CISR Agency Operations Exam 82 Questions with Answers
Four benefits of ethical behavior -CORRECT ANSWER a. To be recognized as knowledgeable insurance
... [Show More] professionals within the community
b. To gain public trust and confidence
c. To avoid government regulation
d. To enhance credibility with customers and companies
Misrating & Misclassification - CORRECT ANSWER Risk misrated to write coverage - Insurer doesn't receive enough premium; Insurer not able to pay losses
Common ethical issues - CORRECT ANSWER Rating a vehicle using wrong class; incorrect protection class; relying on RC endt; hiding other residents of household; hiding young drivers; underestimating rating for reduced premium; signing for insured
Peer standards - CORRECT ANSWER Require duties to be performed in a manner similar to other in same position
Oral and written agreements - CORRECT ANSWER Law recognizes the duties of the parties to perform and provides a remedy for non-performance
Statutes - CORRECT ANSWER Every state has statutes: rebating
Actual or Expressed Authority - CORRECT ANSWER Given by the insurance company (Binding authority, Underwriting approval)
Implied Authority - CORRECT ANSWER Insurance company is stopped from denying the authority when it's allowed same activity in the past (allowing bad loss ratio for last 10 years)
Apparent Authority - CORRECT ANSWER Believed authority. Protects insured from unauthorized acts of agent. (Ins. Co. pay claim, subrogates against agent)
Standard of Care Owed to Insurers: Loyalty - CORRECT ANSWER Remaining faithful to company/agency relationship
Standard of Care Owed to Insurers: Good Faith - CORRECT ANSWER Honesty throughout transaction; Acting in best interest of insurance co
Standard of Care Owed to Insurers: Reasonable Care - CORRECT ANSWER Submit only business that meets or exceeds UW requirements
Standard of Care Owed to Insurers: Contractual Duties - CORRECT ANSWER Identified in agency agreement; Staying w/in binding authority; following required time frame
Standard of Care Owed to Customers: Adequate Coverage - CORRECT ANSWER Determine appropriate amount of coverage; Explain benefits & advantages; Identify loss exposure
Standard of Care Owed to Customers: Proper Coverage - CORRECT ANSWER Understand differences among policies; Use tools to assist in identifying exposure to loss; Keep current w/ changes & innovations
Standard of Care Owed to Customers: Coverage placed in best interest of customer - CORRECT ANSWER Best possible terms; Understand differences among policies; Not placing coverage bases only on highest commission
Standard of Care Owed to Customers: Prompt communication - CORRECT ANSWER Notify customers about changes, exclusions, transactions, claims, cancellations, non-renewals
Standard of Care Owed to Customers: Coverage placed with financially sound company - CORRECT ANSWER Coverage placed with insurer that can pay a claim; Obtain knowledge if company is experiencing financial troubles and move insured
Licensing - CORRECT ANSWER Each state has established requirements
Pre-Licensing - CORRECT ANSWER Specific education required before eligible to take license exam
CE - CORRECT ANSWER Specific to license; Statutes (laws); Violations lead to fines, lost license, criminal charges
Agency culture affected by leadership - CORRECT ANSWER 1. Vision for the agency
2. Plan of action to advance vision
3. Support from employees
4. Culture becomes well defined and self sustaining
5. Lack of leadership=less success
Factors that affect how an agency distributes its product and provides customer service - CORRECT ANSWER 1. # of employees
2. Single or multiple locations
3. Local, regional, international operation
4. Areas of specialization
5. Use of service centers
Agent/Producer - CORRECT ANSWER Acts on behalf of insurance company
Broker - CORRECT ANSWER Acts on behalf of the customer
5-Step Risk Management Process - CORRECT ANSWER 1. Risk Identification (most important: an unknown exposure is unable to be analyzed, controlled or financed)
2. Risk Analysis
3. Risk Control
4. Risk Finance
5. Risk Administration
Four major classes of exposures - CORRECT ANSWER Property
Four major classes of exposures - CORRECT ANSWER Liability
Four major classes of exposures - CORRECT ANSWER Loss of income/loss of use
Four major classes of exposures - CORRECT ANSWER Human exposure
Risk identification methods - CORRECT ANSWER Interview
Risk identification methods - CORRECT ANSWER Checklist, survey, questionnaire
Risk identification methods - CORRECT ANSWER Physical inspection
Risk identification methods - CORRECT ANSWER Activity analysis
Risk identification methods - CORRECT ANSWER Advertising/Website
Risk identification methods - CORRECT ANSWER Document review
Risk Control Techniques: Avoidance - CORRECT ANSWER Choose not to own certain property or engage in activity (not always practical)
Risk Control Techniques: Loss prevention - CORRECT ANSWER Reduce frequency of loss occurring (alarm system, safety training)
Risk Control Techniques: Loss reduction - CORRECT ANSWER Reduce severity (safety equipment, seat belt)
Risk Control Techniques: Duplication/Separation - CORRECT ANSWER Reduces severity (Back up disks off site, parking fleet in separate lots)
Risk Control Techniques: Combination - CORRECT ANSWER more than one technique
Active retention - CORRECT ANSWER When customer knows before the loss that they are financially responsible for some or all of the loss
Passive retention - CORRECT ANSWER When customer finds out after the loss that they are financially response (whoops)
Stakeholders of Insurance Agency - CORRECT ANSWER a. Board of directors
b. Managers and employees
c. Customers
d. Insurers
e. Vendors
f. Government
g. Industry associations
How Insurance Companies are Regulated - CORRECT ANSWER By states or jurisdictions where they do business
Admitted Company - CORRECT ANSWER Authorized and licensed to do business in state
Non-Admitted Company (Surplus Lines) - CORRECT ANSWER Not authorized or licensed to do business in state; Not protected by Guaranty Fund (paid to policyholders if company goes bankrupt)
Excess and Surplus Lines Agent/Broker - CORRECT ANSWER Licensed to write through non-admitted insurer; Appointed by non-admitted insurer
Financial Rating - CORRECT ANSWER Companies submit finances to insurance department to determine financial stability
Treaty reinsurance - CORRECT ANSWER Ceding company agrees to cede (give) certain classes of business to the reinsurer as described in the agreement; Reinsurer agrees to accept all business qualifying under the agreement
Facultative reinsurance - CORRECT ANSWER Exposure that ceding company reinsures is offered on an individual basis; Individually underwritten and priced
Lloyds of London - CORRECT ANSWER market for difficult to insure, unique, or unusual risks; Grouped together into syndicates
Managing General Agent (MGA) - CORRECT ANSWER Wholesale agent who represents one or more insurers
Verbal communication - CORRECT ANSWER 7% of what listener hears in face-to-face is from words spoken, 55% from body language, 38% from tone of voice
Telephone communication: 14% from words spoken, 86% from tone of voice
Non-Verbal Communication - CORRECT ANSWER Personal space, eye contact, facial expressions, physical contact, smell
3-step process for proofing written communication - CORRECT ANSWER 1. Content
2. Grammar
3. Appearance
Social Media for Insurance Companies - CORRECT ANSWER Customer service
Inform
Branding/visibility
Social Media for Insurance Agents - CORRECT ANSWER Develop & maintain relationships
Pursue sales opportunities
Broadcast information
Social Media for Insurance Customers - CORRECT ANSWER Gather information
Share findings
Access to service features
Standards - CORRECT ANSWER Must inform employees what is expected in the work they perform to achieve what needs to be accomplish
Benefits of writing systems and procedures - CORRECT ANSWER Uniform performance, training & reference tool, removes uncertainty, E&O loss prevention
Four phases of technology: Manual transition - CORRECT ANSWER Minimal reliance on technology and automation
Four phases of technology: process focused - CORRECT ANSWER beginning to utilize technology
Four phases of technology: service focused - CORRECT ANSWER use of technology and automation is essential and primary source of information and documentation
Four phases of technology: client focused - CORRECT ANSWER technology and automation is fully implemented
Characteristics of formal training plan - CORRECT ANSWER 1. Written
2. Constructed by employee and manager
3. Relevant
4. Specific
5. Time sensitive
6. Achievable
7. Reviewed
Internal quality control - CORRECT ANSWER To ensure business is being handled correctly, E&O control
Underwriting guidelines - CORRECT ANSWER Indicator of the type of business the insurance company is either interested or not interested in
Underwriting guidelines exceptions - CORRECT ANSWER Some situations make sense for UW to make an exception for a risk outside of guidelines, Infrequent (Book of business based on exception can lead to unprofitability)
Guidelines for effective documentation - CORRECT ANSWER 1. Made in agency management system
2. More effective to us free form note screen
3. Made immediately after event
4. Consist of the facts
5. Used for E&O claims
Financial statements as part of UW - CORRECT ANSWER 1. Evaluating financial condition
2. Relationship between financials and loss experience
3. Availability of automated accounting programs
4. Explain how information will be used and will be confidential
Balance sheet components - CORRECT ANSWER a. Assets: What is owned
b. Liabilities: What is owed
c. Equity: Assets - Liabilities = Equity
d. Statement of financial condition on a given date
Profit and Loss - CORRECT ANSWER a. Summarizes financial results over a period of time
b. Beginning, middle, and end
c. Revenues - Expenses = Profit or Loss
d. Analyze statements for the past 3 to 5 years to identify trends
Inspections - CORRECT ANSWER Conducted to identify hazards, verify operations, establish
property values, determine fire and life safety protection, etc.
Inspection recommendations - CORRECT ANSWER At the insured's discretion whether to complete; Mandatory recommendations to be satisfied before coverage can be bound or within specified time period (failure to comply=cancellation or nonrenew)
Claims - CORRECT ANSWER 1. Let insurance adjuster accept or deny coverage
2. Not to begin repairs until advised by adjuster
Service Center - CORRECT ANSWER Removes service responsibilities, service outlined in contract, agency notification of changes, log for center for errors or problems
E&O Claim - CORRECT ANSWER Negligence must be proved (importance of documentation)
Four elements for negligence - CORRECT ANSWER 1. Duty owed to another party
2. Breach of duty
3. Actual loss or injury
4. Relationship between duty and loss or injury
E&O claims: Against agents by Insureds - CORRECT ANSWER a. Failure to obtain proper coverage
b. Failure to place coverage after agreeing to it
c. Failure to give proper advice
d. Failure to advise insured promptly of rejection or lack of coverage
e. Failure to renew coverage
f. Failure to service policies
g. Failure to place on best terms available
h. Misrepresentation (Telling insured policy provides coverage for earthquake when it does not)
i.Placing with an insolvent insurer or unauthorized insurer
j. Modifying established service to customers (Not notifying clients that their premium is late when you
have always done so in the past)
k. Making a clerical error
E&O Claims: Against agents by insurance companies - CORRECT ANSWER a. Exceeding binding authority/underwriting authority
b. Failure to notify carrier of material change in risk
c. Misrepresenting the risk to the carrier
d. Delay in forwarding loss information
Steps to take when faced with potential E&O claim - CORRECT ANSWER 1. Prepare your defense before summons and complaint
2. Report claim to carrier
3. Assign one claims coordinator
4. Meet with all involved agency personnel
5. Prepare narrative
6. Confidentiality
7. Good witness
8. Don't change procedures w/out approval from E&O carrier
9. Share results once resolved [Show Less]