Skip to content

IAI Actuarial Core Principles · Business Management · Business and consumer needs, the industry value chain and competitive forces

In the insurance industry value chain, which description best fits the role of an independent insurance broker acting for a customer?

A broker sits in the distribution stage between insurers and customers, advising the customer and arranging cover from several insurers. It does not underwrite risk, hold reserves, manufacture products, set capital requirements or audit accounts.

  1. AIt sits between product providers and customers, advising the customer and arranging cover from several insurersCorrect
  2. BIt underwrites the risk and holds the policy reserves
  3. CIt sets the regulatory capital requirements for insurers
  4. DIt manufactures products and bears the investment risk
  5. It audits the insurer's published accounts

Explanation

Brokers operate in distribution, advising clients and placing business with insurers. Underwriting, reserving and product manufacture belong to the insurer, while capital rules and audit are regulatory or assurance functions.

Did you get it right without looking?

One question tells you little. A timed set on Business and consumer needs, the industry value chain and competitive forces shows your real accuracy, how long you take and where you lose marks.

Practise Business and consumer needs, the industry value chain and competitive forcesFree diagnostic mock

More Business and consumer needs, the industry value chain and competitive forces questions