be a leader or a follower?
✔✔what is insurtech - ✔✔- innovative technology start ups that are challenging the
insurance market to create mutual business opportunities, accelerate growth, and
improve efficiency
, ✔✔the best practices used to establish and direct the various functions of an insurance
company - ✔✔1. in some cases, these guidelines reflect statutory/regulatory
requirements
2. in other cases, the guidelines are designed to standardize employee practices for
delivering service
3. Even if a procedure is not related to statutes or formal regulations, failure to follow an
insurance company's guidelines can be used to establish a basis for bad faith claim
handling
4. Internal audits monitor compliance with internal practices and procedures; they also
provide feedback to management on areas that are both in and out of compliance
5. Established process - used to measure adherence to the standards
✔✔different in compliance and control - ✔✔1. Compliance deals with whether the
insurance company is meeting the regulatory/statutory requirements that exist in the
territories where the insurance company does business
2. Control makes certain the insurance company in every way is following its own
internal policies, practices and procedures
✔✔Identify the ways in which technology platforms may be selected and describe the
considerations for each - ✔✔Selection considerations
a. Buy an "off the shelf" platform from a vendor with minimal modifications
1) Least expensive option, quickest to market
2) Least amount of flexibility
3) Dependence on the vendor to make fixes, modifications, upgrades - can get
expensive
b. Buy a vendor system with rights/abilities to make future modifications using own
personnel
1) Lower initial cost with less flexibility
2) Ability to make company specific changes as business grows
3) Higher costs associated with changes are offset by the growing premium volume
4) Vendor system may have limitations that cannot be overcome
c. Build own system
1) Greatest flexibility
2) Highest cost - both initial and ongoing
3) May have significant timeline
AND ANSWERS GUARANTEE A+
✔✔company risk appetite - ✔✔- how much risk they are willing to assume
- may not have the same risk appetite in all lines of business, jurisdictions, geographic
territories
- management controls involves underwriting authority and claims settlement authority
- willingness and ability to purchase reinsurance (catastrophe and non-catastrophe)
- desired objective of premium to surplus, loss ratios, expense ratios, and combined
ratios (regulation, competition, distribution, rating agencies, economic conditions,
reinsurance)
✔✔constraints that affect product decisions - ✔✔internal constraints
- size, expertise, financial resources, branding, technology
external constraints
- regulation, competition, distribution, rating agencies, economic conditions,
reinsurance, distribution methods
✔✔why does a company select a particular geographical location - ✔✔1. primary
influences
- due diligence on market need
- receptivity by agents to new insurance company
- state environments
2. success in one state does not guarantee success in another state
- some may choose to take the challenges of a difficult state
- when able to navigate the challenges successfully the environment of the state may
then serve as a perceived barrier to entry for competitors
3. balancing spread of risk vs expanding beyond core competencies
4. accounting pressures
- cost of expanding
- how will it be done? (planned expansion over time and through acquisition
5. the wider the geographic area, the more diverse the skill set required
- creates the risk of damaging efficiency
- skill set needed to manage (50 states with a 2 million in premium per state vs single
state with 100 million in premium)
✔✔centralized vs decentralized - ✔✔1. The more decentralized an organization, the
higher the risk that actions will not meet expectations across the organization -
compliance risk
,2. The more centralized the organization, the higher the risk of bureaucracy and silos,
which can lead to inertia and stagnation
3. There will be some variation in actions/behaviors from geographic area to geographic
area - necessary to adequately address specific individual market needs
✔✔methods of distributing insurance products - ✔✔1. independent agency system
- good for entering into a new territory, when expanding strategically within an existing
territory
- challenges include competition with multiple insurance companies represented and
may create additional costs
2. exclusive agents
- good for non competition with other insurance companies and requires broad enough
offering of products and competitive pricing for its agents
- challenges include sales force turnover and may occur when rate action is taken that
severely damages the competitive nature of the product
3. insurance company employees/direct marketing
- characteristics include it requires a product with broad appeal or a means of
preselecting customers and a significant time must be spent in properly screening
prospects
- can also be expensive because many costs are fixed
4. online distribution
- characteristics include It is excellent for pricing, researching products, and learning
about the insurance company
- customers may be uncomfortable purchasing insurance in a fully online process
5. hybrid or conversion
- multiple distribution channels
- decision to adopt a new system from management
✔✔selection considerations - ✔✔- off the shall platform from a vendor with minimal
modifications
- vendor system with rights/abilities to make future modifications using own personnel
- build own proprietary system
✔✔how do you determine needs for technology platforms - ✔✔- the insurance company
may want it to be a competitive advantage
- does the insurance company choose to be a leader or a follower?
✔✔what is insurtech - ✔✔- innovative technology start ups that are challenging the
insurance market to create mutual business opportunities, accelerate growth, and
improve efficiency
, ✔✔the best practices used to establish and direct the various functions of an insurance
company - ✔✔1. in some cases, these guidelines reflect statutory/regulatory
requirements
2. in other cases, the guidelines are designed to standardize employee practices for
delivering service
3. Even if a procedure is not related to statutes or formal regulations, failure to follow an
insurance company's guidelines can be used to establish a basis for bad faith claim
handling
4. Internal audits monitor compliance with internal practices and procedures; they also
provide feedback to management on areas that are both in and out of compliance
5. Established process - used to measure adherence to the standards
✔✔different in compliance and control - ✔✔1. Compliance deals with whether the
insurance company is meeting the regulatory/statutory requirements that exist in the
territories where the insurance company does business
2. Control makes certain the insurance company in every way is following its own
internal policies, practices and procedures
✔✔Identify the ways in which technology platforms may be selected and describe the
considerations for each - ✔✔Selection considerations
a. Buy an "off the shelf" platform from a vendor with minimal modifications
1) Least expensive option, quickest to market
2) Least amount of flexibility
3) Dependence on the vendor to make fixes, modifications, upgrades - can get
expensive
b. Buy a vendor system with rights/abilities to make future modifications using own
personnel
1) Lower initial cost with less flexibility
2) Ability to make company specific changes as business grows
3) Higher costs associated with changes are offset by the growing premium volume
4) Vendor system may have limitations that cannot be overcome
c. Build own system
1) Greatest flexibility
2) Highest cost - both initial and ongoing
3) May have significant timeline
