Business Insurance and Finance

You are an underwriter for TFI plc, a commercial insurer. TFI plc has decided to cease insuring fossil
fuel energy companies and will focus on renewable energy companies. This change of strategy will
take place over the next five years.
Whilst TFI plc has received praise from environmental groups for this change of strategy, other stakeholders
are concerned about the impact this may have on TFI plc’s profitability.
(a) Identify, with justification, two significant stakeholders TFI plc need to consider in implementing
this change in strategy. (4)
(b) Explain two significant actions you could take to address the concerns of the stakeholders you
have identified in (a) above. (6)

Question 2 – Learning Outcome 2 (20 marks)
You are a senior manager for CWS plc, a medium sized insurance broker, which historically specialised
in placing insurances for large international companies.
CWS plc has acquired three small insurance brokers over the last five years, with the aim of diversifying its
customer base. CWS plc now has clients ranging in size from individual consumers, to large international
companies.
These acquisitions have led to the following issues:
• An increase in the number of customer complaints.
• Company-wide employee training needs.
• Poor morale of employees due to the lack of a unified strategy.
• Differing pay and bonus scales across staff.
• Difficulty accessing a suitable range of insurers, due to the diversity of the portfolio.
You have been asked to consider the challenges arising from the above issues.
(a) Identify, with justification, the most appropriate strategic planning and management tool to
consider these issues. (4)
(b) Explain briefly, based on the application of the tool you have identified in (a) above, four
significant challenges for CWS plc. (8)
(c) Discuss how you would address the challenges you have explained in (b) above. (8)

Question 3 – Learning Outcome 3 (20 marks)
You are the recently appointed Risk Manager for JDB Ltd, an insurer.
JDB Ltd has grown significantly over the last five years. However, the risk management practices have not
been updated during this time.
An internal audit has identified the following features:
• An absence of technology to monitor geographical aggregation.
• Inadequate reinsurance protection on the liability account.
• Breaches of underwriting authorities.
• Numerous leaks of customer data.
• Investment income has been lower than expected over the last five years.
You have identified that JDB Ltd is not making full use of the three lines of defence model.
(a) Explain how the three lines of defence model could be used by JDB Ltd to improve the risk
management of the business. (5)
(b) Recommend, with reasons, one significant risk management control JDB Ltd could take to
mitigate each of the five features identified in the internal audit. (15)
M92/2019 M92: Insurance business and finance 4
Copyright © 2019 The Chartered Insurance Institute. All rights reserved.

Question 4 – Learning Outcome 4 (20 marks)
You are the Underwriting Manager for WP Ltd, a commercial combined insurer.
You have been presented with an existing scheme for fast food restaurants, which is currently insured by one
of WP Ltd’s competitors. The policy wording of this scheme covers buildings, fixtures and fittings,
employer’s liability and public liability. This scheme is currently rated on a flat rate, per location, basis.
You are considering offering underwriting terms for this scheme.
(a) Identify, with justification, five considerations that should be taken into account when establishing
the pure risk premium for this scheme. (10)
(b) Explain how two of WP Ltd’s insurance-related functions could assist in setting accurate pure risk
premiums. (10)

Question 5 – Learning Outcome 5 (30 marks)
You are the Claims Manager for AVS Ltd, a general insurer. You are evaluating a potential long-term
relationship with a third-party administrator (TPA), to handle all personal lines claims below £5,000 in value.
After a tender process, you have identified a TPA to fulfil the requirements. The TPA has provided the
following information:
2017 2018
Staff retention rates 89.2% 81%
Fee income £19 million £23 million
Staff numbers 280 300
Customer complaints 920 580
Average claim settlement cost £820 £957
Staff salaries £10 million £10 million
Average claim settlement time 20 working days 17 working days
(a) Identify, with justification, based on the information above, five issues that would need
investigation, prior to agreeing a contract with this TPA. (15)
(b) Explain five additional items of financial information that are essential, prior to agreeing a contract
with this TPA. (15)

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