930 - Apr 11

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THE CHARTERED INSURANCE INSTITUTE. 930. Advanced Diploma in Insurance. Unit 930 – Advanced insurance broking. April 2011 examination.
THE CHARTERED INSURANCE INSTITUTE

930 Advanced Diploma in Insurance Unit 930 – Advanced insurance broking April 2011 examination

Instructions •

Three hours are allowed for this paper.



Do not begin writing until the invigilator instructs you to.



Read the instructions on page 3 carefully before answering any questions.



Provide the information requested on the answer book and form B.



You are allowed to write on the inside pages of this question paper, but you must NOT write your name, candidate number, PIN or any other identification anywhere on this question paper.



The answer book and this question paper must both be handed in personally by you to the invigilator before you leave the examination room. Failure to comply with this regulation will result in your paper not being marked and you may be prevented from entering this examination in the future.

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The Chartered Insurance Institute 20 Aldermanbury, London EC2V 7HY Telephone: 020 8989 8464 Fax: 020 8530 3052 Email: [email protected]

© The Chartered Insurance Institute 2011 1711

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Unit 930 – Advanced insurance broking Instructions to candidates Read the instructions below before answering any questions •

Three hours are allowed for this paper which carries a total of 160 marks, as follows: Part I Part II

1 compulsory question (case study) 2 questions selected from 3 (scenarios)

80 marks 80 marks



You should answer the question in Part I, and two out of the three questions in Part II.



You are advised to spend no more than 90 minutes on Part I and 45 minutes on each question selected in Part II.



It is recommended that you spend 15 minutes reading and planning your answer to the case study and 75 minutes answering it, and that you spend 10 minutes reading and planning your answer to each scenario and 35 minutes answering it.



A case study tests extensively across syllabus learning outcomes, whilst a scenario will be more focused on specific learning outcomes.



Read carefully all questions and information provided before starting to answer. Your answer will be marked strictly in accordance with the question set.



You may find it helpful in some places to make rough notes in the answer booklet. If you do this, you should cross through these notes before you hand in the booklet.



It is important to show each step in any calculation, even if you have used a calculator.



If you bring a calculator into the examination room, it must be a silent battery or solar-powered non-programmable calculator. The use of electronic equipment capable of being programmed to hold alphabetic or numerical data and/or formulae is prohibited. You may use a financial or scientific calculator, provided it meets these requirements.



Answer each question on a new page. If a question has more than one part, leave six lines blank after each part.

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PTO

PART I Case study. This question is worth 80 marks. To gain maximum marks you should include relevant examples and further reading in your answer. 1.

Case study You are the recently appointed Junior Partner in a small, well-established brokerage in a semi-rural area. Over the past five years the business has hardly grown at all. The brokerage currently has an annual income of around £1,500,000. Approximately 80% of the brokerage’s income 10 years ago related to personal lines business, with 20% derived from small to medium enterprises (SMEs). Today these percentages are reversed. The Senior Partner has become increasingly concerned that if web aggregators/consolidators begin to become proficient in their ability to sell commercial insurance, then the brokerage will lose SME clients as dramatically as they have been losing private clients. As a result of this, the Senior Partner has put forward two options to grow the SME portfolio. Both options involve the use of technology, the first in collaboration with an aggregator and the second with a software house. Option 1 • The aggregator/consolidator has set up arrangements with a panel of insurers who provide indicative quotes, but do not want to deal directly with the insured. Enquiries are directed to the broker, who is given a guarantee of geographic exclusivity. • The cost would have an initial flat fee, plus a fee for each enquiry. Option 2 • The software house will design a website to the broker’s specification that will integrate with the broker’s existing system. Existing and prospective clients will be able to enter their details and purchase cover via the broker’s chosen insurers just as they would on any aggregator’s site. They will also be able to carry out straight forward administrative tasks such as changing vehicles and other risk alterations and declarations. • The cost would have the same initial flat fee as option 1, plus a significant annual maintenance charge. Both options would be subject to an initial three year contract and include all supplier technology and services. The Senior Partner has made it clear that he wants to grow the business and has asked you to explore the two options with this in mind. He acknowledges that the initial investment for both options may well be expensive, but feels that if the firm does nothing it may decline. Sue, one of the other partners, feels aggregators/consolidators are not the only strategic option to provide a competitive and profitable broking service. She acknowledges that private clients increasingly place their own insurances on-line, but she is certain that this will not happen with SME clients, not least because it is more difficult to underwrite SME or commercial business than personal business on-line. She believes that there are other actions that could be taken to grow the SME portfolio. Question • Analyse Sue’s argument that web aggregators/consolidators are less suited to SME business than personal lines. •

Analyse the two IT options proposed by the Senior Partner.

You do not need to consider the selection of insurers or mergers and acquisitions in your answer. 1711

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(80)

PART II Scenarios. Answer TWO of the following THREE questions. Each question is worth 40 marks. To gain maximum marks you should include relevant examples and further reading in your answer. 2.

Scenario You are a local broker considering the introduction of a pet insurance scheme for veterinary surgeons in your area. Question Outline the regulatory options to implement such a scheme. Consider the advantages and disadvantages for the broker and the veterinary surgeons of these regulatory options.

3.

(40)

Scenario You are a Manager in a small growing regional brokerage which focuses on personal lines and small commercial business, both wholesale and retail. Your business is organised along functional lines (e.g. broking, claims, underwriting etc). You have noticed that your competitors are organised by sector (e.g. personal lines, SME, commercial etc). You have been asked to explore the merits of restructuring. Question Analyse the advantages and disadvantages of the two structures to improve business efficiency in a small growing regional brokerage.

4.

Scenario You are a Manager in a firm of regional insurance brokers specialising in personal lines. The firm is reviewing its future strategy for its household business and senior management have narrowed down the options to either an outsourced arrangement or the operation of a delegated scheme. Question Evaluate the advantages and the disadvantages to the business of the two options.

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(40)

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(40)

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