M92: Insurance business and
finance
Mixed assessment coursework – assignment
Coursework submission rules and important notes
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This includes the following information:
• These questions must not be provided to, or discussed with, any other person regardless of whether they
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• Deadlines for submission of coursework answers.
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• The total marks available are 200. You need to obtain 120 marks to pass this assignment.
• Your answer must be submitted on the correct answer template in Arial font, size 11.
• Answers to a coursework assignment should be a maximum of 10,000 words. The word count does not
include diagrams however, it does include text contained within any tables you choose to use. The word
count does not include referencing or supplementary material in appendices. Please be aware that at the
point an assignment exceeds the word count by more than 10% the examiner will stop marking.
Top tips for answering coursework assignments
• Read the Specimen coursework assignment and answer for this unit, available on RevisionMate.
• Read the Learning Outcome(s) and related study text chapter for each question before answering it.
• Ensure your answer reflects the context of the question. Your answer must be based on the figures and/or
information used in the question.
• Ensure you answer all questions.
• Address all the issues raised in each question.
• Do not group question parts together in your answer. If there are parts (a) and (b), answer them
separately.
• Where a question requires you to address several items, the marks available for each item are equally
weighted. For example, if 4 items are required and the question is worth 12 marks, each item is worth 3
marks.
• Ensure that the length and breadth of each answer matches the maximum marks available. For example,
a 30-mark question requires more breadth than a 10 or 20 mark question.
Copyright © 2020 The Chartered Insurance Institute. All rights reserved.
M92 coursework assignment questions
Question 1 – Learning Outcome 1 (10 marks)
You are a marketing manager for IJ plc, an insurer that underwrites professional indemnity insurance. IJ plc
offers a wide range of professional indemnity insurance products for specific professions. IJ plc distributes its
products through insurance brokers.
Due to stagnating sales, IJ plc has decided that it needs to sell professional indemnity insurance through an
additional distribution channel.
(a) Identify, with justification, the most appropriate additional distribution channel for IJ plc. (4)
(b) Recommend two actions that IJ plc should take to maximise the benefit of the use of the additional
distribution channel, you have identified in (a) above. (6)
Question 2 – Learning Outcome 2 (20 marks)
You are the recently appointed Head of Sales for an insurance company. There are several departments
within the company’s sales division.
During a recent review of the sales division’s current annual budget, you have identified the following issues:
• The proportion of budget allocated to each department is inconsistent.
• All departments have budget variances, both above and below budget.
• Variance management is dealt with differently by each department.
(a) Identify, with justification, four significant ways in which the current budget variances, in the sales
division, can be managed effectively. (8)
(b) Explain four actions you could take to improve the accuracy of future budgeting, when producing
the next annual budget for the sales division. (12)
Question 3 – Learning Outcome 3 (20 marks)
You are a risk manager for TBS plc, an insurer.
Over the last three years, TBS plc has seen an increasing trend of complaints across several of its operating
departments, including the following complaints:
• Slow response times when providing new business quotations.
• Policy documentation is often inaccurate and issued late.
• Claims target settlement dates have been regularly missed.
• Commission payments to insurance brokers are often incorrect.
(a) Identify, with justification, one risk management issue for TBS plc that arises from each of the
complaints included above. (8)
(b) Discuss how risk management practices could assist the future management of these complaints
for TBS plc. (12)
M92/2020 M92: Insurance business and finance 2
Copyright © 2020 The Chartered Insurance Institute. All rights reserved.
Question 4 – Learning Outcome 4 (20 marks)
You are the Commercial Director for YT Ltd, an insurance broker.
Over the last five years, YT Ltd has acquired a number of smaller competitors. Each of the acquired
competitors’ client base was similar to YT Ltd’s. During this period, profits have been lower than anticipated
and the expected benefits from these acquisitions have not been realised.
Since the acquisitions, the following issues within YT Ltd have been highlighted:
• Information technology systems have not been integrated successfully.
• Staff retention levels have significantly declined.
• There is an inconsistent business culture.
(a) Identify, with justification, two of YT Ltd’s functions that should be responsible for resolving the
integration of information technology systems. (4)
(b) Identify, with justification, two of YT Ltd’s functions that should be responsible for improving levels
of staff retention. (4)
(c) Identify, with justification, two of YT Ltd’s functions that should be responsible for creating a
consistent business culture. (4)
(d) Describe how utilising the expertise of the most appropriate functions can ensure that future
anticipated profitability is achieved by YT Ltd. (8)
M92/2020 M92: Insurance business and finance 3
Copyright © 2020 The Chartered Insurance Institute. All rights reserved.
Question 5 – Learning Outcome 5 (30 marks)
You are the Claims Director for MMB plc, an insurer. MMB plc intends to reduce its claims handling costs,
whilst maintaining its current high level of service. Therefore, MMB plc is going to outsource its claims
handling activities for all individual claims up to £10,000 in value.
After reviewing potential claims handling partners, SB Ltd has been identified as the preferred outsourcing
provider.
As part of the review process, the following information about SB Ltd, has been provided to MMB plc:
Gross claims handling fees 2017 £32 million
2018 £35.5 million
2019 £45 million
Average claim fee 2017 £450
2018 £465
2019 £410
Salaries of staff 2017 £15 million
2018 £15.5 million
2019 £16 million
Number of staff 2017 600
2018 620
2019 620
Profit 2017 £2.5 million
2018 £3.5 million
2019 £6 million
No. of complaints 2017 750
2018 790
2019 1,200
Average no. of days to settle a claim 2017 10 days
2018 12 days
2019 20 days
You are required to analyse the above information and come to a decision on whether SB Ltd should be
appointed.
(a) Explain, with justification, based solely on the information above, five issues that need further
investigation by MMB plc. (20)
(b) Identify, with justification, one additional item of financial information for each of the issues you
have explained in (a) above that will assist in the decision making. (10)
Question 6 – Learning Outcome 6 (10 marks)
You are a claims manager for RE Ltd, a commercial lines insurer. RE Ltd has historically taken a
conservative approach to claims reserving. A recent internal audit has identified the following two issues with
the effectiveness of RE Ltd’s claims reserving:
• RE Ltd’s flood mapping tool is outdated and, therefore, unreliable.
• Inaccuracies in reserving for large claims.
Discuss how each of the two issues will impact RE Ltd’s claims reserving. (10)
M92/2020 M92: Insurance business and finance 4
Copyright © 2020 The Chartered Insurance Institute. All rights reserved.
Question 7 – Learning Outcome 7 (20 marks)
You are a commercial underwriter for a commercial lines insurer specialising in retail businesses. The
insurer’s underwriting policy is to only insure financially secure businesses.
An insurance broker has asked you for an insurance quotation for one of their clients, MN plc, who is a
clothing retailer. The broker has provided you with the following financial information for MN plc.
Balance sheet for MN plc as at 31/12/2019
Balance Sheet £’000’s £’000’s
Assets
Non-current assets
Land 12,000
Buildings 10,000
Machinery 500
Total 22,500
Current assets
Cash 10,000
Debtors (trade receivables) 1,000
Stock 18,000
Total 29,000
TOTAL ASSETS 51,500
Equity and liabilities
Equity
Share capital 13,000
Reserves 3,500
Total equity 16,500
Non-current liabilities
Long-term borrowings 13,500
Total 13,500
Current liabilities
Creditors 15,000
Short-term borrowings 6,500
Total 21,500
TOTAL EQUITY AND LIABILITIES 51,500
M92/2020 M92: Insurance business and finance 5
Copyright © 2020 The Chartered Insurance Institute. All rights reserved.
Income statement for MN plc for the year ending 31/12/2019
Income statement £’000’s
Revenue 108,000
Cost of sales (57,000)
Gross profit 51,000
Operating expenses (47,500)
Profit before Tax 3,500
Tax expenses (665)
Profit for the period 2,835
Note: Figures in brackets are negative.
(a) Calculate, showing all your workings, the financial position of MN plc. Use one appropriate
profitability ratio and three other appropriate non-profitability financial ratios. (8)
(b) Analyse, based on your calculations in (a) above, the suitability of MN plc as a risk to be insured. (6)
(c) Recommend, based on your analysis in (b) above, the two most significant financial concerns
about MN plc to raise with the insurance broker. (6)
Question 8 – Learning Outcome 8 (10 marks)
BWL plc is an insurer. Following a recent review by a credit rating agency, BWL plc’s credit rating has been
upgraded.
BWL plc operates in a competitive environment, where most products and services are homogeneous.
(a) Identify, with justification, two significant implications of this credit rating upgrade for BWL plc. (4)
(b) Explain the potential impact on BWL plc’s main competitors, from this upgrade in credit rating. (6)
Question 9 – Across more than one Learning Outcome (30 marks)
You are a strategy manager for RRB plc, an insurer operating in a highly competitive market. RRB plc
distributes its products through intermediaries. RRB plc’s reputation is of critical importance to its business
success.
Over the last five years, RRB plc has achieved a consistent level of profit. Due to competitive pressures,
there is a continuous expectation to reduce costs to ensure future profitability.
The following specific issues, in relation to RRB plc’s business, have been identified as a threat to future
profitability:
• Lack of obvious further cost reduction opportunities.
• Reduction in the number of skilled and experienced employees.
• Disruption to their insurance distribution channels, caused by new entrants.
• Increasing scrutiny from the regulator.
(a) Explain three significant challenges for RRB plc in maintaining its future profitability. (9)
(b) Explain the potential difficulties for RRB plc in maintaining positive relationships with its key
stakeholders whilst achieving its future profitability targets. (9)
(c) Discuss three business opportunities for RRB plc if the challenges, you have explained in (a)
above, are overcome. (12)
M92/2020 M92: Insurance business and finance 6
Copyright © 2020 The Chartered Insurance Institute. All rights reserved.
Question 10 – Across more than one Learning Outcome (30 marks)
You are a newly appointed financial officer for JN plc, an insurer, which underwrites liability insurance. You
are provided with the following income statements for JN plc:
Income statements for two years ending 31st December
Income 2019 2018
£’000’s £’000’s
Gross written premium 105,000 120,000
Outward reinsurance premium (10,500) (6,000)
Net written premium 94,500 114,000
Net earned premium 82,500 85,000
Net investment return 4,500 2,500
Total income 87,000 87,500
Expenses 2019 2018
£’000’s £’000’s
Gross claims incurred (50,000) (65,000)
Reinsurers’ share 7,000 4,000
Claims incurred net of reinsurance (43,000) (61,000)
Acquisition costs (15,500) (18,000)
Other operating expenses (20,000) (32,000)
Total expenses (78,500) (111,000)
Profit 8,500 (23,500)
Note: Figures in brackets are negative.
(a) Discuss three negative features arising from an interpretation of JN plc’s income statements. You
are not required to show any calculations or workings. (15)
(b) Identify, with justification, one potential cause for each of the three negative features you have
discussed in (a) above. (9)
(c) Recommend, with reasons, one action to manage each of the three negative features you have
discussed in (a) above. (6)
M92/2020 M92: Insurance business and finance 7
