LOMA 291 EXAM QUESTIONS & ANSWERS 100% ACCURATE!!
Stakeholders (constituents) - ANSWERA party that has an interest in how a company conducts its
business
Dividend - ANSWERCompensation that a company may pay to owners upon a vote by thr company's
board of directors
Reinsurance - ANSWERInsurance 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 - ANSWERA member of the board of directors who also holds a position within the
company
Outside directors (independent directors) - ANSWERA member of the board of directors who does
not bold a position within the company
Ombudsman Program - ANSWERAn independent, impartial and confidential professional who
provides ethical guidance on specific problems
Line function - ANSWERA 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) - ANSWERA 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 - ANSWERAn organization w a long chain of command and a narrow span of
control
,Flat Organization - ANSWERAn organization w a short chain of command and a wide span of control.
Also called a horizontal organization
Organization by product - ANSWERAn 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 - ANSWERAn 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 - ANSWERAn 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 - ANSWERAn organizational structure which arranges a
company's major divisions according to the distribution channels that deliver products to customers
Required return - ANSWERThe 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 - ANSWERThe return on a risk free investment (the least risky investment opportunity
available)
Risk premium - ANSWERThe 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 - ANSWERThe 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
,Feedback controls - ANSWERA control that takes the form of checks and corrections that are applied
to a process at the end of the process cycle
Risk management - ANSWERA 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 - ANSWERA risk management strategy that involves balancing one risk w a complementary
risk that will ideally offset the original risk
Enterprise Risk Management (ERM) - ANSWERRisk management that takes an organization wide view
of risk and manages risk in a coordinated approach across the organization
Three lines of defense - ANSWERA risk management model structured in three parts: operational
management, internal monitoring and oversight functions, and internal audits
Omnichannel distribution - ANSWERA form of distribution that enables personalized sales to
customers through multiple integrated communication channels
Distribution system - ANSWERThe method an insurance company uses to connect its products or
services w the potential customers who might want or need them
Intermediary distribution system - ANSWERA system in which the insurance company relies on
external individuals and organizations to connect w the customer
Direct sales force - ANSWERFinancial professionals directed by an insurer who distribute the insurer's
products
Direct distribution system - ANSWERA distribution system in which the insurance company owns the
distribution system and communicates directly w the customer
Agent - ANSWERA company employee or independent contractor who is authorized to act on behalf
of an insurance company in selling insurance products
, Career agent (captive agent) - ANSWERAn 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) - ANSWERAn 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 - ANSWERA company employee who is paid a salary for making
insurance sales and providing sales support
Group representative - ANSWERSalaried insurance company employees specifically trained in the
techniques of marketing and servicing group products
Market risk (financial market risk) - ANSWERA risk of unexpected outcomes due to fluctuations in the
market values in a given financial market
Interest rate risk - ANSWERThe risk that unpredictable movements or stagnation in market interest
rates will cause assets to lose value or liabilities to gain value
Default risk - ANSWERThe risk that a borrower will fail to repay their debt
Liquidity risk - ANSWERThe risk of being unable to quickly convert an asset to cash for its underlying
value
Pricing risk - ANSWERThe 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 - ANSWERThe risk that changes in a company's external environment will affect its
operations
Operational risk - ANSWERA broad category of risks resulting from external events or poor internal
processes and controls, people or systems
Business process risk - ANSWERAn operational risk resulting from inefficient or failed internal
processes, controls, people, technology or systems
