CISR EXAM 73 Questions with Answers
What are ethics? - CORRECT ANSWER A discipline dealing with good and evil and with moral duty' A set of rules,
... [Show More] based on a set of principles or values that we accept as truths and that govern our behavior
What are the four benefits of ethical behavior? - CORRECT ANSWER to be recognized as knowledgeable insurance professionals within the community
to gain public trust and confidence
to avoid government regulation
to enhance credibility with customers and companies
What are some common ethical issues confronted by insurance professionals? - CORRECT ANSWER vehicle usage, protection class, property values, other residents in the household, young drivers in the household, young drivers in the household, rate basis or classification or garaging address, signing for an insured
What are legal duties based on? - CORRECT ANSWER peer standards, oral or written agreements, and statutes
Define peer standards. - CORRECT ANSWER requires duties be performed in a manner similar to others in the same position
Define oral or written agreements. - CORRECT ANSWER the law recognizes the duties of the parties to perform and provides a remedy for non-performance
Define statutes. - CORRECT ANSWER state laws
Define actual authority. - CORRECT ANSWER expressively given by the insurance company as found in the Agency Contract/Agreement
Define implied authority. - CORRECT ANSWER created from a relationship based on actual authority. the insurance company has allowed the agent to have the appearance of authority either through estoppel or through custom and usage
Define apparent authority. - CORRECT ANSWER the insured believes the agent "apparently" has the authority. this authority protects the insureds from the unauthorized acts of the agent. this insurance company may have to pay the claim; however, the insurance company may subrogate against the agent
Explain the standard of care an agent owes to its insurance compaines. - CORRECT ANSWER loyalty, good faith (honesty throughout the insurance transaction; acting in the best interest of the insurance company), reasonable care, and contractual duties
Explain the standard of care an agent owes to its customers. - CORRECT ANSWER adequate coverage (helping them determine the appropriate amount of property insurance to meet their needs, identifying their explores to loss and recommending the appropriate limits of coverage), coverage placed in the best interest of the customer (placing coverage on the best possible terms for the customer, no placing coverage with a carrier solely on the basis of the sales contest, higher commission, etc.)
Explain the difference between an agent and a broker. - CORRECT ANSWER an agent acts on behalf of the insurance company; a broker acts on behalf of the buyer/customer, many of the responsibilities are identical except a broker does not usually have binding authority
What is a Customer Service Rep? - CORRECT ANSWER they may also be referred to as a Customer Service Agent (CSA), Account Rep, Account Executive, or Account Manager; responsible for providing information, advice, and service to customers during and after the insurance transaction, responsible for the day-to-day operation of an agency, responsibilities of this position may also include sales such as cross-selling and account rounding, many of the responsibilities could be considered "transacting insurance"; therefore, many states require this person to be licensed as an agent
What are other positions in an agency? - CORRECT ANSWER accounting, administration/management, claims, loss control, risk management
What is the 5-step risk management process? - CORRECT ANSWER risk identification, risk analysis, risk control, risk finance, risk administration
Identify and describe the methods used to identify exposure to loss. - CORRECT ANSWER interview:
ask the right questions to the right person, listen to their responses
checklist, survey, or questionnaire:
make sure that it is specific to your geographic region and to the demographics of the agency's customers
physical inspection:
look for exposures
activity analysis:
volunteer, travel, hobbies, etc.
advertising/website:
what product or service is being sold?
where is the product sold?
does the advertising create liability?
document review:
don't practice law without a license
Describe risk analysis. - CORRECT ANSWER measuring the exposure to loss, frequency (what is the likelihood a loss will occur? how often will a loss occur?) severity (what are the financial consequences should a loss occur?)
Importance of risk analysis - CORRECT ANSWER the most severe and the most frequent exposures should be addressed first, frequency leads to severity, don't risk a lot for a little, don't risk what you can least afford to lose
Describe a risk control technique. - CORRECT ANSWER loss prevention- reduce the frequency of a loss occurring (e.g. installing an alarm system)
What is active retention? - CORRECT ANSWER when the customer knows before the loss that they are financially responsible for all or some of the loss
What is passive retention? - CORRECT ANSWER when the customer finds out after the loss that they are financially responsible for the loss
What is a stakeholder? - CORRECT ANSWER people who have a potential to be affected by any action taken by an organization or any group or individual who is affected by achievement of a firm's objectives
Identity potential stakeholders of an insurance agency. - CORRECT ANSWER board of directors, managers and employees, customers, insurers, vendors, government, industry associations
How are insurance companies regulated? - CORRECT ANSWER by the states or jurisdiction in which they do business
How are insurance companies formed? - CORRECT ANSWER stock companies are owned by stockholders with the objective of making a profit for their stockholders; mutual companies are owned by policyholders with the objective of providing insurance at or near the actual cost of doing business
Define an admitted insurance company. - CORRECT ANSWER one that is authorized and licensed to do business in the state or jursidiction
Define a non-admitted insurance company. - CORRECT ANSWER one that is not authorized or licensed to do business in the state or jurisdiction; also referred to as surplus lines. (in most states, coverage cannot be written with this company unless a due diligence effort has been made to place coverage in the admitted market)
Explain the characteristics of an excess and surplus lines agent/broker. - CORRECT ANSWER licensed to write p&c insurance through a non-admitted insurer; in most states this individual must be appointed by a non-admitted insurer to solicit, write insurance, collect premiums and collect surplus lines premium taxes assessed; has responsibility to monitor the financial condition of the non-admitted insurance companies used; does not usually have binding authority
Explain the importance of the financial status of a company. - CORRECT ANSWER each state has laws for monitoring insurance companies so that the consumer is not negatively affected by the inability of the insurance company to meet its financial obligations; companies are required to submit financial data to the insurance department annually
Identify some rating organizations. - CORRECT ANSWER A.M. Best, Dun & Bradstreet, Weiss Ratings, S&P, NAIC
What is treaty reinsurance? - CORRECT ANSWER the ceding company agrees to cede certain classes of business to the reinsurer as described in the agreement; the reinsurer agrees to accept all business qualifying under the agreement
What is facultative reinsurance? - CORRECT ANSWER each exposure that the ceding company wants to reinsure is offered to the reinsurer on an individual basis; it is individually underwritten and individually priced
What is the importance of reinsurance to the agency? - CORRECT ANSWER the treaty an insurance company has with its reinsurer is a factor that must be considered when an underwriter is evaluating a risk for acceptance and pricing; personal lines can be affected by the limitations; commercial lines can be affected by both coverage limitations and pricing
What is Lloyd's of London? - CORRECT ANSWER known as a market for difficult to insure risks as well as the unique or unusual risk; not an insurance company but an insurance market comprised of members
What are excess and surplus lines? - CORRECT ANSWER wholesale intermediary for the benefit of retail agents who place excess and surplus insurance directly for own customers
What are managing general agent? - CORRECT ANSWER wholesale intermediary or represents one or more insurer, authority to appoint retail agents within a specific geographical area
What is the purpose of government insurance programs/pools? - CORRECT ANSWER the private insurance market may avoid insuring risks that either fail to meet the insurance company's underwriting criteria and/or are catastrophic in nature; in response, the government may establish insurance programs or insurance pools as a way to make insurance available to individuals in these situations
What is the national flood insurance program? - CORRECT ANSWER federal land management program with flood insurance being one benefit of this program. may not be available in all geographic locations
Explain communication. - CORRECT ANSWER two-way communication- the combination of listening and speaking
Verbal v. non-verbal communication - CORRECT ANSWER only 7% of what the listener hears in face-to-face communication is from the actual words spoken, while 55% comes from body language and 38% comes from tone of voice; in phone communication, only 14% comes from spoken words and tone of voice accounts for the other 86%
What is the best approach for written communication? - CORRECT ANSWER use standardized letters or memos whenever possible. this will not only save time, but may also reduce the likelihood of an errors and omissions claim
What is the 3-step process for proofing written communication? - CORRECT ANSWER content, grammar, and appearance
What are the components of a job description? - CORRECT ANSWER identify reason and objective of the position, identify and describe the level of authority granted, describes responsibilities, duties, and functions of the position, outlines performance evaluation standards
What is the importance of a job description? - CORRECT ANSWER defines what is the expected result for the responsibilities, duties, and functions of the position; to measure the performance compared to the expected result; leads to improved performance and productivity for both the employee and the agency
What are the benefits of having written systems and produces? - CORRECT ANSWER uniform way for work to be performed, training tool for new employees, reference tool for all employees, reinforces quality of works by removing uncertainty about how to accomplish what needs to be done, E&O loss prevents, key for defending E&O claims
What are the four phases of technology? - CORRECT ANSWER manual transition, process focused, service focused, client focused
What is manual transition technology? - CORRECT ANSWER the agency has minimal reliance on technology and automation
What is process focused technology? - CORRECT ANSWER the agency is beginning to utilize technology to enhance service and allow staff to work more efficiently
What is service focused technology? - CORRECT ANSWER the agency is now at the stage where the use of technology and automation is essential and is the primary source of information and documentation
What is client focused technology? - CORRECT ANSWER technology and automation is fully implemented allowing more time to focus on the customer and achieve increased productivity
What are the characteristics of a formal training plan/ - CORRECT ANSWER plan must be written, constructed by employee and manager, relevant, specific, time sensitive, achievable, reviewed
What is the purpose of the internal quality control process? - CORRECT ANSWER verify work is being performed as intended
Explain the role of underwriting guidelines. - CORRECT ANSWER know your binding authority, the majority of new business submitted should meet or exceed the underwriting guidelines
Explain underwriting exceptions - CORRECT ANSWER there are situations where it makes sense for the underwriter to make an exception to the underwriting guidelines and agree to provide coverage for a risk that falls outside of the acceptability guidelines
Explain the guidelines for effective documentation. - CORRECT ANSWER applications should always be completed thoroughly, accurately, and honestly; make sure the correct person or entity is shown as the named insured, have the named insured sign the application even if the signature is not required - the agency should never sign the insured's name
What are guidelines for effective documentation? - CORRECT ANSWER documentation should be made in the agency management system according to the agency's policies and procedures
Explain the steps in account servicing for new business and policy services. - CORRECT ANSWER insureds contact agency to make changes to their coverage: verify the person requesting the change is the named insured, ask the insured for all of the information necessary to make the change, verify the insurable interest of any property being added, advise the insureds when they will receive verification of the change from the insurance company, upload or forward the endorsement from insurance company, make changes to customer's policy information in the agency management system, use the contact as an opportunity to cross-sell or account development
How should you handle renewals? - CORRECT ANSWER general the renewal list 90 to 120 days prior to renewal. discuss the account and any change in type of entity, change in named insured, changes in the operation, additional employees
Explain the use of financial statements as a part of the underwriting process. - CORRECT ANSWER there is a relationship between the financial condition and the loss experience of an insured; an insured experiencing financial difficulty is more likely to experience an increase in both loss frequency and loss severity. with the availability of automated accounting programs, it is much easier for customer to provide financial statements
What are the components of a balance sheet? - CORRECT ANSWER assets, liability, equity
assets - liability = equity
it is a statement of financial condition on a given date
What are income and expense reports? - CORRECT ANSWER reports that analyze statements for the past 3 to 5 years to identify trends
revenues - expenses = profit or loss
What is direct bill? - CORRECT ANSWER agency may be responsible for collecting the initial premium and submitting it to the insurance company
What is account current (agency bill)? - CORRECT ANSWER the agency is responsible for collecting the premium and submitting the net premium to the insurance company according to the agency agreement. premiums collected are held in a fiduciary capacity
Certificate of Insurance - CORRECT ANSWER issued for informational purposes only. does not give any rights to the certificate holder and is not a contract or legal document. does not amend, extend, or alter the coverage provided by the policies
Evidence of Property Insurance - CORRECT ANSWER evidence that insurance is in force, issued for information purposes only
Insurance Binder - CORRECT ANSWER temporary insurance contract, issued when coverage is placed in force and the agency either has binding authority or has received permission from the insurance company to bind coverage. should only be issued by authorized persons
Explain some of the steps in claims processing. - CORRECT ANSWER understand that most customers have not experienced a loss and are unfamiliar with the process. do not indicate whether or not the loss is covered, let the insurance company adjuster accept or deny coverage. let the customer know what to expect next
When should you report a claim? - CORRECT ANSWER immediately report the claim to the insurance company
Explain benefits of claims log. - CORRECT ANSWER use as a tool to identify trends with a company's claims department or its claims process
What are some issues of claims? - CORRECT ANSWER if the claimant reports the claim, take their information but do not confirm any information, contact the insured; do not share policy information, especially coverage or limits of insurance, with anyone other than your insured
What are common causes of E&O claims made against agents by insureds? - CORRECT ANSWER failure to obtain proper coverage, failure to place coverage after agreeing to it, failure to give proper advice, failure to advise insured promptly of rejection or lack of coverage, misrepresentation, exceeding binding authority/underwriting authority
What is important to do with a potential E&O claim? - CORRECT ANSWER assign one person to act as claims coordinator; claims coordinator gathers all pertinent information into a master file and prepares a chronological written narrative, prepare to be a good witness [Show Less]