CISR AGENCY OPERATIONS ACTUAL
PRACTICE Q&A LATEST EXAM GRADED A+
Describe actual authority -- ANSWER--when the agency is expressly given the
authority in the agency contract
Describe the standard of care an insurance agency owes to an insurance
company -- ANSWER--loyalty
good faith reasonable care contractual duty
Describe a contract -- ANSWER--Oral or written agreements between two
parties that creates an obligation to do or not do a particular thing
Which source of revenue is typically the largest source of income for an
insurance agency? --
ANSWER--Commission
What does a large number of locations mean for how an agency operates? --
ANSWER--It may mean some features of the agency are centralized
List the four major classes of exposure to loss -- ANSWER--Property
Human Resources
Page 1 of 75
,Liability
Net Income
What are the methods of identifying loss exposures? -- ANSWER--Interview
Checklist
Physical inspection
Activity analysis
Document review
Advertising/website
Flow charts
Loss history
Financial statements
Why is insurance regulated? -- ANSWER--To protect the consumer
Lloyd's of London -- ANSWER--Not an insurance company, but rather a market
where Lloyd's members are grouped together to insure risks. Typically accessed
through an excess broker
Guarantee Fund -- ANSWER--The pool of funds that standard insurer's
contribute to in the instance that they or another standard carrier become
insolvent
Page 2 of 75
,Excess and Surplus Lines -- ANSWER--A whole sale intermediary that places
business for the benefit of the agent
Insurance Distribution Methods -- ANSWER--Independent: Independent agents
writing with various insurance companies. Independent agency system.
Captive: Captive agents work only for one insurance company. Direct writing.
Describe stock and mutual companies -- ANSWER--Stock: Are owned by stock
holders and operate with the goal to make a profit for stakeholders.
Mutual: Owned by policyholders. Profits are used to reduce policyholder
premiums to at or neat the cost of doing business.
What are the four benefits of ethical behavior? -- ANSWER--To be recognized
as a knowledgeable insurance professional within the community
To gain public trust and confidence
To avoid government regulation
To enhance credibility with customers and companies
What is the risk management process? -- ANSWER--Risk Identification
Risk analysis
Risk control
Risk finance
Risk administration
Page 3 of 75
, Explain the five steps of risk management -- ANSWER--Risk identification:
identify the customers exposure to loss
Risk analysis: determine frequency or severity of the exposure. How much
could a loss actually cost the customer
Risk control: understand what methods can be implemented to eliminate or
reduce cost associated with exposure
Risk finance: fund losses by user either internal or external dollars
Risk administration: Implement and monitor the customers risk management
program
Stakeholders -- ANSWER--People who have the potential to be affected by any
action taken by an organization. Any group or individual who is affected by the
achievements of a firm's objectives
Risk Control Methods -- ANSWER--Avoid: not always practical
Prevent: reduces frequency
Reduce: reduces severity
Segregation: includes separation or duplication
Transfer: can be physical transfer or contractual transfer
What is the difference between a broker and an agent/producer? -- ANSWER--
Brokers do not have binding authority
Page 4 of 75
PRACTICE Q&A LATEST EXAM GRADED A+
Describe actual authority -- ANSWER--when the agency is expressly given the
authority in the agency contract
Describe the standard of care an insurance agency owes to an insurance
company -- ANSWER--loyalty
good faith reasonable care contractual duty
Describe a contract -- ANSWER--Oral or written agreements between two
parties that creates an obligation to do or not do a particular thing
Which source of revenue is typically the largest source of income for an
insurance agency? --
ANSWER--Commission
What does a large number of locations mean for how an agency operates? --
ANSWER--It may mean some features of the agency are centralized
List the four major classes of exposure to loss -- ANSWER--Property
Human Resources
Page 1 of 75
,Liability
Net Income
What are the methods of identifying loss exposures? -- ANSWER--Interview
Checklist
Physical inspection
Activity analysis
Document review
Advertising/website
Flow charts
Loss history
Financial statements
Why is insurance regulated? -- ANSWER--To protect the consumer
Lloyd's of London -- ANSWER--Not an insurance company, but rather a market
where Lloyd's members are grouped together to insure risks. Typically accessed
through an excess broker
Guarantee Fund -- ANSWER--The pool of funds that standard insurer's
contribute to in the instance that they or another standard carrier become
insolvent
Page 2 of 75
,Excess and Surplus Lines -- ANSWER--A whole sale intermediary that places
business for the benefit of the agent
Insurance Distribution Methods -- ANSWER--Independent: Independent agents
writing with various insurance companies. Independent agency system.
Captive: Captive agents work only for one insurance company. Direct writing.
Describe stock and mutual companies -- ANSWER--Stock: Are owned by stock
holders and operate with the goal to make a profit for stakeholders.
Mutual: Owned by policyholders. Profits are used to reduce policyholder
premiums to at or neat the cost of doing business.
What are the four benefits of ethical behavior? -- ANSWER--To be recognized
as a knowledgeable insurance professional within the community
To gain public trust and confidence
To avoid government regulation
To enhance credibility with customers and companies
What is the risk management process? -- ANSWER--Risk Identification
Risk analysis
Risk control
Risk finance
Risk administration
Page 3 of 75
, Explain the five steps of risk management -- ANSWER--Risk identification:
identify the customers exposure to loss
Risk analysis: determine frequency or severity of the exposure. How much
could a loss actually cost the customer
Risk control: understand what methods can be implemented to eliminate or
reduce cost associated with exposure
Risk finance: fund losses by user either internal or external dollars
Risk administration: Implement and monitor the customers risk management
program
Stakeholders -- ANSWER--People who have the potential to be affected by any
action taken by an organization. Any group or individual who is affected by the
achievements of a firm's objectives
Risk Control Methods -- ANSWER--Avoid: not always practical
Prevent: reduces frequency
Reduce: reduces severity
Segregation: includes separation or duplication
Transfer: can be physical transfer or contractual transfer
What is the difference between a broker and an agent/producer? -- ANSWER--
Brokers do not have binding authority
Page 4 of 75
