Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Insurance Management
Chapter 1; Resources
Primarily, when we talk about a set-up (whatever it is, a hawker selling clothes in a market up to a reinsurance company which is a major and complex company) we need resources
...
Resources can be
Capital, Equipment, Human, Space, Systems, and Processes
...
It is the most liquid form of capital that exists and through this base of
financial instruments, we can set-up and organise an enterprise
...
Reputations, nature, security of the company are all factors
that may be an issue to raising capital
...
It is not easy to raise capital
...
You need to make sure all the time that you have
enough to pay the interest and repay the loan and to be able to make profit (Liquidity and Profitability)
...
When processes fail, you get complaints
...
These processes nowadays are
incorporated in electronic systems
...
These systems are required for compliance services (companies have to be audited and obey the
authority and the law)
...


The bigger the organisation, the more you are going to need resources
...
In terms of premises, do you buy premises or
do you hire the premises
...

Equipment; today it is more efficient to rent rather than buy, because you get maintenance agreements
...
A business plan seeks to set out its objective to
attain a return (a profit) through adequate management, business plans and financial projections
...
Sole-trader – The simplest form of ownership where the individual in his own capital capacity is
setting up his own business
...
You are
responsible for your own business
...
Partnership – You can have more than 2 people who come together to share a common
business, profession or service, and they agree to share their profits
...

c
...
Public – Companies that invite the public to be part of the company
...

This is done through the stock exchange
...
Eg MAPFRE, Go, BOV,
b
...
These are the same as
public, but the shares are not for sale
...
Mutual – Owned the Policy-Holders ex Bupa in the UK
...

Through their purchase they become owners, and will pass the benefits through
cheaper products, benefits, discounted premium, but do not pass profits
...
To generate capital, we need people to fund in money into the
business
...
People lend money to the organisation and the money is pooled into
the organisation and are called shareholders
...
The shareholders are entrusting the capital to Directors who are
setting up a company which will return a profit, known as dividend
...
At law, the
company is a separate legal entity, and although it has been formed a s a result of a capital investment,
its assets and operations are independent from the shareholders, and the shareholders ado not own the
equipment, the staff, etc… those are properties of the company
...

Example: Macaura Vs Northern assurance co 1925
...

Economics dictates all the business activities in a particular country
...
The market tries to reach an equilibrium, and
when you have a lot of companies and relatively low buyers, the price falls
...
They do this, to become larger ( to benefit
from economies of scale), to increase efficiency, market share
...

Capital Generation
When a company is in operation, it needs money to resume its operations
...
Throughout the years, it may need to borrow additional money where
companies call for shares
...
They can also take a loan (from a financial institution)
...
(so 3 methods; shareholders, debt or profits)

Lloyd’s
The building is called the Corporation of Lloyd’s, where it is the owner of the building and services
...

It rents out the place for insurance trade to take place and service which is very useful to the operators
(Lloyds brokers, Lloyds syndicates)
...


Structure of the Board
This unit focuses on the respective roles and positions that are required to run an insurance company
...
Shareholders are
also the owners of that company
...
They use this money they invested to gain a return
...
Therefore the shareholders
entrust their money to a Board of Directors
...
They appoint a chairman to run and lead the board in strategic decisions
...
Through their decisions, they need to make sure that a return is being provided
...

The difference between the two is that executive directors are involved in the day-to-day running of the
business, they are employed full-time
...
These people add reputation; add
words to the company in terms of relationships
...
These
directors will report what and how the company is faring at least once a year by law to the shareholders
in what is known as AGM (Annual General Meetings)
...
Somebody has to execute
and perform the strategy so the board of directors will employ a CEO to overlook this responsibility
...
The
company as a legal individual may be sued if it does not comply with the law, and the boards of directors
are responsible for that company, so they have an audit committee to see if they are complaint with the
law
...
The board of
directors has various sub committees
...

From CEO level downwards, we have the management
...

The corporate roles are CEO, COO, CFO, CRO, Company Secretary, Head of Internal Audit, Underwriter
Director, Claims Director, and Actuary
...
The chief operations officer is a very high ranked employee who is responsible for the day
to day running of the organisation (non-technical day to day running eg procurement, the general
running, expenditure, bidding for tenders, stock levels are good, and all other departments in terms of
administration are efficiently and adequately run)
...


These 2 are the ones who are technical and take the decisions
...
The CRO has
become important after the failure of various organisations
...
It would target
those risks that would not be shown in the financial statements
...

Internal audit is checking the processes of the organisation to check that they are in line with their
regime
...


Corporate Governance
Corporate governance is the way an organisation is controlled, monitored, and governed
...

When people are investing money, there could be abuse of this invested money, so there should be a
method of control
...
Stakeholders are shareholders, regulators,
customers (policy-holders), competitors, government, employees, banks, suppliers, etc…
We need a structure in place to make sure the interest of these parties is protected and assured
...

There are 2 areas of governance: internal and external
...
For internal checking, we have internal control, and the external is controlled by
external audits
...

Corporate governance are rules by which the company is monitored
...
The directors have to ensure that there is corporate governance, a good
reporting process coming from the compliance, the audit and the risk management function
...

These directors can be executive or non-executive directors
...
The code says that the chairman and the CEO

must be 2 separate roles, as the thinker cannot be the doer
...
The chairman sets out the strategy and the CEO implements the strategy
...
You also need the non-executive and executive directors
...
The board needs to have the knowledge, be sound, qualified, experienced, know the company’s
operations through a system of reporting, and see that they adhere to law and regulations
...
These are the 3 pillars
...
A risk management review will not only look at
your financial situation, but it would undertake the evaluation of all the risks that a company is facing
...

We have to identify the risks by looking at cash flows, economic trends, political stability, competition,
lack of resources, key members of staff, etc… These are known as market risks, credit risks, liquidity,
asset/liability risks, operational risks, reputational risks
...
Identify – to identify those risks that affect (market risks, credit risks, liquidity, etc… se above
...
Evaluate – each risks have different weighing, so here we measure the risks in terms of
frequency (no of times they occur) and the severity
...
Manage – there should be a control mechanism that either transfers the risks to somebody
else(eg to pass the risk of an earthquake to an insurer), and to fund the risk, or even to avoid the
risk
...
Monitor – This is an ongoing exercise which will be repeated monthly, quarterly, and yearly,
etc…
5
...
Whatever is reported to the board will be acted
upon, and will scrutinize this report and will act accordingly
...

John Bond has been the Chairman and also the CEO of the firm
since 1985 and has always conducted and attended all of the
company’s board meetings
...
John is an engineer by
profession and is a very technical person
...

John Bond always exercised a strong dominant position and
rarely were his actions challenged by the other Board members
...

The auditor appointed to audit Orange Ltd is also John‘s friend
and always asked him to present the company records at AGM
meetings held sporadically
...

However, the following incidents happened during the past 20
years:
1
2
3
4
5

2 directors resigned only to be replaced by John Bond
A fire to one of the offices reveal that no insurance was in
force
A wrong contract decision costed the company a loss of
€1
...
John Bond cannot be the
Chairman and the CEO of the company as the Code does not allow it
...
A sub-committee is formed
to perform a project, and he cannot be part of a sub-committee
...
The board should have appropriate skills, competence,
experience, and knowledge
...
The auditor has to be an independent auditor not someone you know
...
The financial picture as they are not enough
...
Figures are not enough; risk management will reveal the fraud, the bad decisions,
the lack of tally
...
Get hold of an annual report of an insurance company (can be local or foreign)
...
The scope is to understand the various components and sections especially the ones noted in
the question, and in our own words, report the operations of the organisation
...
Tell the reader what the company is all about (its objectives), and also the components of its
structure
...
Read sections on corporate governance and risk management (very important, as they say how
the company “behaved”)
...
Simple Organisation Structure
a
...
1), however structure will have
various other components and other departments with their respective personnel
...

B
...
Functional structure means various departments each responsible for their own
operations
...
Each and every
section has its own head
...

C
...
These could be the case when you have a head office and it may set-up regional
offices/branches where certain functions are delegated to the regional office
...
GasanMamo has a regional office in Mellieha, Paola, and Naxxar
...
Hybrid
a
...
It is
a combination of a Functional and a Divisional structure
...

E
...
In the diagram it is noted by the letter D
...
We have a
product manager A for product A, another for B and another for C
...
This is a
complex situation of people responsible for different items although their responsibility
overlaps with others
...
In this
core, you will find people who are in a position to take decisions
...
It generates stability and it is
also an efficient company because powers are derived from 1 source
...
So if you need a lawyer, the same
lawyer will cater to all the branches
...
It is
cheaper to run because of this
...
BOV has a head office but it also has regional centers
everywhere in Malta, and they may be linked to the head office, but these regional office are

decentralised which means, they have the authority and power to take decisions independent of the
head office
...
They each have their own manger and decision making power
...

When there are support functions (In IT, keeping of Accounts, areas like general administration, to
recruit people), usually on a one off basis, it doesn’t justify to have a department, you have to outsource
the function eg to go to ETC, Misco… Outsourcing has the advantage of helping an organisations and it
should have the advantage of being cost effective, reducing work load of the company, being staffed
with expertise, saving time and effort
...
To outsource the marketing of such
a product it is very risky because of leaks to competitors
...
To outsource we need o factor the size of the company, the cost of such outsourcing, the
specialization, look at our own staff in terms of ability time and competency, etc…

Strategic vs Operational Planning
Strategic Planning is formulated by the Board of Directors
...

Strategic Planning – look at slides
...
Aims are the broad and the ultimate
achievement that is required by the board (eg to become leaders in Life Assurance)
...
One of the objectives could be to ensure
that family income is safeguarded through a number of products (so we need to produce to products to
target infants, babies, teens, school children, adults, old people, etc…)
A strategic plan can change especially in a volatile market environment
...
There can be strategies that can change the whole philosophy of the company
like mergers, acquisitions, etc…
To Shape Strategy we have to look at the external environment using the PESTLE (Political, Economical,
Socio-Cultural, Technological, Legal, and Environmental factors)
...
Usually, the
CEO is responsible for this, unless there is a Chief Operations Officer
...
Goal have to be SMART; s= Specific, M= Measurable, A= Attainable, R=
Result Oriented, T= Time Based
...
All of
these operations come in a certain form of parameters; Money (in the form of a budget), Resources
Available, Set Processes, and also that they are operating in an environment which is within certain
quality boundaries to ensure the best possible product/service is being undertaken, and that these are
processes that are compliant with laws and regulations of the organisation
...

SWOT
Strength refers to our current strengths in the current environment, while opportunities look at the
future and external opportunities that may arise
...
The threats are the potential mishaps, circumstances that
could threaten the company in achieving less success
...

 To use new technology
 Diversification of products
 Targeting Opportunities
 Opportunity to befriend the press
(apologize after falsifying data)

Weaknesses
 Seasonal Products
 Inefficiency (more people, no return)
 Lack of innovation
 Old Equipment
 Limitations
Threats
 Competitors
 Losing money on export
 Culture threats (weight)
 Campaigns
 Falsify data (lose faith because of lies)

Life Assurance Case Study
If they want to invest further to grow, they need to set a new objective, and look at the company in a
broader way and try to make full use of its resources
...

With the technology present today, there is opportunity to sell online using electronic medium
...


Data Management
When you access a site, they ask you for personal information, ie data
...
We need a particular system that sorts out the data
...
The results and findings from this sorting is
done so that decisions are take in a meaningful way
...
The decisions taken are then
categorized as strategic, tactical or operational decisions
...
Data capture is very easy because we have technology on our
side
...
Data capture is
to capture as much data as you can and has to be complete
...

Data process is the sorting of data which is done electronically
...
Data is vital and has to be stored adequately
...
The MFSA
runs a duplicate system in other premises 10km away from its location and this system is mirrored in
another location so that if there is a fire, data would not be lost and be preserved
...
Access means, who can view the data? Data
can be strategic – data which the Board views, tactical data – data which is relevant to managers eg
budgets and returns on projects, and data can also be operational data – day to day data
...
A proper data processing system can answer questions
...
Depending on the query, the insurance
system will return a decision
...
The bottom diagram shows customers who are providing information,
captured and processed and relayed to the respective department if it is needed
...
In insurance, data is compared to own data
...
The more data you have, the more you can
establish trends
...
Trend is what happened so far,
and tendency is what may happen in the future
...
We also have to compare with the competitors to see how they are doing and to
see if we are doing better
...

IT manager
An IT manager does management of the information system
...
He must also ensure that records are processes and returns relevant data to
the enquirer
...
An IT manager will also have a central database system to which equipment is connected
...

Control
Operational control restricts access to information to the day to day running of business
...

Management control allows certain people to access certain information such as profitability,
performance, effectiveness, attainment of budgets
...

Management Information Systems Worksheet
1 – Sort by gender, claim, amount, or even by year to look out for trends
...

5 – Sort by Amount of theft claims,
6 – Sort by occupation, age, gender, type of cover,
7 – Sort by number of years, no of policies,
8 – Sort by class of insurance, age, occupation, gender,
9 – Sort by premium, claims, the number of policies, the number of people insured
10 – Sort by location
11 – Sort by market statistics
12 – Sort by the agents that you have and denote the number of sales, customer turnover, premium
13 – Sort by location where most thefts occur
External Information and the use of informational systems worksheet
1
...
It is doing poorly in terms of premium as from
2,000,000 it is only ending up with 80,297 in profit
...

3
...
They are similar organisation, but BHP is doing better
because it is reinsuring its risks better and in fact it has made several reinsurance recoveries when it
comes to claims and so there is higher profit
...
A budget is prepared purposely
to set a financial plan which is prepared a year ahead and through this we commit resources and costs
...

Types of budgets
1
...
You start from the very top and
each and every sector would have their own allocated funds and they have to work with such a
fund
...
Bottom up budget – it is used in medium sized companies where they ask the respective
departments (eg motor department, reinsurance department, etc…) to prepare their own
budgets known as mini-budgets, so they ask for money to be able to operate
...

Flexible budgets are those budgets which are not fixed
...
Zero based budgeting – To start from a clean sheet (no budget at all), and what you need you
buy
...
You spend as the vase may be
(typical of family business)
...
Rolling budget – it is a complex budget
...
It is not an annual budget, and has really no end
...
You move on, so every February you create a budget for next February, and
the next month you prepare a budget for next march, and so on
...
An integral part of management is to control resources
...

The score card will include objectives measures, targets and initiatives
...
An internal audit is part of the company
...
It is a very important structure within the
organisation and it is required by the MFSA
...
They check upon the management
...
This unit reports directly to the board of
directors
...
The external auditor reports its findings to the
shareholders
...
It is
important that they work independently
...
A manager needs certain skills to enable him to operate
effectively
...
A leader needs to
incorporate these 3 aspects, the technical aspects, the administrative aspects, and the human’s aspects
...
When we talk about such skills, we are trying to achieve what is known
as action centre leadership incorporates the tasks that need to be undertaken into projects by assigning
them to a team of people
...

Peter Drucker is a person who has done a lot of work on management studies and is a pioneer on
identifying on what skills a manager’s requires
...
Motivation is a tool used by
managers to motivate an individual
...
He said that employees
are not only motivated by just giving them more money, but there a series of motivational factors that
will drive an employee; physiological factor`s(food, shelter, warmth ie the basic needs), safety needs
(shelter), social needs, esteem needs, self-growth
...
Social interaction is needed as he has to communicate somehow
...
Growth is to continuously look at
developing your skills
...
But what if they are not trained,
and they stay?
Herzberg found several factors that stood, and if these factors were going in the wrong direction, this
would have a negative impact on motivation
...

Management styles

3 is the worst position
...
Number 1 is bad as
well as it is bad for business
...
5 is the best when trying to
integrate not accommodate or trying to balance positions
...
Completer
finisher (to be bothered with detail ie the detailed persons), specialist (that team player who is
technically knowledgeable), coordinator ( the one who has the skill to bring the ideas together), team
worker (makes sure that the team as individuals do not slack, and are always coordinated to pull the
same rope and all the time moving ahead in the same direction), implementer ( the person who knows
how to get on with it, and the one who sets in motion acts and plans), monitor evaluator (the person
who is focused and moving in line with the objective), plant (the creative team member and the one
who comes up with ideas and thinks outside the box), resource investigator (that person who is usually a
PRO as a resource investigator is the one who connects the team to the outside world
...

Leadership skills;
Communication, delegation, Decision making, coordination, etc…
Communication is a very important aspect within the operations of an organisation
...
When it is something that needs to be actioned or permanent, communication has to
be written
...

There are different methods of communication and one of the most effective way is brain storming
...
A good manager needs
to listen and to integrate all the ideas of those involved in the team
...
The best way to get employees working at a level motivation that gets them by is
to ask for their ideas
...
Delegation has another feature

which needs to be amplified
...

Decision making is part and parcel of management
...


Project Management
These are one off assignments that are entrusted to a manager/leader to ascertain in certain
parameters eg time, money, and resources
...

Recruitment – Nowadays, companies can out-source this function, and they can find the right
employees on behalf of the company
...

These companies are equipped with the best staff for the recruitment process
...
When one is recruiting, a set
of job requirements are set up ie what skills, what knowledge, what competence is required, the job
description (what is the person expected to do), etc…
The process is done by group dynamics, discussion, role plays, personality, intelligence, and
performance
...
Today, the extent of business that you can undertake is great
...


Change Management
Research and development has changed the world of insurance
...
Changes have to be made in products, regulation and governance (3 functions
that need to be in place to ensure that companies are solvent, ethical and able to perform their trade
promises; Risk management, Internal Audit and compliance)
...
Organisations need
to live up to customer expectation reputation, business image, observe a code of conduct( rules for the
organisation to obey in a professional way), market, standard, TCF, conflict of interest, technical/legal,
trust, regulated, economic financial, changes, CRM
...
CRM is an innovative tool that captures
the interest of customers

---