CISR: Agency Operations Exam 100 Questions with Answers,100% CORRECT

CISR: Agency Operations Exam 100 Questions with Answers Types of Stakeholders - CORRECT ANSWER managers and employees customers insurers vendors industry associations government Transfer - CORRECT ANSWER ...

CISR: Agency Operations Exam 100 Questions with Answers Types of Stakeholders - CORRECT ANSWER managers and employees customers insurers vendors industry associations government Transfer - CORRECT ANSWER Insurance: transfer of financial consequence to an insurance company Non Insurance: when a customer transfers financial consequences to another by contract or agreement Retention - CORRECT ANSWER Active: when a customer knows before the loss that they are responsible for all or part of the loss Passive: Whoops! when a client finds out after a loss occurs that they are responsible What is NOT one of the four benefits of ethical behavior? - CORRECT ANSWER Ethical behavior encourages governmental action Describe the standard of care an insurance agency owes to an insurance company - CORRECT ANSWER loyalty good faith reasonable care contractual duty Describe actual authority - CORRECT ANSWER when the agency is expressly given the authority in the agency contract Describe a contract - CORRECT ANSWER Oral or written agreements between two parties that creates an obligation to do or not do a particular thing What are the four benefits of ethical behavior? - CORRECT 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? - CORRECT ANSWER Risk Identification Risk analysis Risk control Risk finance Risk administration Explain the five steps of risk management - CORRECT 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 - CORRECT 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 - CORRECT 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? - CORRECT ANSWER Brokers do not have binding authority How would you best describe an agency stakeholder? - CORRECT ANSWER The primary stakeholders are any group or individual who is affected by the achievement of a firm's objective Which source of revenue is typically the largest source of income for an insurance agency? - CORRECT ANSWER Commission What does a large number of locations mean for how an agency operates? - CORRECT ANSWER It may mean some features of the agency are centralized List the four major classes of exposure to loss - CORRECT ANSWER Property Human Resources Liability Net Income What are the methods of identifying loss exposures? - CORRECT ANSWER Interview Checklist Physical inspection Activity analysis Document review Advertising/website Flow charts Loss history Financial statements Why is insurance regulated? - CORRECT ANSWER To protect the consumer Lloyd's of London - CORRECT 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 - CORRECT ANSWER The pool of funds that standard insurer's contribute to in the instance that they or another standard carrier become insolvent Excess and Surplus Lines - CORRECT ANSWER A whole sale intermediary that places business for the benefit of the agent Insurance Distribution Methods - CORRECT 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 - CORRECT 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. Managing General Agency (MGA) - CORRECT ANSWER may employee excess and surplus line agents to assist in their operation. In addition, they may also have arrangements with standard marker whole sale intermediary who represents on or more insurance companies Describe Reciprocals - CORRECT ANSWER Groups of individuals or organizations called subscribers, who join together in an association to insure one another. Attorney in fact acting as manager carrying out every operations. The subscribers insure one another in an application of "one for all and all for one". Most specialize in one line of insurance. Describe a risk retention group - CORRECT ANSWER An insurance company that each of the policyholders is also a stock holder. The members are businesses with related or similar activities, and the coverage provided is limited to liability insurance formed under federal laws granted under the "federal liability risk retention act of 1986". Still state regulated. Describe captive insurance companies - CORRECT ANSWER Owned and controlled by insureds' typically providing coverage for casualty exposures. Can be a single (parent) or group (group captive) that are homogenous in nature but can also insure. Group captives are formed and licensed by state domiciled in and will use insurance company as a front to their program. Government insurance programs and pools - CORRECT ANSWER Catastrophic in nature Flood insurance is an example Markets sometimes created when certain state or federal laws necessitate the availability of some insurance protection for all. FAIR plan - CORRECT ANSWER Fair access to insurance requirement Wind/hail pools NFIP Workers comp assigned risk Federal crop insurance corp Alternative Markets - CORRECT ANSWER Breakdown; Lloyd's: private underwriters Excess and Surplus Lines: Wholesale intermediaries properly licensed retail agents. MGA. Reciprocals: subscribers Risk retention group: members Captive: parent Government: FAIR plan, wind hail pools, NFIP, workers comp assigned risk, federal crop Reinsurance - CORRECT ANSWER The process of transferring risk from one insurer to another insurer. Sometimes referred to as "the insurance companies insurance company" and includes both treaty and facultative reinsurance Describe Treaty Reinsurance - CORRECT ANSWER The insurance company (ceding company) agrees to transfer (cede) certain classes of business to the reinsurance company. These classes of business are described in the treaty (agreement). The insurance company agrees to cede and the reinsurance company agrees to accept all business qualified as contained in treaty. The reinsurance company, in return, received a premium for the ceding insurance company. Describe facultative reinsurance - CORRECT ANSWER Any exposure that does not qualify for reinsurance by treaty can be offered to the underwriter on an individual basis. It is individually underwritten and individually priced. The reinsurer is not obligated to offer a quote and can decline the submission. Describe the importance of reinsurance to an agency - CORRECT ANSWER Personal Lines: Can be affected by limitations such as liability limits property limits, PC's, etc. The insurance company may be unable to provide coverage because reinsurance is not in place. Reinsurance restrictions may be the reason for the limitation of binding authority. Commercial Lines: Can be affected by both coverage limitations and pricing. If reinsurance is required on a risk that falls outside of the scope of treaty, pricing and coverage availability can be affected. underwriter must include premium charge. How are non-admitted companies accessed? - CORRECT ANSWER Can only be accessed by excess/surplus lines broker Do agents have binding authority in the alternative market? - CORRECT ANSWER Not typically. What is the best way to describe an MGA or an agent? - CORRECT ANSWER Representing one or more insurance companies Communication skills - CORRECT ANSWER Listening Speaking Writing Body Language Ways to improve non verbal communication - CORRECT ANSWER Watch your proximity to the other person; 2-4 ft Eye contact Facial Expressions Smell Ways to improve verbal communication - CORRECT ANSWER Pay attention to the volume of speech. Have a pleasant voice Avoid using industry jargon when possible Ways to improve listening skills - CORRECT ANSWER After customer speaks, summarize what has been said for clarification before answering any questions or providing recommendations Avoid thinking about what you want to say next Do not interrupt Types of communication - CORRECT ANSWER Two way communicating; listening and speaking Body Language and tone of voice One way communication Email Percentages of communication styles picked up on - CORRECT ANSWER Telephone: Actual words 14% Tone 86% Face to Face: Actual words 7%, tone 38%, body language 55% What are the steps to proofing written communication? - CORRECT ANSWER Proof the content Proof the grammar Look at the correspondence after printing and before mailing Ask yourself these questions when proofing a document - CORRECT ANSWER Is the information accurate? Is the message clear to the reader? Did I avoid using jargon/abbreviations? Is this organized and professionally written? Social media - CORRECT ANSWER Combining personal interaction with technology to create some level of value. A collection of internet based applications that permit an exchange of content *Used to communicate &, share information, directions, for advise or opinions, entertainment and to connect with others. Why do insurance companies use social media? - CORRECT ANSWER Expand customer base Provide customer service Inform clients and exchange information Increase product branding and visibility to better connect with customers Can be an excellent marketing + relationship tool Creates the ability to interact with clients, prospects, other companies, vendors, and industry associates Explain what should be contained in an employee social media policy - CORRECT ANSWER Purpose Confidentiality No expectation of privacy Authority Productivity Definitions Violations Discipline Other Components of position description - CORRECT ANSWER Reason for the position Authority granted Defined responsibilities Standards of work performed What are the benefits to written uniform systems and procedures? - CORRECT ANSWER Become the map for how things are to be accomplished and the standard or level of performance required Cornerstone for measuring effectiveness and productivity Serve as a key training tool Reinforce the quality of work while removing uncertainty of how to accomplish what needs to be done List the phases of technology utilization by an agency - CORRECT ANSWER Manual transition: the agency has minimal reliance on technology and automation Process focused: agency is beginning to utilize technology to enhance service and work more efficiently Service focused: use of technology and automation is the primary source of information and documenting Client focused: technology and automation fully implemented allowing more time to focus on the customer and achieve increased productivity A formal training plan should be... - CORRECT ANSWER Written Constructed by management and employee Relevant to the position Specific Time sensitive Achievable What is the purpose of implementing an internal quality control process - CORRECT ANSWER To determine: That work is being done according to the agency's system and procedures That the quality of the work is within the required standards The level of productivity *The benefit is the verification that agency expectations are being met A formal training plan for sales and service staff of an agency should include strong skill development in which three major areas? - CORRECT ANSWER Technical Product knowledge Agency process (the agency way) What is the best way to describe standards? - CORRECT ANSWER They define what the expected result is for the responsibilities duties and functions of a position Sources that prospects come from? - CORRECT ANSWER Product generated Referralls Associations/programs Advertising/internet What are the three components to a balance sheet? - CORRECT ANSWER Assets: what is owned and what has accumulated; cash, investments, inventory, business property, accounts receivable and buildings Liabilities: what is owed to others and what was the cost to accumulate the assets; mortgages, accounts payable, debt, etc.. Equity: difference between assets and liabilities; all assets sold-liabilities paid= equity$$ Agency workflow steps - CORRECT ANSWER New business development: Source of business and relationship Account plan established Account information and documentation Submission to market Proposal to customer Activity after the order What are the roles of a CSR? - CORRECT ANSWER Technical insurance knowledge Underwriting guidelines Effective customer service practices Good communication The use of agency automation Knowledge of agency operations Underwriting guidelines; remember the following - CORRECT ANSWER Review underwriting guidelines periodically to stay aware of any changes Know your binding authority with each company The majority of the new business submitted should meet or exceed the company's underwriting guidelines The importance of underwriting guidelines; PL - CORRECT ANSWER Factors that affect a company's underwriting guidelines and make them non-negotiable are; the rate or rules files with the insurance departments prohibit any deviation. Sometimes an accounts exposure will fall outside of a company's reinsurance program making it ineligible for coverage by that company Account servicing; New business - CORRECT ANSWER Applications Underwriting questions Clients signature Documentation Issuing binders, etc Sending app to insurance company Verifying the policy *Always collect initial premium if direct bill to insured Account servicing; Existing business - CORRECT ANSWER IE: Endorsements; With endorsements verify that the named insured is making the change, communicate, request the change/follow up with the company, and verify the change Guidelines for effective documentation - CORRECT ANSWER "To support records instruments and other evidentiary authorities" "To record, create a written record of" Use agency management system Use a free form note screen Capture documentation immediately Facts only What are some coverage differences? - CORRECT ANSWER Perils insured against Special limits of coverage Limits of liability Additional coverages Commercial lines; know your companies appetite - CORRECT ANSWER Likes to write certain business Specializes in certain business Offers additional services Processing renewal business - CORRECT ANSWER Renewal List Review list and cnontact insured to look for changes, verify and find new exposures Renewal checklist Commercial applications contain boxes that trigger coverage. This coverage is only in place if...? - CORRECT ANSWER Only if the boxes are marked A difference between personal or commercial underwriting guidelines is? - CORRECT ANSWER Additional services such as loss control could be the deciding factor when selecting the company to place coverage with Why is evaluating the financial condition of an insured an important piece in the underwriting process? - CORRECT ANSWER There is a direct correlation between the financial condition of insured's and their loss experience Increase in loss frequency and severity due tp not having funds for maintenance The profit and loss statement is also referred to as an....? - CORRECT ANSWER Income and expense statement What are the three components to a profit and loss? - CORRECT ANSWER Revenues: various sources of income such as sales, serving, consulting, etc. In an insurance agency income could include CL commission, PL commission, life + benefits commission, contingent income, fee income, etc. Expenses: all expenses incurred to generate income in an agency could include compensation expenses, business development and operation expenses etc. Profit or Loss: This is the difference between income and exposure when income exceeds expenses. The result is gross profit. income - expenses = profit or loss How many years of financial statements should be obtained for an accurate profit/loss statement? - CORRECT ANSWER 3 Years Question to ask before forwarding financial statements to an insurance company: - CORRECT ANSWER Has income been increasing or decreasing Has profit been increasing or decreasing Is the operation profitable? if not, why What is the trend of the profit or loss Does the income match the rate basis used in calculating the liability premium Direct Bill - CORRECT ANSWER Insurance company collects all besides initial down payment of premium and sends all billing notices, cancellations, etc. Company remits the agency commission monthly after collecting from policyholders. Commission adjustments made for endorsements + cancellations Net premium formula - CORRECT ANSWER gross premium - commission = net premium Agency bill - CORRECT ANSWER Billed to agency Agents submit an accounting of the policies billed showing the gross premium, commission, and net premium due to the insurance company. The report is called account current. Premiums collected are held in a fiduciary capacity. They cannot be used for any purpose except for paying company net premium on the account current statement Statement billing - CORRECT ANSWER Offered by company for agency Lists all transactions from agency bill items and calculates the net premium due from the agency for these items Agency must reconcile to the companies statement and submit the net premium due to the company even if hasn't collected from insured offered by company for agency Billing statement - CORRECT ANSWER If insured doesn't pay the premium it is the agency's responsibility to request that the company cancel for NP. Agency is still responsible for any earned premium while coverage was in force Direct bill advantages - CORRECT ANSWER Agency is not responsible for unpaid premiums Agency saves on expenses by not incurring costs to collect, deposit, and account for the premiums Disadvantage of agency bill - CORRECT ANSWER Agency is responsible for unpaid premiums as well as those they collect Expenses increase due to cost of collecting, depositing, and accounting for premiums Premium financing - CORRECT ANSWER Agency bill payment plan option Finance agreement has right to request cancellation for non payment to company Evidence of Insurance - CORRECT ANSWER Certificate of insurance: NOT a contract or legal document. Holder of certificate has no rights or privileges under the contract. Issued to third part for info only. Confirm coverage in force. Does not amend, change, or extend the policy Evidence of property insurance: same purpose as certificate of insurance unless granted under terms of contract the holder of the form is not an interests and hasn't been extended rights. Does not change, amend, or extend coverage or terms provided Binder: temporary insurance contact. Bound but not received What is the best way to describe the profit and loss statement? - CORRECT ANSWER Summarize the financial results over a period of time Best way to describe mandatory recommendations? - CORRECT ANSWER Must be satisfied, usually prior to coverage being bound If the claimant and not the insured files a claim, you should...? - CORRECT ANSWER Take the claimants information but do not confirm any of the insured's info What are the steps to the claims process? - CORRECT ANSWER Insured reports the claim Report the claim to the company Claims log Draft authority Other claims issues PINES - CORRECT ANSWER P: protect property from further damage I: inventory the damaged property N: notify the insurance company E: exhibit property to the adjuster S: submit a sworn statement Benefits to a claims log - CORRECT ANSWER Keep track of: Total claim counts Number of open claims Amount paid per claim Total claim dollars paid Time between notice + closure Identify loss trends + loss ratio issues Benefits of a service station/center - CORRECT ANSWER Remove service responsibilities from the agency staff so they can focus on sales Reduce personnel in agency Offer extended hours for the convenience of the customers Why are E&O claims brought against an agent? - CORRECT ANSWER Apparent failure to perform a legal or ethical duty Different aspects of E&O - CORRECT ANSWER Negligence Common causes of claims brought against agents by insured's Common causes of claims brought against agents by insurance companies Agency defense activities What are the four elements of negligence? - CORRECT ANSWER Duty owed to another party A breach of that duty An actual loss or injury must occur There has to be a proximate cause or cause and effect relationship between the duty and the loss or injury Common causes of claims brought against agents by insureds - CORRECT ANSWER Failure to obtain proper coverage: agent will be obligated to show that it made a good faith effort to properly place risk Failure to place coverage after agreeing to it Failure to give proper advice Failure to advise insured promptly or rejection or lack of coverage Failure to renew coverage; agency billed policy gets missed Failure to service policies Failure to place on best terms available Misrepresentation Placing business with an insolvent insurer or unauthorized insurer Modifying established service to customer Making a clerical error Common causes of claims brought against agents by insurance companies - CORRECT ANSWER Exceeding binding authority Failure to notify carrier or material change in risk Misrepresenting the risk to the carrier Delay in forwarding loss information The most common reasons that agents are found guilty of E&O include: - CORRECT ANSWER Lack of product knowledge Lack of documentation Lack of consistent procedures Agency defense activities - CORRECT ANSWER Report the claim to the E&O carrier as required by policy language. How does the E&O policy define a claim? a loss? Assign one person to act as claim coordinator The claims coordinator should collect all pertinent information to a master file Promptly have a meeting with all involved agency personnel Prepare a written narrative containing all of the facts of the claim Remind all to maintain confidentiality in and out of the office Prepare to be a good witness Do not change any operating procedures afterwards without approval of the E&O carrier Let staff know results when resolved What helped in defense What lesson of any did agency learn Do changes need to be made to procedure manual Is additional training needed for agency staff An example of a false underwriting guideline - CORRECT ANSWER The pricing consideration for placing business with the carrier should always influence underwriting guidelines What is the best way to describe agency culture? - CORRECT ANSWER Leadership created the vision and employees unite and support the vision, a plain is implemented that advances the vision