Caib 4 Complete

Top down approach - management decides unilaterally on a mission, strategies, and objectives and instructs individual business units to achieve established objectives

Bottom-up - management still provides the mission and broad strategies, but leaves development of objectives, goals, and activities to the individual units

A combination of both is most effective

1) Simplicity

2) Practicality

3) Severability

4) Flexibility

- Strategic plan gives direction to the action plan

- Action plans must contain specific activities to support fulfillment of strategic plan

1) Scanning external environment

2) Analyzing internal environment and asessing current position

3) Matching strengths and weaknesses to opportunities and threats

4) Defining a corporate focus

5) Developing strategies

6) Developing objectives

7) Setting goals

The purpose of strategy creation is to describe how the brokerage intends to achieve its mission.

1) Controlling implementation

2) Linking budgets to strategies, objectives, and goals

3) Motivating

1) Creating an organizational structure

2) Defining employee relationships

3) Establishing position descriptions

1) Line organization

2) Functional organization

3) Line and Staff organization

In order to avoid confusion the flow of authority and responsibility must be clearly defined

1) Sole Proprietorship

2) Partnerships

3) Corporations

1) Loosley Knit Affiliations

2) General Purpose Groups

3) Clusters

4) Common Identity Groups

1) Services and Support

2) Exclusivity

3) Fees

4) Contractual Agreement

5) Financial Strength

Is a law that imposes a higher standard of conduct on agents than is required in the normal care of business

Agent - selling insurance as agent of insurance company providing coverage

Broker - selling insurance as agent of part buying insurance

1) Express Authority - abything legal parties agree to, either verbally or in writing

2) Implied Authority - law and custom permit other acts to be undertaken which are deemed neccessary in conjunction with the express authority

3) Apparent Authority - authority an innocent third party might perceive a brokerage has, but it has not been given by insurance company

After a transaction has been completed, the insurance company, with full knowledge of the unauthorized act, accepts what the brokerage has done, it is as if insurance company granted authority in first place

1) Brokerage appoints an individual to represent it

2) Brokerage places business through another broker

1) Planning

2) Selecting

3) Orienting

4) Training

5) Developing and Recording

6) Managing employee performance

1) Less Expensive

2) Length of vacancy should be shorter

3) Takes guesswork out of hires

4) Reduces turnover

Explanation of performace expectations

1) Quality Service Training

2) Sales Training

3) Product and Service Knowledge Training

4) Leadership Training

1) Delegating

2) Motivating

3) Communicating

4) Managing Conflict

5) Managing Change

6) Coaching

- Key factor is communication

- Delegation breaks down when the balance between responsibility and authority is not maintained or when communication between the parties is not clear

1) Communication Skills

2) Mutual Respect

3) Interactive Problem Solving

4) Win-win solutions

1) Tradition

2) Past Failures

3) Lack of time or too many currnet priorities

4) Unpredictibility of the Future

1) Assessing Performance

2) Setting Goals

3) Self Evaluation

4) Rewarding

5) Mentoring

- Right to bind certain coverages

- Eligibility to partake in profit sharing

Direct Bill - clients billed directly by insurance company

Agency Bill - brokerage bills clients directly

1) Marketing philosophy and practises

2) Claims Services

3) Policyholder Services

4) Financial Stability

5) Underwriting Procedures

6) How many insurance companies

- a system of business activites which are designed to plan, promote, price, and distribute want satisfying products, services, and ideas to target markets in order to acheive the objectives of both the consumer and the company

- placing business by an insurance brokerage with various insurers

- Insurance companies promoting their products to brokerages

- Insurance companies promoting their products to consumers

1) System of Business Activites

2) Value

3) Products, Services, Ideas

4) Objectives of the Consumer and Organization

1) Marketing Segmentation

2) Differentiation

3) Market Positioning

- determines which product line to offer, the services surrounding the core products, the choice of brands to offer, and manner in which products will be packages or bundled

- positioning refers to how the brokerage is perceived by clients in relation to competing brokerages

- Differential Advantage refers to any feature, service, or product offered by the brokerage which differentiates it from others and provides an advantage

1) Demographics

2) Geographic Information

3) Psychographics

4) Behavioral Variable

5) Relationship Variable

1) undifferentiated

2) Differentiated

3) Niche Marketing

4) Customized Marketing

- some customers are in a position in the community to influence others

- those clients that speak positively about the brokerage are amongst the most valuable clients

1) Retention

2) Refferals

3) Recovery

1) By Client

2) By Branch

3) By Product

4) By Employee

1) Enhance Profitibility

2) Build Client Relationships

3) Improve Effectiveness

1) Single entry interface

- advantage: communication costs are less

- disadvantage: response to transaction is not immediate

2) Interactive Interface

- advantage: gives brokerage immediate access to some of insurance companies database

- disadvantage: duplicate information entry still may be required

- Profit Maximization = more profit the better

- most brokerages are too distracted by the day to day operation that they are distracted from a profit focus

- it does not take into account the profitiblity of the brokerage

1) Employee Incentive Plans

2) Lease Arrangements

1) Acid Test

2) Equity to Debt Test

1) Cost per Account

2) Revenue per Employee

3) Lapse Ratios

4) Commission Lapse Ratio

5) Poilcy Count Ratio

6) Expense Ratio - most meaningful

7) Close Ratio

- is the culmination of the management process and ensures the effectiveness of the planning, organizing, staffing, and leading processes

- gathers and presents information in a form useful for measuring performance

Characteristics are:

- Simplicity

- Accessibility

- Merge Capability

- Adaptability

1) Financial Data

- typically extracted from previous budgets, major weakness is it does not recognize changing economic or competitive conditions

2) Sales Data

- sales info is closely tied to the planning stage of management

- More precise the sales plan is, the more precise the standards will be that are established