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CAIB 4 Exam 105 Questions and
Answers with Complete Solutions 2025 -
What nare nthe ntwo napproaches nto nplanning? nExplain neach n- nANS-1) nTop nDown nPlanning n- nManagement nprovides nthe nmission, nstrategies, nand nobjectives nfor nthe nbrokerage
- nBottom nUp nPlanning n- nManagement nprovides nthe nmission nand nbroad nstrategies. nLeaves nthe nobjectives, ngoals nand nactivities nto nbusiness nunits. What nare nthe nadvantages nand ndisadvantages nof ntop ndown nplanning? n- nANS-Advantages: nManagement nfeels nin ncontrol nand nin ncharge nof ndecision nmaking. Disadvantages: nhard nto nget nbuy-in nfrom nemployees What nare nthe nadvantages nand ndisadvantages nof nbottom nup nplanning? n- nANS- Advantages: nbusiness nunits nhave nownership nand nbuy nin. Disadvantages: nManagement nfeels nless nin ncontrol, nthere nmay nbe nresistance nto nchanges nmade nto nthe nplan nby nmanagement. Why nis nTop nDown nplanning nnot nsuitable nfor na nsmall norganization. n- nANS-Stifles ninnovation, nslows ndecisions, nmanagers nneed nto nknow ntoo nmuch, What nare nthe nfour ncharacteristics nof na nplan? n- nANS-1) nSimplicity
- nPracticability
- nSeverability
- nFlexibility Explain nSimplicity n(2 npoints) n- nANS-The nplan nshould nbe nexplainable nin nsimple nterms. The nplan nshould nbe nimplemented nwithout nextensive ntraining nwhile nemployees ncontinue ntheir nday nto nday noperations. Explain nPracticability n- nANS-The nplan nmust nbe nrealistic Explain nseverability n(2 npoints) n- nANS-The nparts nof na nplan nmust nbe nseparate nand nidentifiable. Each nbusiness nunit nmust nsee nhow nto napply nit nto ntheir narea Explain nflexibility n- nANS-A ngood nplan nmust nallow nfor nmodification nas nit nis nimplemented.
Explain nthe ndifference nbetween na nstrategic nplan nand nan naction nplan n- nANS-Strategic nplans nare nbroad nand ncover n 3 - 5 nyears. Action nplans ngive nspecific nactivities nto nsupport nSP. nThey napply nto na nparticular nunit nand ncover n 1 - 3 nyears, ntypically none nyear. How nmany ncomponents nof na nstrategic nplan nare nthere? n- nANS-Seven. What nare nthe nfirst nthree ncomponents nof na nstrategic nplan? n- nANS-a) nScanning nthe nexternal nenvironment. b) nScanning nthe nInternal nEnvironment c) nMatching nstrengths nand nweaknesses nto nopportunities nand nthreats. Explain n"scanning nthe nexternal nenvironment" nand nits ntwo nsub ncategories. n- nANS- Scanning nthe nexternal nenvironment nlooks nat nthe ncompetitive nenvironment nand nattempts nto nidentify nopportunities nand nthreats. They nlook nat nthe ndistant nenvironment nand nnear nenvironments. Explain nthe ndistant nenvironment. n- nANS-Factors nthat nare ncritical nto nthe nsurvival nof nthe nbrokerage, nbut nover nwhich nit nhas nno ncontrol. nExample: nHard nand nsoft nmarkets. nChanges nto nlaws. nTechnology. Explain nthe nnear nenvironment. n- nANS-Factors nover nwhich na nbrokerage ndoes nhave ncontrol. nExample: nClients nand nprospects, nmarket nsegment ntargeted, ndirect ncompetitors. What nare nthe nthree ntypes nof nprofiling nwithin nNear nenvironment nscans? n- nANS-Competitor, nmarket, nand nclient nprofiling. Competitor: nSize, nfinancial ncondition, nand nlocation nof nhead noffice. Market: nTotal nmarket, nmarket nsegments nwhere nthey ncompete, nand nthe nmarket nportion nthat nthey nserve. Client: nFind na nclear nunderstanding nof nthe nnature nand ncharacteristics nof na nbrokerage's nclients. Explain nSWOT nand nthe nneeded nactions ngiven nthe nfour nscenarios n- nANS-If nthere nis na nweakness nwhere nthere nis na nthreat n- nImmediate nAttention If nthere nis na nweakness nwhere nthere nis nan nopportunity n- nResources nshould nbe nallocated nto ncapitalize nlater. If nthere nis na nstrength nwhere nthey nis na nthreat n- nNo naction nneeded If nthere nis na nstrength nwhere nthere nis nan nopportunity n- nit nshould nbe nimmediately ncapitalized non Recite nthe nvision nstatement n- nANS-Protection nof nassets nby nprotecting nwhat nis nnear nand ndear nto nour nclients Recite nthe nvalue nstatement n- nANS-We nseek nand nencourage ninnovative nsolutions nto nproblems nthat ndeliver nresults nfor nour nclients.
Disadvantages: nConflicts ncan narise nwhen nmanagers ntry nto nassert nline nauthority, nline nmanagers ncan nresent nseeking nadvice, nthere nis na ncost nassociated nto nproviding nstaff nadvice. Define na npartnership, nwhat nare nthe ntwo ntypes nof npartnerships? n- nANS-A npartnership nis na nvoluntary nassociation nof ntwo nor nmore npersons nwho nare nco-owners nof na nbusiness. General nand nlimited. Explain nGeneral nand nLimited nPartnerships n- nANS-General n- nAll npartners nare ngeneral nwith nequal nrights nand nresponsibilities nwithin nthe ncompany Limited n- nAt nleast none ngeneral nand none nlimited. nThe nlimited nare nlimited nto nthe namount nof ntheir ninvestment. What nare nthe nfour ntypes nof noperating naffiliations? n- nANS-Loosely nknit naffiliations, nGeneral npurpose ngroups, nClusters, nCommon nIdentity nGroups. What nis na nLoosely nKnit nAffiliation? n- nANS-Informal ngathering nof nowners nand nmanagers What nis na ngeneral nPurpose nGroup? n- nANS-Formalized nLKA, nprovide neducation, npreference nfrom ninsurance ncompanies, nand ngeneral ninfo. What nis na nCluster? n- nANS-A ngroup nof nbrokerage nseeking nback nroom nservices nand neconomies nof nscale. What nis na ncommon nidentity ngroup? n- nANS-Groups nestablished nto nestablish nan nimage nand nresources non na nnational nor ninternational nscale. What nare nthe nfive ncriteria nfor nevaluating nOperating nAffiliations? n- nANS-Service nand nsupport Exclusivity Fees Contractual nAgreement Financial nStrength Explain nwhy nservices nand nsupport nare nimportant nto noperating naffiliations: n- nANS-The nservices noffered nby nthe nOA nmust nbe nattractive nto nthe nbrokerage naiming nto njoin. nDifferent ntypes nof nOAs noffer ndifferent nservices, nmake nsure nit nis nworth nthe nfeed nand ntime nspent. Explain nwhy nExclusivity nis nimportant nto noperating naffiliations: n- nANS-Brokers njoin nOAs nto ngain nan nadvantage nof none ntype nor nanother, nIf nit ndidn't nboost ntheir ncapabilities nthey nwouldn't njoin. nIf nthe nclub nisn't nexclusive nin nsome nway, nand nallows neveryone nin, nIt nwon't nbe nof nmuch nuse. Explain nwhy nfees nare nimportant nto noperating naffiliations: n- nANS-How nmuch nit ncosts nto njoin nis na nbig nfactor nin nchoosing nan nOA. nIf nyou ncan't nafford nthe nfees, nthen nthere's nno nsense njoining.
Explain nwhy ncontractual nagreements nare nimportant nto noperating naffiliations: n- nANS-The ncontract nlays nout nwhat nis nexpected nof nthe nbroker nand nwhat nbenefits nthe nOA nwill nprovide. nIt nis nthe nnature nof nthe nagreement nand nshould nbe ncarefully nreviewed. Explain nwhy nfinancial nstrength nis nimportant nto noperating naffiliations: n- nANS-It nis nnot nenough nfor nthe nOA nto npromise nsome nservice nor nanother. nIt nmust nalso nhave nallocated nthe nmoney nnecessary nfor nthe nproject. What nare nthe nthree nkinds nof nauthority ngiven nto nan nagency nby nan ninsurance ncompany: n- nANS-Express nauthority, nimplied nauthority, nand napparent nauthority. What nis nexpress nauthority? n- nANS-Anything nlegal nthat nthe nparties nagree nto, neither nverbally nor nin nwriting. What nis nimplied nauthority? n- nANS-Acts nbased non nprecedent nor ncustom nwithin nthe nindustry nare naccepted nby ninsurance ncompanies. What nis napparent nauthority? n- nANS-Authority nthat nan noutsider nmay nthink nthe nbrokerage nhas nbut nwhich nit ndoes nnot nhave. Discuss nratification n- nANS-Ratification ntakes nplace nwhen na nbroker nsteps noutside ntheir nauthority nto nbind na nrisk nand nthe ncompany, nwith nfull nknowledge nof nthis nmisstep, nagrees nto nplace ncoverage nunder nthe nterms nthat nthe nbroker nset, nbackdated nto nthe nday nthe nagreement nwas nmade nwith nthe nclient. What nare nthe nparts nof nplanning nwith nrespect nto nHR n- nANS-1) nEvaluate nexisting nability nto ngenerate nsales nand npremium ngrowth nand ndetermine nif nthe nexisting nemployee nbase nis nenough nto nmeet nthe ndemands.
- nEstimate nthe nHR nneeds nto ncarry nout nthe nstrategic nplan
- nLay nout nthe nskills nthe nnew nemployees nwill nneed, nthe nhiring ntimetable, nand na ncontingency nplan. What nare nthe nthree nphases nin nSelecting nemployees nin nand nHR nplan, n- nANS-Recruitment, nScreening nand ninterviewing, nand nhiring. Explain nrecruitment n- nANS-The nprocess nof nbuilding nawareness nof nthe nposition, nsearching nfor napplicants, nand nattracting nqualified npeople nto napply. Explain nscreening nand ninterviewing n- nANS-This nis nthe nprocess nof ndeciding nwhich ncandidates nare nbest nqualified nand nwho nshould nbe noffered nthe njob. Explain nHiring n- nANS-Giving nand nformal nletter nof noffer nand nobtaining na nnon-piracy nagreement.
- nPast nFailures n- nExplain nhow nthis nchange ncan nbe nsuccessful nbecause nwe nlearned nfrom npast nfailures.
- nLack nof ntime n- nPut noff ndoing nthings nright ntoday nso nthat nwe ncan ndo nthem nright ntomorrow.
- nUnpredictability nof nthe nfuture n- nThe n"do-nothing" napproach ndoes nnot ntake ninto naccount nthe ncontinuing nuncertainties nthat nbrokerages nface. What nis nthe ndifference nbetween nagency nbilling nand ndirect nbilling n- nANS-Agency nbilling ncomes nfrom nthe nbrokerage nand nis npassed nto nthe ncompany. nDirect nbilling nis ndone nthough nthe ncompany. What nare nthe nadvantages nand ndisadvantages nof ndirect nbilling? n- nANS-Advantages: nCollection ncosts nare nreduced nfor nboth nthe nbrokerage, nand nthe ninsurance ncompany. nAdmin ncosts nfor nbrokerage nare nreduced. Disadvantages: nCan't nuse npremiums nwhile nheld, nbroker nlacks ncontrol nover nprep nand nmaintenance nof npolicies, nloss nof npersonal ncontact nwith nclients, ninaccessibility nto nthe ninsurance ncompany's nrecords. What nare nfour nfactors nthat ncontribute nto nhow nattractive nan ninsurance ncompany's nunderwriting npractices nare? n- nANS-Location nof nunderwriting ndecisions n- nWhere nthe ndecision nare nmade, nhow nmany nunderwriters nwill nyou ndeal nwith, ndo nthey nclass nunderwrite? Underwriting nguidelines n- nAre nthey nasking nfor nmassive namounts nof ninfo nevery ntime? Rate nlevels n- nare ntheir npremiums nfair nfor nthe nservices nthey nprovide? Competence nand ncontinuity nof nstaff n- nAre ntheir nunderwriters ngood. nDo nthey nstay nin na nrole nlong nenough nto nbuild nand ncapitalize non na nrelationship, nor ndo nthey nchange nall nthe ntime? Discuss nwhy nit nis nnot neffective nto nhave nmultiple ncompany nrepresentation. n- nANS-Less npremium nwith neach ncompany, na nsingle nloss nmay naffect nloss nratio ndrastically, ncustomers ndon't ncare nif nyou nrepresent nall navailable noutfits. What nare ntwo nchannels nfor ncompany/broker nrelations? n- nANS-Formal n- nWritten npublications, nletters, nvisits. Informal n- ncocktail nparties, ngolf ngames. Q: nWhat nare nthe nthree nphases nof nmarketing? n- nANS-A: nToolkit, nStrategy, nCulture. Discuss nmarketing nas na ntoolkit. nWhat nare nthe nfour nPs? n- nANS-Price, nplace, nproduct, nand npromotion nIf nyou nhae nthe nfour nPs nin norder, nthe nclients nwill ncome. Discuss nMarketing nas na nStrategy n- nANS-Strategic nabout nwhat nyou're nmarketing nby n- nMarket nsegmentation, nDifferentiation, nMarket nPositioning Discuss nmarketing nas nCulture. n- nANS-Everything nwithin nthe ncompany nis nfocussed non nbuilding nclient nsatisfaction. nThey nwant ntheir nclients nto nbe nretained, nand nalso nto nrecommend nthe ncompany nto nothers.
Explain na nproduct n(3 npoints): n- nANS-Which nproduct nlines ndo nwe noffer, nservices nsurrounding ncore nproducts, nthe nchoice nof nbrands nto noffer. nNot njust nthe ncontract nof ninsurance, nit's nthe nservices naround nthe nproduct. Explain nprice n- nANS-Price nis nthe nbase nprice nof nthe npolicy nplus ncredit nterms nand nfees. Explain nplace: n- nANS-Used nto nbe nthat nthe nbrokerage nhad nto ndecide nwhere nthe nbranch nwould nbe nand nwhen nto nbe nopen. nNow nit nshould nfactor nin nwhether nor nnot na ncall ncentre nis nneeded nand nif nan nonline npresence nis nneeded. Explain nPromotion n- nANS-The ncommunication nof na nmarketing nmix. nHas nmany nfactors. Explain nPeople n- nANS-The nemployees nwho ninteract nwith nclients nare na nkey nfactor nin nbuilding na nlong nterm nrelationship. What nis npositional nAdvantage? n- nANS-How nthe nbrokerage nis nperceived nby nclients nin nrelation nto ncompeting nbrokerage. nA nbrokerage nwho ncan ndifferentiate nthemselves nwill ngain nan nadvantage. nThis nis nin nterms nof nhow nit nis nPERCEIVED. What nis nDifferential nAdvantage? n- nANS-Any nFEATURE, nSERVICE, nor nPRODUCT nthat nsets nit napart nfrom nothers nand nprovides nand nan nadvantage. Define nDemographics nand nlist n 6 nsubtypes, nexplain neach: n- nANS-Grouping nclients ntogether nbased non npersonal ninformation nsuch nas nage, ngender, nlife-cycle, neducation, noccupation, nethnicity. What nare nthe nthree nbasic nprinciples nfor nselecting ntarget nmarket nsegments? n- nANS-1) nThe nbrokerage nmust nexercise ncare ntarget nsegments nare ncompatible nwith nthe nGOALS nAND nIMAGE nof nthe nbrokerage,
- nThe nbrokerage nmust nbe nable nto nmatch nRESOURSES nto nthe ntarget nmarkets
- nConsider npotential nof nsegment nto ngenerate nsufficient nbusiness nand nincome nto nmake nthe ninitiative nworthwhile. What nare nthe nfour nbasic ntarget nmarket nstrategies nthat ncan nbe nused nto ndevelop nthe nfour nPs? n- nANS-1) nUndifferentiated n- nOne nmarketing napproach nfor nentire nmarket.
- nDifferentiated n- nDifferent nmarketing nmix nfor neach nof nthe ntarget nmarkets
- nNiche nMarketing n- nOnly none ntarget nmarket nand nconcentrate nall nefforts non nthat nmarket
- nCustomized nMarketing n- nA nselective nmarketing nmix nfor neach nclient What nare nthe nfive nways nthat na nbroker ncan nbe nviewed nas nthe nproduct? n- nANS-1) nAttitude n- nposive, nprofessional, ncinfident nand nsincere
- nAppearance n- nstrive nto nimpart na nprofessional nimage nof ntheir nbrokerage ntheir nproducts, nand ntheir nworkspace nand nthemselves
- nKnowledge n- nsuccessful nbrokers nare nconcientious nof ntheir nlevel nof nknowledge
- nMotivation n- nInherrent nattribute nof nsuccessful nbrokers. nCare nabout nclients, ncare nabout nfate nof nbrokerage
What nare nthe nadvantages nof nElectronic nDate nInterface? n- nANS-1) nCan nTrack nClient nactivities
- nReduction nin nwork nDuplication
- nDecrease nin nmailing ncosts
- nImproved nCommunications nand nworking nrelationships What nare ntwo ntypes nof ninterface? nList nthree nadvantages nand ndisadvantages nof nthe nsecond none. n- nANS-1) nSingle nEntry nInterface
- nInteractive ninterface n- nAdvantages: nLittle nadditional ninvestment, nintegrate nnew nor nchanged nproducts neasily, nImmediate nAccess. nDisadvantages: nDuplicate nentry nmay nstill nbe nrequired,Ongoing ntraining nis nnecessary nto nkeep nemployees ncurrent, nnot nstandardized namongst ncompanies nand nseparate nprocedures nwith neach ncompany nwill nbe nneeded.
- nadvantages nand ndisadvantages n- ncost nand nconfidentiality. What nare nthe nbenefits nof nbudgets? n(Can nbe ncombined nwith nthe nnext ncard) n- nANS-Budgets nare nprojections nof nanticipated nincome nand nexpenses nthat nforce nbrokerage nprincipals nto nexamine nincome nand nexpenses nplus nplan nthe nfinancial nresults nthey nexpect nto nachieve. What ntwo ncategories nare nwithin nbudgets: n- nANS-1) nRevenue n- nmoney ncoming ninto nthe nbrokerage nsuch nas ncommissions, ninvestment nincome, nand nother nincome
- nExpenses n- nMoney nthe nbrokerage nneeds nto npay nto noperate n- nAccounts npayable nto ninsurance ncompanies. nLease npayments, nsalaries, nAP nto ninsurance ncompanies. Discuss nbank naccounts nand nhandling nof npremiums n- nANS-Provincial nlegislation ngoverns nhow npremium nfunds nare nhandled. nBrokerages nmust nhave ntwo nbank naccounts. nOne nis nan noperating naccount, nand none nis na ntrust naccount. nWithdrawals ncan nonly nbe nbrokerages ncommissions, nnet npremiums, nand nrefunds. What nare nthe naspects nof nan nAccounts nReceivable nPolicy? nDiscuss. n- nANS-Payment narrangements n- nOutlines nwhen npayment narrangements nare nto nbe nmade nand nshould nbe nwhen nthe nbusiness nis nwritten Credit nChecks n- nIf nsomeone nwants ncredit, nmaybe nmake nan nagreement nwith na nbureau Payment nMeothods n- nThere nare nnumerous npayment nmethods, npolicy nmust noutline nwhat nwe ntake. Responsibility nfor nFollow nUp n- nWho nwill nexecute nand nenforce ncredit npolicy Performance nplans nare nlinked nto nemployee nperformance nand nthere nare ntwo ntypes: n- nANS- Profit nsharing n- ncommits nto nsharing nactual nprofits Stock npurchase nplans n- nRight nto npurchase nstock nimmediately There nare nthree ntests nused nto nassess nthe nfinancial ncondition. nList nand nexplain. n- nANS-1) nAcid ntest n- nCompares nassets nto nliaiblities nto ndetermine nhow nquickly nthey ncan nbe nconverted ninto ncash.
- nEquity nto ndebt ntest n- nReveals nhow nmuch nthe nbrokerage nowes nvs nowns.
- nWorking nCapital nDefence nInterval n- nShows nhow nlong ncurrent nworking ncapital nwill ncoverage naverage ndaily nexpenses.
What nare ntwo ntests nof nefficiency? n- nANS-1) nThe ncost nper naccount nratio.
- nRevenue nper nemployee nratio
- nLapse nratio
- nExpense nratio
- nPolicy nCount nRatio What nare nthe nfour ncomponents nof nthe nmonitoring nprocess? n- nANS-1) nA nManagement nInformation nSystems n- nThe ngathering, ncollating nand npresening ninfrmation nin na nmatter nthat nis nuseful nfor nmeasuring nperformance.
- nStandards nand nBenchmarks n- nto naccurately nmeasure nperformace, nstandards nand nbenchmarks nmust nbe nadopted nand nwe nmust ncheck nto nsee nif nyou're nmeeting nthem
- nResults n- nDo na ncomparison nof nthe nactual nperformance nwith nthe nestabilished nstandards
- nCorrective nActions n- nIdentify nareas nof nconcern nas nearly nas npossible nand nto naddress ncritical nissues nby ntaking ncorrective naction. What nare nthe nfour ncharacteristics nof nan neffective nmanagement ninformation nsystem? n- nANS-1) nSimplicity
- nAccessibility
- nMerge nCapability
- nAdaptability What nare nthe ntwo nsets nof nstandards? n- nANS-Historical nStandards n- nwhat nhas nbeen ndone nin nthe npast. Engineered nstandards n- nSpecifically nengineered nfor na ngroup
