Lesson 8 Part 2 - Lesson 8(2 Lesson INSURANCE COMPANY...

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Unformatted text preview: Lesson 8 (2) Lesson INSURANCE COMPANY INSURANCE OPERATIONS OPERATIONS “There’s more to insurance than sales.” Introduction Introduction Why buying insurance? to provide protection. Hence, insurers need to specialize in many Hence, functions or activities. functions INSURANCE COMPANY OPERATIONS OPERATIONS 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. the skilled mathematician who is involved in every stages of insurance. skilled determine the legal reserves determine The objectives of actuary is to calculate premium that: Make the business profitable Compete Pay claims How? Study the statistical data on births, deaths. fires, diseases Study 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 Steps 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, Present convictions convictions Physical Inspection Example: dangerous machinery, safety rules, wearing goggles, toxic plant Physical Examination: Physician Reports Overweight? High blood pressure? 3. Making Decision 3. Accept 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 Market research 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 Company loss, arrange for payment loss, 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. 5. REINSURANCE Shifting of part or all of the insurance originally Shifting 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 Stabilize profits Provide protection Source of advice about new business line 6. 6. INVESTMENTS Since premiums are paid in advance, they can Since be invested. be 7. ACCOUNTING 8. LEGAL FUNCTIONS 9. MANAGEMENT INFORMATION ...
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