LOMA 308 MODULE 2 EXAM REVIEW
QUESTIONS WITH COMPLETE
SOLUTIONS
potential advantages of outsourcing - Answer-- Lower costs
- Efficency and effectiveness
- minimal delays
Vendeors can specialize in these functions
Potential advantages of in-house operations - Answer-- greater company control
- expertise
telecommuting - Answer-which allows employees to work from their homes, using their
own or company-provided computer and telephone equipment. Telecommuters usually
also have access to other work-related tools such as conference calling, video
conferencing, specialized software programs, and private networks.Many insurers
already offer a telecommuting option to underwriting and customer service staff and
many more are likely to offer programs in the future.Telecommuting has important
advantages—and disadvantages—for both employees and employers.
telecommuting advantages - Answer-The biggest advantage of telecommuting for
employees is that it allows them to control their working hours, even if those hours aren't
normal business hours. It also allows employees to balance the demands of home life
and work. It can even reduce employee stress and travel costs by eliminating long
commutes during heavy traffic.
Telecommuting saves money by allowing companies to
Cut back on dedicated workspaces and reduce overall space requirements and costs
Maintain operations during emergency situations that prevent employees from coming
into the office
Attract talented employees from remote areas who need the work-at-home option
Take advantage of any available tax credits for offering telecommuting arrangements
telecommuting disadvantages - Answer-Employees who work at home full time may feel
cut off from their fellow employees. Full-time telecommuters also need to ensure that
home offices are stocked with all necessary equipment, including phone lines,
computers, and other resources, and that home systems are compatible with office
systems. To minimize this disconnect, some companies provide computer equipment to
ensure compatibility. Many companies also allow employees to telecommute only part
of the time.
,The downside of telecommuting is that it
Isn't appropriate for all kinds of jobs or all employees. Managers who need to oversee
company operations on a day-to-day basis or employees who require direct supervision
generally aren't suited to telecommuting.
May affect company performance or customer satisfaction if insufficient numbers of
employees are on-site to perform necessary functions or if telecommuting employees
don't complete assignments or turn results in on time.
Hoteling - Answer-As an alternative to full-time telecommuting, some insurers provide
temporary workspaces, orhotels, for employees who work at home but who need to
come in for meetings, functions, or special assignments.
Some hotel spaces have regular desks, storage cabinets, and complete computer
systems. Others provide a docking station for personal or company-issued laptop
computers and limited desk and storage space.Because hotel spaces are used by
groups of people who come in at different times rather than by just one person,
companies usually manage hotel usage by requiring employees to reserve space in
advance.Other companies offer fully equipped telework centers located in remote areas
where large numbers of employees live. These centers allow employees to perform
their jobs in an office setting rather than at home. Another virtual work option is a
remote office center available to employees from more than one company, usually
through a leasing arrangement with the office center owner.
The Manning Insurance Company recently implemented a rightsizing program to help
reduce its operating costs. This program most likely involved
Replacing employees who left the company because of job changes, retirement,
disability, or death
Discontinuing lines of business
Eliminating unnecessary operations
Eliminating non-essential jobs - Answer-Eliminating non-essential jobs: Rightsizing is an
expense reduction program that involves eliminating nonessential employees or jobs. It
can also be accomplished by not replacing employees who leave the company.
Discontinuing lines of business and eliminating unnecessary operations are ways to
eliminate costs, but they are not examples of rightsizing.
The Barksdale Insurance Company decided to outsource its claim administration
operations. By outsourcing this function, Barksdale can (choose all that apply)
Reduce delays in processing claims
Lower its overall operating expenses
Improve the efficiency of its operations
Gain greater control over its operations - Answer-all but gain greater control over its
operations - Outsourcing certain operations can improve operational efficiency, lower
costs, and minimize delays, but outsourcing requires companies to relinquish some or
all control over outsourced operations.
,The Arcade Insurance Company allows its senior customer service representatives to
work from home three days a week and to determine their own working hours.
Telecommuting
Telework center
Hoteling - Answer-Telecommuting
The Apex Insurance Company's home office is in a major city, but it maintains small,
fully-equipped offices in three nearby communities where a large number of employees
live. Employees in these areas can work in these small offices instead of coming into
the main office.
Telecommuting
Telework center
Hoteling - Answer-Hoteling
The Bancroft Insurance Company sets aside a limited number of workspaces for
employees who come to the office on an irregular basis. Employees must reserve a
spot in one of these workspaces in advance.
Telecommuting
Telework center
Hoteling - Answer-Hoteling
First-year commission - Answer-designed to encourage new product sales and support
company profitability. These commissions are calculated as a percentage of the
premium the insurer receives during the first policy year.
Renewal commission - Answer-designed to encourage product persistency and help
ensure that the company recoups its product development costs. These commissions
are calculated as a percentage of each premium paid for a specified number of years.
Vested commissions - Answer-re guaranteed payable to sales professionals and serve
as a reward for generating new business. Insurers can encourage sales professionals to
stay in contact with policyowners by offering conditionally vested commissions or
nonvested commissions.
conditionally vested commission - Answer-A commission that becomes vested only after
a sales professional reaches a certain age or number of years of service with a
company.
nonvested commissions - Answer-A commission that is payable to a sales professional
only if the producer still represents the company when the commission becomes due.
persistency bonuses - Answer-An element of producer compensation that provides
extra earnings for favorable persistency results; can be used as an alternative to a
production bonus.
Penalties - Answer-Charge-back Penalties
, Some companies reduce, or charge back, commissions if a sales professional's
business includes an excessive number of early lapses. If a sales professional's
persistency rate is very low, the company may even cancel production bonuses.
Managing Annuity Commissions - Answer-Commission schedules for annuities are
different than the schedules for life insurance products because
Annuities often feature a large initial premium and smaller—if any—subsequent
premiums. To account for this difference, annuity commission schedules usually don't
distinguish between initial commissions and renewal commissions.
Insurers can use a deposit-based commission schedule based on premiums or an
asset-based commission schedule based on account balances.
Most insurers today use a combination of deposit-based and asset-based commission
schedules.
deposit-based commission schedule - Answer-A commission schedule used for annuity
sales that pays commissions only on premium payments made by annuity owners.
asset-based commission schedule - Answer-A commission schedule used for annuity
sales that calculates commissions as a percentage of the accumulated value of a
deferred annuity contract's funds.
The Sampson Insurance Company pays commissions on its life insurance contracts
according to a heaped commission schedule. This information indicates that
commissions are
The same for first year and all subsequent years
Higher for the first year than for subsequent years
Lower for the first year than for subsequent years
Payable only for the first year - Answer-A heaped commission schedule generally pays
relatively high first-year commissions and lower renewal commissions.
The Argon Insurance Company offers conditionally vested commissions on product
sales. This means that commissions are payable only if the
Sales professional is employed by Argon when the commission is payable
Sales professional has worked for Argon for a minimum number of years
The product remains in force for a minimum number of years
The product premium is above a minimum amount - Answer-A conditionally vested
commission is a commission payable only after a sales professional has reached a
certain age or number of years of service with the company. A nonvested commission is
payable only if the sales professional is employed when the commission is payable.
Although vesting is designed to encourage product persistency, vesting schedules are
not linked to the length of time a contract remains in force or the amount of premium
paid.
David Parmely, a sales professional for Crandall Financial, sold a deferred annuity that
was paid for in five equal payments. If Crandall uses an asset-based commission
schedule, then David's commission will be based on
QUESTIONS WITH COMPLETE
SOLUTIONS
potential advantages of outsourcing - Answer-- Lower costs
- Efficency and effectiveness
- minimal delays
Vendeors can specialize in these functions
Potential advantages of in-house operations - Answer-- greater company control
- expertise
telecommuting - Answer-which allows employees to work from their homes, using their
own or company-provided computer and telephone equipment. Telecommuters usually
also have access to other work-related tools such as conference calling, video
conferencing, specialized software programs, and private networks.Many insurers
already offer a telecommuting option to underwriting and customer service staff and
many more are likely to offer programs in the future.Telecommuting has important
advantages—and disadvantages—for both employees and employers.
telecommuting advantages - Answer-The biggest advantage of telecommuting for
employees is that it allows them to control their working hours, even if those hours aren't
normal business hours. It also allows employees to balance the demands of home life
and work. It can even reduce employee stress and travel costs by eliminating long
commutes during heavy traffic.
Telecommuting saves money by allowing companies to
Cut back on dedicated workspaces and reduce overall space requirements and costs
Maintain operations during emergency situations that prevent employees from coming
into the office
Attract talented employees from remote areas who need the work-at-home option
Take advantage of any available tax credits for offering telecommuting arrangements
telecommuting disadvantages - Answer-Employees who work at home full time may feel
cut off from their fellow employees. Full-time telecommuters also need to ensure that
home offices are stocked with all necessary equipment, including phone lines,
computers, and other resources, and that home systems are compatible with office
systems. To minimize this disconnect, some companies provide computer equipment to
ensure compatibility. Many companies also allow employees to telecommute only part
of the time.
,The downside of telecommuting is that it
Isn't appropriate for all kinds of jobs or all employees. Managers who need to oversee
company operations on a day-to-day basis or employees who require direct supervision
generally aren't suited to telecommuting.
May affect company performance or customer satisfaction if insufficient numbers of
employees are on-site to perform necessary functions or if telecommuting employees
don't complete assignments or turn results in on time.
Hoteling - Answer-As an alternative to full-time telecommuting, some insurers provide
temporary workspaces, orhotels, for employees who work at home but who need to
come in for meetings, functions, or special assignments.
Some hotel spaces have regular desks, storage cabinets, and complete computer
systems. Others provide a docking station for personal or company-issued laptop
computers and limited desk and storage space.Because hotel spaces are used by
groups of people who come in at different times rather than by just one person,
companies usually manage hotel usage by requiring employees to reserve space in
advance.Other companies offer fully equipped telework centers located in remote areas
where large numbers of employees live. These centers allow employees to perform
their jobs in an office setting rather than at home. Another virtual work option is a
remote office center available to employees from more than one company, usually
through a leasing arrangement with the office center owner.
The Manning Insurance Company recently implemented a rightsizing program to help
reduce its operating costs. This program most likely involved
Replacing employees who left the company because of job changes, retirement,
disability, or death
Discontinuing lines of business
Eliminating unnecessary operations
Eliminating non-essential jobs - Answer-Eliminating non-essential jobs: Rightsizing is an
expense reduction program that involves eliminating nonessential employees or jobs. It
can also be accomplished by not replacing employees who leave the company.
Discontinuing lines of business and eliminating unnecessary operations are ways to
eliminate costs, but they are not examples of rightsizing.
The Barksdale Insurance Company decided to outsource its claim administration
operations. By outsourcing this function, Barksdale can (choose all that apply)
Reduce delays in processing claims
Lower its overall operating expenses
Improve the efficiency of its operations
Gain greater control over its operations - Answer-all but gain greater control over its
operations - Outsourcing certain operations can improve operational efficiency, lower
costs, and minimize delays, but outsourcing requires companies to relinquish some or
all control over outsourced operations.
,The Arcade Insurance Company allows its senior customer service representatives to
work from home three days a week and to determine their own working hours.
Telecommuting
Telework center
Hoteling - Answer-Telecommuting
The Apex Insurance Company's home office is in a major city, but it maintains small,
fully-equipped offices in three nearby communities where a large number of employees
live. Employees in these areas can work in these small offices instead of coming into
the main office.
Telecommuting
Telework center
Hoteling - Answer-Hoteling
The Bancroft Insurance Company sets aside a limited number of workspaces for
employees who come to the office on an irregular basis. Employees must reserve a
spot in one of these workspaces in advance.
Telecommuting
Telework center
Hoteling - Answer-Hoteling
First-year commission - Answer-designed to encourage new product sales and support
company profitability. These commissions are calculated as a percentage of the
premium the insurer receives during the first policy year.
Renewal commission - Answer-designed to encourage product persistency and help
ensure that the company recoups its product development costs. These commissions
are calculated as a percentage of each premium paid for a specified number of years.
Vested commissions - Answer-re guaranteed payable to sales professionals and serve
as a reward for generating new business. Insurers can encourage sales professionals to
stay in contact with policyowners by offering conditionally vested commissions or
nonvested commissions.
conditionally vested commission - Answer-A commission that becomes vested only after
a sales professional reaches a certain age or number of years of service with a
company.
nonvested commissions - Answer-A commission that is payable to a sales professional
only if the producer still represents the company when the commission becomes due.
persistency bonuses - Answer-An element of producer compensation that provides
extra earnings for favorable persistency results; can be used as an alternative to a
production bonus.
Penalties - Answer-Charge-back Penalties
, Some companies reduce, or charge back, commissions if a sales professional's
business includes an excessive number of early lapses. If a sales professional's
persistency rate is very low, the company may even cancel production bonuses.
Managing Annuity Commissions - Answer-Commission schedules for annuities are
different than the schedules for life insurance products because
Annuities often feature a large initial premium and smaller—if any—subsequent
premiums. To account for this difference, annuity commission schedules usually don't
distinguish between initial commissions and renewal commissions.
Insurers can use a deposit-based commission schedule based on premiums or an
asset-based commission schedule based on account balances.
Most insurers today use a combination of deposit-based and asset-based commission
schedules.
deposit-based commission schedule - Answer-A commission schedule used for annuity
sales that pays commissions only on premium payments made by annuity owners.
asset-based commission schedule - Answer-A commission schedule used for annuity
sales that calculates commissions as a percentage of the accumulated value of a
deferred annuity contract's funds.
The Sampson Insurance Company pays commissions on its life insurance contracts
according to a heaped commission schedule. This information indicates that
commissions are
The same for first year and all subsequent years
Higher for the first year than for subsequent years
Lower for the first year than for subsequent years
Payable only for the first year - Answer-A heaped commission schedule generally pays
relatively high first-year commissions and lower renewal commissions.
The Argon Insurance Company offers conditionally vested commissions on product
sales. This means that commissions are payable only if the
Sales professional is employed by Argon when the commission is payable
Sales professional has worked for Argon for a minimum number of years
The product remains in force for a minimum number of years
The product premium is above a minimum amount - Answer-A conditionally vested
commission is a commission payable only after a sales professional has reached a
certain age or number of years of service with the company. A nonvested commission is
payable only if the sales professional is employed when the commission is payable.
Although vesting is designed to encourage product persistency, vesting schedules are
not linked to the length of time a contract remains in force or the amount of premium
paid.
David Parmely, a sales professional for Crandall Financial, sold a deferred annuity that
was paid for in five equal payments. If Crandall uses an asset-based commission
schedule, then David's commission will be based on
