Unformatted text preview: Lesson 8 (2)
“There’s more to insurance than sales.” Introduction
Introduction Why buying insurance? to provide protection. Hence, insurers need to specialize in many
functions or activities.
functions INSURANCE COMPANY
1. RATE MAKING Pricing of insurance.
So special because the actual cost is unknown.
The actual losses and expenses are known only after accident.
Actuary the person who determines the rates.
skilled mathematician who is involved in every stages of insurance.
determine the legal reserves
determine The objectives of actuary is to calculate premium that: Make the business profitable
Pay claims How?
Study the statistical data on births, deaths. fires, diseases
etc. 2. UNDERWRITING
UNDERWRITING Process of selecting and classifying applicants for insurance.
Decides to accept or reject an application.
Objectives: produce a safe and profitable book of business.
Policy: statement of underwriting policy. Determine by top management.
It becomes a guidelines to everyone. Steps in Underwriting
A form of communication to the sales force.
1. Agent as First Underwriter Field underwriting
Agent is told the types of business to solicit
Example: drug addicts, alcoholics, hazardous occupations 2. Sources of Information Property Insurance: physical features and personal characteristics
Where to get? Application: basic source Age, sex, weight, occupation
Agent’s Report: evaluation of the prospective insured. How long she or he has known the applicant
Inspection Report: outsider’s report Present financial conditions, drinking habits, marital status, police record,
Physical Inspection Example: dangerous machinery, safety rules, wearing goggles, toxic plant
Physical Examination: Physician Reports Overweight? High blood pressure? 3. Making Decision
Accept subject to certain restrictions or modifications •
• Iron bars on windows Reject • Other Considerations • Rate adequacy and underwriting •
• Commercial property and liability insurance subjects to negotiation Reinsurance and underwriting
Renewal underwriting •
• The right to refuse renewal if loss experience is unfavorable 3. PRODUCTION
3. Sales and marketing activities of insurers. Agency/Sales Department Recruiting and training new agents and supervision
Marketing strategies 4. CLAIM SETTLEMENT Verification of a covered loss Fair and prompt payments of claims
Personal assistance to the insured Person or property is covered?
To what extent? Temporary housing after a fire occurs Who you can see? Agent: settle small claims Speedy, reduces adjustment expenses, good will Company Adjustor: investigate the claim, determine the amount of
loss, arrange for payment
Independent Adjustor: by fees, for distanced area. Steps in Claim Settlements Notice of loss Investigation
Filling a Proof of Loss Notify the insurer of a loss. A sworn statement by the insured Decision
Pay Deny Pay but dispute Appoint independent appraiser 5.
Shifting of part or all of the insurance originally
written by one insurer to another insurer.
written Ceding company= initially write the insurance
Reinsurer= accept part or all insurance
Retrocession= reinsurer of reinsurance company WHY? Increase underwriting capacity
Source of advice about new business line 6.
6. INVESTMENTS Since premiums are paid in advance, they can
MANAGEMENT INFORMATION ...
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- Spring '09
- Finance, insurance company, Field underwriting, Renewal underwriting, Present financial conditions