Financial Chapter 5

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Financial Chapter 5
2011-12-02 16:45:17

Chapter 5: Achieving Operating Efficiency
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  1. cost accumulation
    The process of capturing all of a co's costs and categorizing them in meaningful ways.
  2. investment expenses
    The costs accociated with investing a co's assets.
  3. general and administrative expenses
    The costs accociated with undertaking normal business activities to generate sales of products and to support products.
  4. expenses for contractual benefits
    The total amount an insurer must pay to fulfill the terms of its insurance & annuity contracts.
  5. operating expenses
    The costs of ops other than expenses for contractual benefits.
  6. development expense
    An expense an insurer incurs in designing, testing, and implementing a new product line.
  7. acquisition expense
    An expense an insurer incurs to obtain and issue new business.
  8. maintenance expense
    A product related expense an insurer incurs while a contract is in force.

    aka renewal expense
  9. overhead expense
    Cost incurred during normal business ops that is not directly connected to a specific product or service.
  10. direct expense
    A product expense incurred for or physically traceable to a specified life ins or annuity product.

    aka traceable cost
  11. indirect expense
    A product expense that can NOT be traced to or that is not incurred for one specific product.
  12. variable expense
    An expense amount that varies in direct proportion to some variation in a specified level of operating activity.
  13. fixed expense
    exp amt is constant regardless of # policies sold or some other measure of the level of operating activity
  14. rightsizing
    The elimination of nonessential empees or jobs in an org.

    aka downsizing.
  15. straight-through processing
    the automation of the steps in industry specific transactions electronically, with little or no manual intervention.

    aka end-to-end processing
  16. first-year commission
    a stated percentage of the amount of the premium an insurer receives during the first policy year.
  17. renewal commission
    commission on policies that remain in force that is equal to a stated percentage of ea premium paid for a specified number of yrs after the first policy year.
  18. heaped commission schedule
    a commissn sched that has a high first year comm. and lower renewal comm.'s.
  19. vested commission
    comm. guaranteed payable to producer, whether or not the producer represents the co. when the comm. becomes due.
  20. nonvested commission
    comm payable to producer only if he STILL represents the co. when the comm. becomes due.
  21. conditionally vested commission
    A comm. that becomes vested only AFTER agent reaches a certain age or # of years of service with the co.
  22. Persistency Bonus
    In producer compensation, a bonus for good persistency results; can be used as a alternative to a production bonus.
  23. Deposit-based commission schedule
    For annuity sales, a commission sched that pays comm's only on premium PAYMENTS made by annuity owners.
  24. asset-based commission schedule
    For annuity sales, comm. sched. where comm's are a PERCENTAGE of the ACCUMULATED VALUE of a deferred annuity contract's funds.
  25. process
    A series of ongoing activities directed toward achieving a goal.
  26. benchmarking
    a process of (1)identifying best outcomes of other co. for a specific activity or process & the practices that produced those outcomes, and (2) implementing the best ones to = or surpass them.
  27. total quality management (TQM)
    The process of creating an organizational culture committed to continuous improvement.
  28. kaizen
    The Japanese word for continuous improvement; refers to improving a system by constantly improving the little details.
  29. quality control circle
    A voluntary problem-solving group of 5-10 empees from the same work area who meet regularly to discuss quality improvement and ways to reduce costs.
  30. Six Sigma
    A disciplined approach for improving quality by reducing process defects or correcting problems so that results fall within customer specifications.
  31. root-cause analysis (RCA)
    A set of problem solving methods and tools that attempts to find the actual causes that led to an incident that that it can be corrected or removed.
  32. lean management
    A quality improvement method that emphasizes teams or "cells" that process work with fewer hand-offs, greater speed, and better communication.
  33. business process reengineering
    A comprehensive and systematic analysis and redesign of a org's work processes.

    aka reengineering