CISR Agency Operations 45 Questions with Answers
Agency Characteristics - CORRECT ANSWER Number of Employees, Locations, Areas of Specialization, AMS
... [Show More] used, Local, Regional, National, International Operations, Use of Service Centers.
Small Agency - CORRECT ANSWER Require staff to fill multiple roles.
Mid-Sized Agencies - CORRECT ANSWER Staff may be split
Large agencies - CORRECT ANSWER More Specialization in single lines.
single or multiple locations - CORRECT ANSWER The number of locations will affect how an agency communicates and informs. It may also mean that some functions of the agency may be centralized.
Local, regional, national or international operation - CORRECT ANSWER As with the number of locations, where an agency conducts business affects how an agency communicates and informs. Understanding cultural differences and the local economy becomes a critical factor in the operations of an international agency.
Areas of Specialization: - CORRECT ANSWER Specialization may require all employees to have a higher level of training and skills in the type or types of business specialized in. The agency management system may require customization to meet the unique needs of the areas specialized in.
Use of service centers - CORRECT ANSWER Some agencies have transferred the servicing of accounts from their agencies to their insurance carriers by contracting with a service center or customer service unit, leaving the agencies staff available for sales. Other agencies continue to provide customer service to their customers at the agency level. Service Centers will be discussed in detail later.
Agency management system used - CORRECT ANSWER Since agency management systems differ in their capabilities, the system an agency has will affect its every day operations including how it provides customer service, what type of marketing material it can generate, the reports provided, and the accounting or financial reports available.
Sources of Revenue - CORRECT ANSWER Commission, Fee Based Services, Profit-Sharing, Investment Income.
Commission: - CORRECT ANSWER This is typically the largest source of income and is the percentage of the premium that the agency earns from the selling and the renewing of insurance including personal lines, commercial lines, life, health and disability, and employee benefits
Fee based services: - CORRECT ANSWER In addition to selling insurance coverage, agencies may offer additional services for which they may be able to legally charge a fee. Loss control, risk management and insurance consulting are examples of fee-based services.
Profit-sharing: - CORRECT ANSWER This is a bonus that insurance companies may pay to agencies to reward the agencies profitability and growth. (Sometimes referred to as a contingency check.)
Investment Income: - CORRECT ANSWER Income generated from the investment of the agencies' assets. An example of investment income would be interest earned on a bank account.
Sales Staff - CORRECT ANSWER The sales staff is comprised of agents (referred to as producers in some jurisdictions) and/or brokers with the responsibility to identify prospects, makes sales calls, present solutions, and secure the buying decision.
Broker - CORRECT ANSWER License: Must hold a broker's license issued by the department of insurance
Binding Authority: Does not have binding authority
Degree of Loyalty: Acts on behalf of, and hold highest degree of loyalty to the customer
Responsibilities: Identical to those of an agent except a broker does not usually have binding authority
Agent - CORRECT ANSWER License: In some states of jurisdictions, must hold a license issued by the department of insurance authorizing them to transact insurance
Binding Authority: Has binding authority for the insurance company
Degree of Loyalty: Acts on behalf of, and hold highest degree of loyalty to the insurance company
Responsibilities: Identifying prospects, making sales calls, presenting solutions, securing the buying decision, collecting premium, and binding coverage
Binding authority - CORRECT ANSWER means the agent can temporarily place coverage in force while waiting for the insurance company to issue the policy.
Service Staff - CORRECT ANSWER The service staff is comprised of customer service representatives. Customer service representatives may also be referred to as customer service agents, account representatives, account executives or account managers.
These positions are professional, not clerical positions. Customer service representatives have responsibility for the day-to-day operation of an agency and have responsibility for providing information, advice, and service to clients during and after the insurance transaction has taken place. How these duties take shape depends on the size of the agency.
Cross selling - CORRECT ANSWER refers to selling new lines of business to existing customers.
Account rounding - CORRECT ANSWER refers to selling new coverage to an existing customer.
Transacting insurance - CORRECT ANSWER includes explaining or discussing coverage, presenting quotes, completing applications and binding coverage.
Other positions - CORRECT ANSWER In addition to sales and service, positions in an agency may include administration and management as well as employees in accounting, claims, loss control or risk management departments.
Standard of care an agent owes its insurance companies - CORRECT ANSWER Loyalty, Good Faith, Reasonable Care, Contractual Duties,
Loyalty - CORRECT ANSWER Remaining faithful to the company/agency relationship
Good Faith - CORRECT ANSWER Being honest throughout the entire insurance transaction and acting in the best interest of the insurance company.
Reasonable Care - CORRECT ANSWER Using reasonable care in selecting the insureds that meet or exceed the insurance companies' underwriting requirements rather than submitting business that the agency knows does not qualify
Contractual Duties - CORRECT ANSWER Staying within the authority as granted in the agency agreement. For example, staying within the insurance companies' binding authority with regard to both limits of coverage and types of coverage; or uploading policy information within the required time frame; or submitting the application, endorsement or binder within the required time frame.
agency agreement (also referred to as the agency contract) - CORRECT ANSWER sets the foundation of the agency's relationship with the company. It defines duties and responsibilities of both parties as well as authorizing certain activities.
What does the company expect from the agency? - CORRECT ANSWER A good working relationship between agency/company staff members.
Honest submissions with full disclosure of material facts.
Agency premium growth with that company and a respectable loss ratio.
Discretion in asking for exceptions or accommodations.
What does the agency expect from the company? - CORRECT ANSWER Stability in the marketplace - not hopping in and out of lines of business.
Stability and fairness in its rate structure and underwriting decisions.
Some agency support through advertising, education, or possible management assistance
Explain the standard of care an agent owes its customers. - CORRECT ANSWER Adequate Coverage, Proper Coverage, Coverage placed in the best interest of the customer, Prompt Communication, Coverage Placed with a financially sound insurance company.
Adequate coverage - CORRECT ANSWER Providing adequate coverage means the agency helps the customers determine the appropriate amount of property insurance to meet their needs; explaining the benefits and/or advantages of adequate amount of insurance; and identifying their exposures to loss and recommending the appropriate limits of coverage.
Proper coverage - CORRECT ANSWER Before an agency can provide proper coverage for its customers, the staff must first understand the differences in coverages among the policies available from the insurance companies represented in the agency. It also requires the agency to use available tools to identify customer's exposures to loss. Finally, it means the agency staff must keep current with changes and innovations in the insurance marketplace.
Coverage placed in the best interest of the customer - CORRECT ANSWER This requires the insurance agency to place coverage on the best possible terms for the customer. This doesn't mean the lowest cost; it means the best coverage for the customer based on the specific needs of that customer.
Prompt communication - CORRECT ANSWER Promptly notify customers about all aspects of their insurance transaction with the agency and includes, but is not limited to, changes, exclusions, limitations, claims, cancellations, and non-renewals.
Coverage placed with a financially sound insurance company - CORRECT ANSWER Taking care to place coverage with an insurance company that is financially able to pay a claim. If an agency obtains knowledge that a company is experiencing serious financial difficulty, consideration should be given to moving the insurance coverage to a financial sound insurance company. Signs of financial difficulty may include the insurance company's delay in payment of claims, a high rate of declined claims, late payment of commissions, or delay in returning of premiums.
Stakeholders of Insurance Agencies - 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 achievement of a firm's objectives.
Stakeholders of Insurance Agencies - CORRECT ANSWER Board of directors
Managers and employees
Customers
Insurers
Vendors
Industry associations
Government
Managers and employers - CORRECT ANSWER Managers and employers benefit by continued job security and the potential for increased wages or benefits.
Customers - CORRECT ANSWER Customers benefit by having an agency that is financially stable which may result in the stability of its products and customer service.
Insurers - CORRECT ANSWER Insurers benefit from successful agencies as it means a continued distribution source.
Vendors - CORRECT ANSWER Vendors, such as providers of agency automation systems or comparative rating systems will benefit either by the agencies keeping their existing systems or spending available revenue to upgrade to a newer system.
Industry Associations - CORRECT ANSWER Industry associations, such as agency associations and user groups benefit from agencies successes, as those agencies are more likely to continue their membership.
Government - CORRECT ANSWER Government is negatively affected if an agency is having difficulty as it may result in the agency's non-compliance with insurance regulations. [Show Less]