Caib 4 Derek Review

1) Simplicity: keep it simple, easy to implement by employees without intense training

2) Practicality: Plan should be realistic

3) Severability: Dissectible plans are easier to execute by individual business units

4) Flexibility: All good plans are flexible, business conditions change so should your plans.

Involves matching the brokerages, internal strengths and weaknesses to the environmental opportunities and threats. One of the key reasons for strategic planning is to identify opportunities, so that the brokerage may capitalize on them, and to highlight threats, so the brokerage may avoid them

Value Statement: what target are we aiming for?

Vision Statement: what values have we used as the foundation of our business?

Mission Statement: What is the organization’s purpose of existence?

Goals should not express how the objectives should be accomplished, but they should express what is to be accomplished and by when

SMART

Specific: must clearly state what is to be accomplished

Measurable: goal must be measureable to determine if it was achieved or not

Action-oriented: goal must be clear in what is expected. “To increase revenue by 15%”

Realistic: employees should feel they can achieve it and it is not so aggressive as to be unattainable

Timely: the goal must have a completion date or time frame.

Strategic plan establishes primary strategies, objectives and goals. Gives direction to the action plan.

Action plan aims to achieve specific goals and done within the framework of the strategic plan. Focuses on how objectives are achieved.

Strategic plan establishes primary strategies, objectives and goals. Gives direction to the action plan.

Action plan aims to achieve specific goals and done within the framework of the strategic plan. Focuses on how objectives are achieved.

Strategies: Form the brokerages long term battle plan

Objectives: Support the strategies and there may be multiple objectives from each strategy

Goals: express in specific terms what the objectives state in general terms and which the strategies state conceptually.

1) Sole Proprietorship: business owned by a single individual. Advantage: right to all profits. Disadvantage: all liability rest with the owner.

2) Partnerships: a voluntary association of two or more persons who are co-owners of a business. Advantage: liability shared, broader expertise. Disadvantage: more potential for conflict, difficult to dissolve.

3) corporation: a legal entity, created by government charter, ownership of which is evidence by shares of stock. Advantage: liability limited to corporate assets - personal assets are protected. Disadvantage: start up fees, legal fees.

1) Express Authority: legal agreement, can be either orally or written. Includes: classes of risk, collection and remittance of premiums, withholding commissions.

2) Implied Authority: no agreement can address every possible occurrence, therefore allowances are made.

3) Apparent Authority: when an innocent third party is led to believe that the brokerage has the authority even though it doesn’t.

PSOT DMT

Planning: brokerage must evaluate its existing ability to generate sales and premium growth, and determine whether the existing human resources are capable of producing the levels.

Selecting: Selecting employees is one of the most difficult and time-consuming tasks of the management process. Selection includes: recruitment, screening and interview, hiring.

Orienting: In order to perform effectively, new employees need to be provided with extensive information regarding the brokerage and their role within it

Training: Long-term success of your brokerage depends on the strength of its employees. Key to delivering quality service is strong performing, highly trained, highly motivated employees.

Developing/Rewarding: Developing employees contributes to long-term growth and financial viability. A career path (develops employees, so that they become the preferred candidates for more senior positions)

Managing performance: managing employee performance helps meet brokerage expectations and strategic plan. Ideal performance management program gives ideal weight to both quantitative measures and quantitative measures.

Termination: Be aware of your provincial employment standards. To avoid legal action against your brokerage for wrongful dismissal, seek legal advice and or human resource specialists.

1) who is to be trained?

2) what is the subject of training?

3) why are we training?

4) how will training be evaluated?

DMC MMC

Delegating: accomplishing objectives and achieving goals through involvement of others, by clearly defining and giving authority and responsibility to accomplish a job. The key to delegation is communication.

Motivating: needs and wants are the roots of motivation, as the desire to satisfy a need or want precipitates action

Communicating: effective verbal and nonverbal communication is a crucial factor to successfully managing and motivating. When employees don’t know what is expected of them, their performance will be mediocre.

Managing Conflict: having Strong, talented employees will grow your business. With strong employees conflict will arise. Managers occasionally need to operate as mediators in conflict resolution.

Managing Change: in times of growth, anticipating and handling the effects of change is a challenging task for managers. Managers should view themselves as the champions of change within their brokerage.

Coaching: A planned process performed by a leader, to introduce and train an employee to a new position, or improve the performance of an existing employee. 5 steps: Assessing performance, Setting goals, Self-evaluation, Rewarding, Monitoring

1) Authority: guidelines set out by the insurance company regarding the types of risk to be bound, the limits of each type, limitations on certain classes of business.

2) Ownership of Expirations: what happens when the relationship ends, refers to the fact that parties are agreeing that business they have with the insurance company belongs to the brokerage. Insurance company has no claim to stake the business and they cannot go after it. Broker agreement should clearly state which party owns the expirations of the policies.

3) Billing Procedures: gives direction on how to deal with premiums due to the insurance company. Two types: Agency: Insurance company bills brokerage, brokerage pays within a specific time period. Direct: Clients are billed directly by the insurance company.

4) Commissions: very between companies and lines of business. Typically 10 to 20%. Although not mandatory, the standard practice is 90 to 180 days notice of change of commission rate.

5) Termination: Insurance company will want the ability to terminate the agreement for a number of different reasons like lack of sales, producing poor book of business. Notice period of termination 90 to 180 days.

6) Hold harmless: to protect brokerages from responsibility for the acts of the insurance company, the brokerage agreement should include a clause in which the insurance company indemnifies, and holds the broker harmless against all civil liability.

7) Privacy act: Both parties agreed to a abide by PIPEDA rules and regulations

8) EDI Provisions: Agreements should be in place on who is responsible for loss of data, or any other loss as result of sending insurance transactions between the brokerage and the insurance company.

9) Other provisions: how to handle joint promotion programs, shared technology, arbitration for settling disputes, etc.

Personal contact between brokers and insurance company personnel helps foster appreciation for each other’s point of view. Examples: golf games, brokerage visits.

There are multiple ways to establish formal communication channels. For example: weekly or monthly newsletters, setting up advisory council.

PSM P POF

prospect and qualify: Method of finding prospects include: referrals by existing clients, contacting previous clients, newspapers, business journals.

Set objectives: use competitive information, and your knowledge of the prospect to plan a strategy

Make the initial contact: Make a good first impression by conveying, a professional image, gaining the prospects confidence, showing interest in prospect situation and more

Probe for needs: Commonly referred to as the fact finding step. Use open and closed questions to identify wants and needs of the prospect.

Present the proposal: Matching features and benefits of the brokerages product to the wants and needs of the prospect. Present an attractive solution to the prospect to solve their insurance problems or concerns.

Overcome objections and close: ask for the sale. Expect prospects to need clarification on questions or concerns. Asking questions doesn’t mean no

Follow-up: a completed sale should be considered the first step and creating and building a long-term client relationship.

Product: this component of the marketing mix determines: which product line to offer, what services surround the core product, choice of brands to offer, the manner in which products will be packaged or bundled together

Price: This component includes the basic price for the product, credit terms, and fees.

Place: brokerages must respond to their clients perception of location, convenience, and accessibility

Promotion: Marketing efforts for communication components: personal presentations, special, promotions, advertising, public relations, direct, marketing

People: how clients feel is critical to perception of value, level of satisfaction, and likelihood to refer business or repeat business. Employees are key to clients perception.

Demographics: age, gender, lifecycle, education, occupation, ethnic background

Geographic information: uses city size, urban, rural, climate.

Psychographics: uses clients personality, social class, lifestyle

Behavioural variables: analyzes how clients behave with respect to purchasing and using products. Does the client shop around? What items are covered by their policy?

Relationship variables: A broker must understand how a client perceives their relation, or even if they feel there is one

1) Hands on/High involvement: characterized by relaxed, casual conversation. Has high levels of emotions like trust and confidentiality. Typically on a first name basis.

2) Face to face: interaction is face-to-face and on a regular basis. May develop very close, friendly, personal relationship

3) Distant: characterized by less frequent contact. Contact is made through technology over the phone, voicemail, email or Internet.

4) Brand: Consumers develop loyalties to the brand and re-purchases the product

Relationships at risk can be identified by reviewing your clients patterns of behavior. For example: clients coverages have been reduced, new acquisitions are not placed with your brokerage.

When you notice a shift in clients behaviors, take steps to attract the client back to the brokerage

CPA ACTS

1) Client file database: should provide easy retrieval of past quotes, current active files, closed files, accounting information, etc. Should allow for flexible, accurate, and quick access to information it contains.

2) Product Management: the rating function supports the process of issuing quotations and proposals for new business, policy changes, and renewals. Brokerages need the capability to issue quotations in a timely manner for all major lines of business to support sales efforts.

3) Accounting: Should support all new business, endorsements, renewals, and audit transactions. Should include general ledger system for financial reports and the ability to control invoicing and cash receipts. Needs capability to monitor all direct bill transactions and reconcile with insurance company statements.

4) Administration: since considerable repetition is involved, using Word processing, database mail merge, and formatted mailing lists, brokerages can accomplish tasks in a shorter amount amount of time

5) Communications: brokerages can use technology to improve their communication. For example: email/electronic file transfers, Internet, texting/smart phones, integrated telephone systems/call centers.

6) Training: technology has changed so quickly that using computers requires a constant process of learning.

7) Service and support: technology vendors support their products with helpdesks and customer service assistance. Sometimes brokerages will have internal IT employees

CPA ACTS

1) Client file database: should provide easy retrieval of past quotes, current active files, closed files, accounting information, etc. Should allow for flexible, accurate, and quick access to information it contains.

2) Product Management: the rating function supports the process of issuing quotations and proposals for new business, policy changes, and renewals. Brokerages need the capability to issue quotations in a timely manner for all major lines of business to support sales efforts.

3) Accounting: Should support all new business, endorsements, renewals, and audit transactions. Should include general ledger system for financial reports and the ability to control invoicing and cash receipts. Needs capability to monitor all direct bill transactions and reconcile with insurance company statements.

4) Administration: since considerable repetition is involved, using Word processing, database mail merge, and formatted mailing lists, brokerages can accomplish tasks in a shorter amount amount of time

5) Communications: brokerages can use technology to improve their communication. For example: email/electronic file transfers, Internet, texting/smart phones, integrated telephone systems/call centers.

6) Training: technology has changed so quickly that using computers requires a constant process of learning.

7) Service and support: technology vendors support their products with helpdesks and customer service assistance. Sometimes brokerages will have internal IT employees

To enhance profitability

Information is entered into brokerages systems and transmitted to insurance companies for processing.

Advantages: Communication costs are lower as transmissions can take place at off-peak periods. Training time is reduced, and productivity is improved.

Disadvantages: there is not an immediate response. There are delays in correcting errors. Software costs may be extensive for both parties.

The brokerage enters the information directly into the insurance company’s online system.

Advantages: Requires little additional investment and software. Insurance company can make changes to product. Errors can be quickly detected and corrected.

Disadvantages: Duplicate information entry into broker systems and company systems. Ongoing training required therefore only a small number of employees may be familiar with the changes. User interface not standardized between insurance company.

Acid Test: how quickly can a brokerage turn its assets into cash and pay off what it owes. ACID TEST = CASH + ACCOUNTS RECEIVABLE / CURRENT LIABILITIES.

Equity-to-debt test: how much you owe versus how much you own. EQUITY TEST = SHAREHOLDERS EQUITY / TOTAL ASSETS

Working capital defence Interval: brokerages expenses must be paid immediately, but commissions come in slowly, so the brokerage needs working capital to cover the gap. WCDI = WORKING CAPITAL / AVERAGE DAILY EXPENSES

Acid Test: how quickly can a brokerage turn its assets into cash and pay off what it owes. ACID TEST = CASH + ACCOUNTS RECEIVABLE / CURRENT LIABILITIES.

Equity-to-debt test: how much you owe versus how much you own. EQUITY TEST = SHAREHOLDERS EQUITY / TOTAL ASSETS

Working capital defence Interval: brokerages expenses must be paid immediately, but commissions come in slowly, so the brokerage needs working capital to cover the gap. WCDI = WORKING CAPITAL / AVERAGE DAILY EXPENSES

Cost per account ratio: is determined by dividing the number of accounts handled by the brokerage into total office and general expenses. Can be misleading because it ignores the fact that a brokerages costs are mostly fixed – a brokerage can write additional accounts without increasing costs. OFFICE COST PER ACCOUNT = OFFICE COSTS / # OF ACCOUNTS.

SALES COST PER ACCOUNT = SALES COST / # OF ACCOUNTS

Revenue by employee ratio: the higher the average, the higher the efficiency. NET REVENUES / NUMBER OF PERSONNEL.

Lapse ratio: commission lapse ratio: volume of lost business from one year compared to another. COMMISSION VOLUME LAPSED / COMMISSION VOLUME OF RENEWALS. Policy count ratio: Assuming brokerage wants to renew all business. # OF ACCOUNTS LAPSED / # OF ACCOUNTS SUBJECT TO RENEWAL.

Expense ratio: the most meaningful efficiency measure as it compares profit to administrative and sales expense. TOTAL BROKERAGE EXPENSE / NET INCOME

Close rate: measures the sales efficiency – may indicate a need of training and sales and closing techniques. #OF POLICIES SOLD / # OF QUOTES PROVIDED.

1) A management information system: Gathers and presents information in a form useful to measure performance. Characteristics: simplicity, accessibility, merge capability, adaptability.

2) Standards and benchmarks: standards and benchmarks stand as a base for measuring performance – must first identify which characteristics define good performance. Some standards used to measure performance are historical standards, and engineered standards.

3) Results: once standards have been set, they can be compared to the actual employee performance, or brokerage performance. they use financial data and sales data.

4) Corrective action: there is no sense in setting goals and monitoring them. If a brokerage does not try to correct activity that does not follow the goals or plans of the brokerage.

1) Simplicity: should allow for easy comparison, and not overly time-consuming, should not distract employees from goals of selling and servicing clients.

2) Accessibility: if inaccessible, it is useless

3) Merge capability: should integrate internal and external information, such as competitive and economic data, so management can compare its brokerage to other competitors.

4) Adaptability: should be flexible enough to change along with the brokerage.

CHAPTER 2!!!