M92 Insurance Business and Finance Coursework Assignment Solution

This document presents a comprehensive solution to a coursework assignment for the M92 Insurance Business and Finance module. It addresses various aspects of insurance and finance, starting with outsourcing challenges faced by WSP PLC, including data confidentiality and service improvement strategies. The assignment then delves into corporate governance issues at ORI PLC, exploring challenges in management style and the implementation of organizational changes. It further examines corporate governance requirements for RKU Ltd. before listing on the LSE, and the actions needed to meet these requirements. The solution also analyzes the impact of issues in MGA on PFO PLC, focusing on affected functions and delegated responsibility terms. It includes an evaluation of existing and prospective classes of business, identifying profitability risks and discussing the risks of comparing business classes. Furthermore, the assignment addresses accounting requirements, including true and fair view, and the resolution of potential conflicts for insurers. Finally, it covers financial analysis using ratios like gross profit ratio and debt-to-assets ratio for MC PLC, offering a comprehensive understanding of insurance business and finance principles.

M92work Assignment
Coursework assignment answer template
Answer to Question 1 – Learning Outcome 1 (10 marks)
Part (a)
In the given question WSP PLC has outsourced its post-sale and claim handling
services to a third party service provider named FTN PLC which is located outside the UK.
The three challenges faced by the WSP PLC on outsourcing the services are:
 The Confidentiality of the customer information may get leaked. Care must be taken
while outsourcing the services as the data protection law confine the transfer of
customer data to foreign nation (Blackburn, Hart, and Wainwright, 2013).
 It became difficult to comprehend the customer conduct and gratification, if the
communication between the business and outsourced company is insufficient.
 If the FTN PLC the outsourced company get stuck in some financial problem then it
will be difficult for WSP PLC to search the alternative provider in short span of time.
Part (b)
To improve the service of the FTN PLC, the WSP PLC should set a performance
benchmark for the outsource company to achieve (Thompson, Strickland, and Gamble,
2015). A regular monitoring of the company service delivery and customer complaint
handing should be done. Customer feedback should be given importance. The duties of the
WSP should be clearly stated.
Answer to Question 2 – Learning Outcome 2 (20 marks)
Part (a)
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M92work Assignment
In the given question it can be seen that the company ORI PLC is facing many
challenges in achieving its growth objective. The company is having high turnover rate of the
employee. The reasons for this is that the board of the company is involved in making day-to-
day decision of the organization. Rather the role of the board of director is to set strategy,
determining the company policy, approving the company report and accounts, overseeing the
risk management process and many more. So the day to day decision making is the part of the
manager and supervisor and not the board of director. The company should divide the work
based on the role and responsibility like supervisor should perform his accountability by
reviewing the company business operation. Manager work is to make plan to improve
company performance and customer satisfaction.
Part (b)
The four challenges faced by the company in promoting management style.
 The company has to spend extensive efforts in setting strategic business plan like
setting objective, identifying the ways by which the objective can be achieved (Noe,
et.al 2017).
 Challenges in creating the appropriate organizational structure.
 Difficulties in allocating management duties and responsibilities to senior manager.
 Difficulty in agreeing and allocating budget to different department.
 Lack of expertise among the employee and the manager, since from last 20 years the
board is the sole person who were taking decision in every aspect of the business, so
the employee did not get the right kind of exposure of handling and managing the
business risk.
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M92work Assignment
Part (c)
For implementing the new changes in the organization, the following challenges may
be faced by the staff.
 Lack of know how
The staff may face the crisis of the technical and managerial skills, which are required
after implementation of the changes.
 Reduced in the Customer service while implementing new change
When the new changes is announced, staff involve in developing their business and
operational skill, they devote their most time in learning the requirement of new change.
On the other hand they fail to provide the optimum service to the customer as required.
Answer to Question 3 – Learning Outcome 3 (20 marks)
Part (a)
The corporate governance requirement that need to be addressed by the RKU Ltd, before
the share before the shares are listed on the LSE (Noe, Hollenbeck, and Gerhart, 2017).
 Sustaining a sound structure of internal control by evaluating how a company
recognizes and manages risk.
 Comprehending board reports to confirm that they present a balanced and reasonable
viewpoint.
 Confirming the directors are up to date with new accounting and auditing issues. E.g.
international accounting standards.
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M92work Assignment
 Assessing that the board receives the correct communications and information
required from the external auditors.
Part (b)
Significant action that the RKU Ltd must take to address the corporate governance
requirement.
 Reviewing the company internal financial controls.
 Monitoring and reviewing the effectiveness of the company’s internal audit function.
 Reviewing and monitoring the external auditor independence and objectivity.
 Developing and monitoring the external auditor’s independence and objectivity and
the effectiveness of the audit process.
Answer to Question 4 – Learning Outcome 4 (20 marks)
Part (a)
The three common function that will be affected in the PFO PLC by the issue
highlighted in the MGA are given below.
 Failure to achieve the business objectives.
If the business employee are less experienced than this means that they are not performing as
per the business requirement and ultimately will not able to achieve the business objective.
 Decrease in the customer service fulfillment.
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M92work Assignment
If the staff of the company is less exposed to business management or operation, then this
Means that staff will not able to handle the complex business operation and management, as a
result it affects the customer service.
 Difficulty in managing the accounts of the large number of the underwriters.
The MGA is becoming more wide spread in the UK. This means that MGA is undertaking
the other activities of an insurer such as marketing, selling and administration. Company need
to manage the accounts of the different agents, recording the various payment and the other
necessary communication (Nosair, and Bouffard, 2015).
Part (b)
The terms and condition of the delegated responsibility should be clear, concise.
 Auditing and monitoring
The insurer should frequently carryout audit during the year to ensure the terms and
Procedure of the binding authority. The insurer should employ an external auditor who will
visit the office of the cover holder and authenticate the files of the client. This is done to
confirm that the premium and cover providing are in accordance with the binding authority.
 Monitoring the Underwriting performance
The underwriting team will assess the performance of the corporate written in
Contradiction of the business plan. Certain times daily agendas of the new corporate written
and policies transformed, together with the claim reported, will be provided to the class
underwriters and heads of department (Arefifar, 2013).The performance the department is
conversed with the strategy team to see if they are any nonconformity from the complete
underwriting objectives and to assess whether the approach needs to be revised and updated.
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Answer to Question 5 – Learning Outcome 5 (30 marks)
Part (a)
Evaluation of the existing class of business.
From the analysis of the existing class of business it can be seen that business class B
is having the highest risk of profitability. As class B has earned a negative premium of 1
million Euro, which has increased the risk of profitability (Nosair, and Bouffard, 2015).
Working formula
Premium earned
Gross written premium - claim paid - claim outstanding- Expenses.
Gross premium percentage
Percentage Earned / Gross written premium
Part (b)
Evaluation of the Prospective class of business
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From the analysis of the prospective class of business it can be seen that both the business
class X & Y is the greatest risk to profitability. Both of them provide a negative return of
premium with respect to gross written premium.
Working formula
Premium earned
Gross written premium - claim paid - claim outstanding- Expenses.
Gross premium percentage
Percentage Earned / Gross written premium
Part (c)
The two risk of comparing the classes of business identified in the both the table are.
Provision for losses and loss adjustment
The provision for the gross loss should be disclosed in the balances sheet and the amount
expected to be recoverable under reinsurance agreement should be recognized in the balance
sheet as an assets (Friend, and Jessop, 2013).
The provision of the losses are estimated ultimate cost of all claim incurred but not
settled at the date of the balance sheet, whether reported or not. The incurred but not reported
claim are particularly to estimate and can only be estimated in the light of the company
experience.
Deferred acquisition costs
This comprises the cost of acquiring insurance policies that have been written during
the financial year but will earned in a subsequent year. Therefore the portion of the
acquisition costs are attributable to the unearned premiums (Nosair, and Bouffard, 2015).
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Answer to Question 6 – Learning Outcome 6 (10 marks)
Part (a)
As per the requirement of the true and fair view, which states that the financial
statement of account of an entity should represent the true and fair view, meaning they should
be prepared as per the accounting standard and comply with the requirement of the company
act 2006 (Nosair, and Bouffard, 2015).
On the contrary this requirement is not applicable in the case of natural disaster like earth
quake. Where it is not possible to comply the requirement of the IFRS and Company act.
Part (b)
In order to resolve the potential conflict the insurer is required to take the following steps.
 Providing the suitable disclosure even when not explicitly essential by the accounting
standards (Mi, 2015).
 Certifying that substantial information is not hidden by the irrelevant or inappropriate
disclosures.
 Establishing accounting guidelines for objects not explicitly enclosed by the
accounting standards or where they are abstruse.
 Making verdict, for example about assessment, intended at giving a true and fair view.
 Not providing the comprehensive accounting instructions as a justification for poor
accounting.
 Standing back at the conclusion of the accounting procedure and ensuring the
accounts in general do provide a ‘true and fair’ opinion.
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Question 7 – Learning Outcome 7 (20 marks)
Gross profit ratio refer to a profitability ratio that shows the liaison between the gross
profit and the total sales net revenue. It is a popular tool to evaluate the operational
performance of the business. The ratio is computed by dividing the gross profit figure by the
net revenue (Ward 2016).
Debt to assets ratio is also known as the leverage ratio that measures the amount of
the total assets that are financed by the creditors instead of the investors. It shows what
percentage of the assets is funded by the borrowing compared with the percentage of
resources that are funded by the investors.
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The current ratio is a liquidity ratio that calculate whether or not a firm has sufficient
resources to meet its short term requirement. It relates a firm current assets to current
liability. This ratio is the sign of the firm liquidity ( ).
Debt to capital ratio is the portion of the company financial leverage. This ratio is
computed by the taking the company interest bearing debt, together short term and the long
term obligations and dividing it by the total capital. Total capital refers to the all interest
bearing obligation plus shareholder equity.
Part (b)
Based on the above calculation, it can be evaluated that the firm MC PLC is a strong
financial company. The company is having low debt, high profitability ratio, the company is
appropriately utilizing the assets to pay off its liability.
Part (c)
The financial concern which need to discuss are following (Nosair, and Bouffard, 2015).
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M92work Assignment
 Whether the company is preparing its financial statement based on the IFRS and the
relevant accounting standard.
 Whether the company is comply with all the statuary requirement imposed by the law.
 Whether the company policy, has been designed with a view of the welfare of the
employee.
Answer to Question 8 – Learning Outcome 8 (10 marks)
Part (a)
The risk appetite of the firm can be evaluated by examining the statement of risk that is
acceptable for the company to bear (Johnston and Bate, 2013).
Part (b)
The company can maintain their credit rating, by using the following factor
 Comply with the Financial requirement
This applies to all firms and considers key quantitative requirement, including own
funds.
 Governance and supervision
This incorporate an effective risk management system and prospective risk
identification through the own risk and solvency assessment (Tuomikangas, and
Kaipia, 2014).
 Reporting and disclosure
Insurers are required to publish details of the risks facing them, capital adequacy and
risk management.
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Answer to Question 9 – Across more than one Learning Outcome (30 marks)
Part (a)
From the analysis of the above information following, data can be extracted in order to assess
the best performing broker.
PA Ltd in the year 2017 has earned the maximum return per client which 28208.55. This
earning is the highest among the other broker.
Part (b)
Choice of broker based on the non-financial information.
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