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C16 Business of Insurance Practice Exam ||Verified
Exam!!!|| Most Recent Exam Actual Complete Real
Exam Questions And Correct Answers (Verified
Answers) Already Graded A+ || Newest Exam!!!
Discuss the impact of the stock market on the insurance
industry. - Answer-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.
Identify and define the functions of the two board of
director committees mandated by law for all Canadian
insurers. - Answer-The Insurance Acts of Canada and the
,2|Page
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.
List the main factors that influence how an insurance
company organizes itself. - Answer-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
List and explain the three elements an insurance company
considers when evaluating its overall outstanding claims
reserve. - Answer-page 4-23. Outstanding claims reserve
, 3|Page
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:
1. case reserves--all reserves for loss and claims
expenses as posted and estimated by the claims
department
2. Incurred but not reported--IBNR, which is calculated by
actuaries, and represents an estimate of claims that have
occurred, but have not yet been reported. it also includes
provisions for PfAD, which is provision for adverse
deviation, which is where case reserves are insufficient to
settle the loss.
3. Bulk claims expense reserve estimated by actuaries for
unallocated claims expenses, such as the internal cost to
manage and settle all claims the company has that have
not yet been settled.
Define market segmentation and explain how it is used in
an insurance context. - Answer-Market segmentation is
the division of a market into segments which are
subgroups of customers with similar needs,
circumstances, and traits. This allows for concentrated
marketing efforts.
The insurance industry uses segmentation by:
C16 Business of Insurance Practice Exam ||Verified
Exam!!!|| Most Recent Exam Actual Complete Real
Exam Questions And Correct Answers (Verified
Answers) Already Graded A+ || Newest Exam!!!
Discuss the impact of the stock market on the insurance
industry. - Answer-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.
Identify and define the functions of the two board of
director committees mandated by law for all Canadian
insurers. - Answer-The Insurance Acts of Canada and the
,2|Page
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.
List the main factors that influence how an insurance
company organizes itself. - Answer-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
List and explain the three elements an insurance company
considers when evaluating its overall outstanding claims
reserve. - Answer-page 4-23. Outstanding claims reserve
, 3|Page
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:
1. case reserves--all reserves for loss and claims
expenses as posted and estimated by the claims
department
2. Incurred but not reported--IBNR, which is calculated by
actuaries, and represents an estimate of claims that have
occurred, but have not yet been reported. it also includes
provisions for PfAD, which is provision for adverse
deviation, which is where case reserves are insufficient to
settle the loss.
3. Bulk claims expense reserve estimated by actuaries for
unallocated claims expenses, such as the internal cost to
manage and settle all claims the company has that have
not yet been settled.
Define market segmentation and explain how it is used in
an insurance context. - Answer-Market segmentation is
the division of a market into segments which are
subgroups of customers with similar needs,
circumstances, and traits. This allows for concentrated
marketing efforts.
The insurance industry uses segmentation by:
