FCIP F510 cheat sheet

Agency vs. brokerage: an agency represents the insurer under an agency agreement; a broker represents the insured and may bind coverage only through carrier-granted authority.

Binding authority is defined in the carrier-agency contract and specifies lines, limits, and classes the producer may bind without prior approval.

Premium trust accounting: fiduciary funds must be held in a segregated trust account; commingling with operating funds is prohibited in most jurisdictions.

Direct bill vs. agency bill: direct bill has the carrier invoice the insured; agency bill makes the agency responsible for collecting and remitting premium.

Account current (AC) statements reconcile agency-billed premium, commissions, and amounts due to the carrier on a scheduled cycle.

Errors and omissions exposure rises when an agency fails to document coverage declinations, binding confirmations, or client instructions.

Producer licensing is jurisdictional; nonresident licensing typically requires a home-state license in good standing and a reciprocal appointment.

Carrier appointments authorize a producer to act on an insurer's behalf; termination triggers notice and, in some states, renewal-commission rights.

Span of control: the number of direct reports per manager; wide spans flatten hierarchy, narrow spans increase supervisory depth.

Agency perpetuation plans address ownership succession through internal sale, external sale, ESOP, or family transfer.

Agency value is commonly expressed as a multiple of EBITDA or commission revenue; recurring commercial lines and retention rates drive the multiple.

Key performance indicators include revenue per producer, revenue per employee, accounts per producer, and retention percentage.

Strategic planning cycle: mission, SWOT analysis, measurable objectives, action plans, and quarterly review.

Delegation requires matching authority with accountability; decision rights should be documented in written job descriptions.

Change management models (e.g., Kotter's eight steps) sequence urgency, coalition building, vision, and short-term wins.

Producer compensation structures include straight commission, salary plus commission, and book-ownership or equity participation.

Contingent commission (profit-sharing) is paid by carriers based on loss ratios and growth; it is not guaranteed and must be accrued conservatively.

Agency EBITDA = revenue − operating expenses (excluding interest, taxes, depreciation, and amortization).

Trust ratio: trust assets must at all times equal or exceed trust liabilities (premiums collected but not remitted plus return premiums due).

Working capital = current assets − current liabilities; agencies with heavy direct-bill receivables need adequate liquidity buffers.

Accounts receivable aging: 0–30, 31–60, 61–90, and 90+ days; 90+ day balances signal collection or E&O risk.

Commission revenue recognition occurs when the policy is bound and the commission is earned, subject to carrier chargebacks on cancellation.

Budget variance analysis compares actual to budgeted revenue and expense by line and by producer.

Cash flow forecasting must account for premium trust timing, carrier remittance cycles, and producer commission draws.

Sales funnel stages: prospecting, qualification, needs analysis, presentation, objection handling, closing, and account rounding.

Client lifetime value (CLV) = average annual revenue × gross margin × average retention years.

Retention rate = (clients at end of period − new clients acquired) ÷ clients at start of period.

Account rounding targets additional lines per household or commercial account; cross-sell ratio measures lines per policyholder.

Referral programs convert satisfied clients into prospects; tracking source of business identifies highest-yield channels.

Producer scorecards track new business, retention, cross-sell, and activity metrics such as quotes and appointments.

Digital marketing channels include search, social, email, and review sites; compliance review is required for advertising claims.

Sales management cadence: weekly pipeline reviews, monthly production reports, and quarterly goal recalibration.

Risk treatment techniques: avoidance, reduction, transfer, retention, and sharing.

Loss frequency is the number of losses per exposure unit; loss severity is the average cost per loss; expected loss = frequency × severity.

Commercial general liability (CGL) coverage triggers include occurrence, claims-made, and claims-made-and-reported forms.

Business income coverage responds to loss of earnings and continuing expenses during the period of restoration, subject to a waiting period.

Workers compensation provides statutory benefits for work-related injury; exclusive remedy generally bars employee tort suits against the employer.

Umbrella and excess policies sit above underlying limits; umbrella may drop down for uncovered exposures, excess does not.

Professional liability (E&O) and cyber liability are claims-made lines requiring careful retroactive date and extended reporting period review.

Personal lines products include homeowners (HO-3, HO-5), auto (PAP), and umbrella; coverage differences turn on perils insured and valuation.

Underwriting process: gather information, evaluate exposure, classify risk, select terms, and monitor results.

Loss ratio = incurred losses ÷ earned premium; combined ratio = loss ratio + expense ratio.

Underwriting authority is delegated through binding authority letters and carrier appointment agreements.

Claims handling steps: notice, acknowledgment, investigation, coverage determination, valuation, payment or denial, and subrogation.

Reservation of rights letters preserve the insurer's coverage defenses while investigation continues.

Bad faith exposure arises from unreasonable delay, failure to investigate, or failure to settle within limits.

Carrier relations depend on submission quality, hit ratio, loss ratio performance, and timely premium remittance.

Producer role in claims is limited to reporting, advocacy, and documentation; coverage decisions rest with the carrier.

Job descriptions should list essential functions, reporting relationships, and required licenses.

Onboarding includes licensing verification, carrier appointment processing, E&O training, and systems access.

Continuing education requirements vary by state and license class; tracking is a compliance function.

Performance reviews should use measurable criteria tied to job description and agency goals.

Compensation benchmarking uses regional salary surveys for account managers, CSRs, and producers.

Employee handbooks should be reviewed by counsel and include at-will language where applicable.

Training plans combine carrier product training, sales skills, and technology platform certification.

Retention strategies include career pathing, mentoring, and equity or phantom equity participation.

Agency management systems (AMS) store policy, client, and commission data; data integrity depends on consistent coding.

Customer relationship management (CRM) platforms track activities, pipeline, and communication history.

Data security controls include multi-factor authentication, encryption, role-based access, and backup procedures.

Cybersecurity frameworks for agencies include NIST CSF functions: identify, protect, detect, respond, recover.

Data retention policies must satisfy state recordkeeping rules and E&O documentation needs.

Application programming interfaces (APIs) enable real-time quoting and carrier connectivity.

Analytics use loss runs, retention data, and cross-sell metrics to guide management decisions.

Business continuity plans should address system outages, data loss, and alternate communication methods.

Fiduciary duty requires the producer to act in the client's best interest when handling premiums and coverage advice.

State insurance departments regulate licensing, appointments, continuing education, and market conduct.

Unfair trade practices include misrepresentation, twisting, rebating, and unfair claim settlement practices.

Errors and omissions claims typically allege failure to procure, failure to advise, or failure to document.

Recordkeeping rules require retention of policy records, applications, and correspondence for statutory periods.

Privacy regulations govern the handling of nonpublic personal information; Gramm-Leach-Bliley Act (GLBA) safeguards apply.

Ethical standards include disclosure of compensation, avoiding conflicts of interest, and maintaining confidentiality.

Producer licensing reciprocity allows nonresident licensing through the National Association of Insurance Commissioners (NAIC) uniform application.