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LOMA 291 Exam Questions and Answers
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LOMA 291 Exam Questions and Answers
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LOMA 291 Exam Questions and AnswersStakeholders (constituents) - Answer -A party that has an interest in how a company conducts its business
Dividend - Answer -Compensation that a company may pay to owners upon a vote by thr company's board of directors
Reinsurance - Answer -Insurance that one insurance company, the direct writer, purchases from another insurance company, the reinsurer, to transfer all or part of the risk on insurance policies that the direct writer issued
Inside directors - Answer -A member of the board of directors who also holds a position within the company
Outside directors (independent directors) - Answer -A member of the board of directors who does not bold a position within the company
Ombudsman Program - Answer -An independent, impartial and confidential professional
who provides ethical guidance on specific problems
Line function - Answer -A department or other organizational unit that produces or administers products or services
Ex. Product development, marketing, distribution & sales, underwriting & new business, customer service, reinsurance administration, claims
Support functions (staff function) - Answer -A department or other organizational unit that provides support services to line functions or to other support functions but does not produce or administer products
Ex. Accounting & financial reporting, audit, corporate communications, legal & compliance, finance, HR, IT, treasury, risk management
Vertical organization - Answer -An organization w a long chain of command and a narrow span of control
Flat Organization - Answer -An organization w a short chain of command and a wide span of control. Also called a horizontal organization Organization by product - Answer -An organizational structure which arranged a company's major divisions according to the company's product lines
Ex. Annuities & Life Insurance, Property & Casualty Insurance
Organization by territory - Answer -An organizational structure which arranged a company's major divisions according to the geographic areas in which it operates
Ex. Americas, Asia Pacific, Europe
Organization by customer group - Answer -An organizational structure which arranges a
company's major divisions according to the customer group each unit serves
Ex. Group products (commercial), Individual Business (personal)
Organization by distribution channel - Answer -An organizational structure which arranges a company's major divisions according to the distribution channels that deliver products to customers
Required return - Answer -The return an investor needs to earn in order to make the investment, given the risk of the investment; typically found by adding the risk free rate of return to the risk premium
Risk free rate - Answer -The return on a risk free investment (the least risky investment opportunity available)
Risk premium - Answer -The component of investment return that compensates the investor for taking on the risk associated w a specific investment; the rate of return required in addition to the risk free rate for the investor to make the investment
Investment risk - Answer -The possibility that an investor will fail to earn some or all of an expected return or will lose all or part of the original investment
Market risk (financial market risk) - Answer -A risk of unexpected outcomes due to fluctuations in the market values in a given financial market
Interest rate risk - Answer -The risk that unpredictable movements or stagnation in market interest rates will cause assets to lose value or liabilities to gain value
Default risk - Answer -The risk that a borrower will fail to repay their debt
Liquidity risk - Answer -The risk of being unable to quickly convert an asset to cash for its underlying value Pricing risk - Answer -The risk that an insurer's actual experience with pricing factors such as operating costs or mortality rates will be significantly worse than expected, causing the insurer to lose money on its products
Business risk - Answer -The risk that changes in a company's external environment will affect its operations
Operational risk - Answer -A broad category of risks resulting from external events or poor internal processes and controls, people or systems
Business process risk - Answer -An operational risk resulting from inefficient or failed internal processes, controls, people, technology or systems
Event risk - Answer -An operational risk from catastrophic events such as earthquakes, hurricanes, political unrest, airplane crashes, fraud, technology failures, etc
Control function - Answer -Management activity directed toward ensuring that an organization's mission and objectives are accomplished effectively, efficiently and according to plan
Steering controls - Answer -A control established at the beginning of a process that describes how a company intends to implement the process and avoid pitfalls
Concurrent controls - Answer -A control that takes the form of checks and balances built
into a process and that is applied during the process
Feedback controls - Answer -A control that takes the form of checks and corrections that are applied to a process at the end of the process cycle
Risk management - Answer -A systematic application of management policies, procedures, and practices to identify, quantify, model, offset and limit the impact of unexpected outcomes, consistent w organizational objectives
Hedging - Answer -A risk management strategy that involves balancing one risk w a complementary risk that will ideally offset the original risk
Enterprise Risk Management (ERM) - Answer -Risk management that takes an organization wide view of risk and manages risk in a coordinated approach across the organization
Three lines of defense - Answer -A risk management model structured in three parts: operational management, internal monitoring and oversight functions, and internal audits
Omnichannel distribution - Answer -A form of distribution that enables personalized sales to customers through multiple integrated communication channels Distribution system - Answer -The method an insurance company uses to connect its products or services w the potential customers who might want or need them
Intermediary distribution system - Answer -A system in which the insurance company relies on external individuals and organizations to connect w the customer
Direct sales force - Answer -Financial professionals directed by an insurer who distribute the insurer's products
Direct distribution system - Answer -A distribution system in which the insurance company owns the distribution system and communicates directly w the customer
Agent - Answer -A company employee or independent contractor who is authorized to act on behalf of an insurance company in selling insurance products
Career agent (captive agent) - Answer -An agent who is under a full time contract w an insurer to sell primarily that insurance company's life, health and annuity products
Multiple line exclusive agents (MLEAs) - Answer -An agent who sells life insurance, health insurance, annuities and property casualty products for one insurance company w the majority of sales being property casualty products
Salaried sales representatives - Answer -A company employee who is paid a salary for making insurance sales and providing sales support
Group representative - Answer -Salaried insurance company employees specifically trained in the techniques of marketing and servicing group products
Direct to consumer sales (D2C) - Answer -Non face to face distribution programs directed by the insurance company
Agency operations unit - Answer -The unit in an insurance company that supports and services the insurer's direct sales force
Advanced underwriting - Answer -A group of specialists who will assist in preparing proposals and will accompany the agent if requested to sales presentations on how to use insurance products in a financial plan or in estate planning
Estate planning - Answer -A type of planning in which a financial professional helps a potential customer to develop a program that will cover the customer's current and future financial needs and will provide a means of conserving the personal assets the person wants to pass on to her heirs at her death
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