2. 2
LEARNING OUTCOMES :
At the end of chapter, the students should be able to :
Categorise insurance market in Malaysia and explain
its roles
List and explain other insurance market components
Explain organizational structure of insurance company
Identify various institutions and other insurance
organization
3. 3
CATEGORISE INSURANCE MARKET IN MALAYSIA AND
EXPLAIN ITS ROLES
Insurance market :
the facilities for buying and selling insuance.
A market is made up of components.
Insurance market components are:
7. 7
ORGANIZATIONAL STRUCTURE
Insurance companies may be categorized in
various ways :
Functions performed
Products sold (Life insurer , General Insurer,
Composite insurer)
Territories
When companies is organized by functions
performed, the departments commonly found
are:
9. ADMINISTRATION DEPT.
Provides & handles services commonly
used by many departments
Eg. Office services, building services &
personnel administration
Responsible for matters relating to the
company’s employees
Formulates company policies with respect
to the hiring, training & dismissal of
employees, determines salary scale with
labour unions, & ensures compliance with
relevant laws
9
10. ELECTRONIC DATA PROCESSING
DEPT.
It serves other departments by
establishing procedures & programs
that enable them to utilize the
computer in their work
Underwriting & policy preparation,
performing calculations required by
accounting & investment dept.,
maintaining all kinds of company’s
records, preparation of financial
statements & management
information reports.
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11. ACCOUNTING DEPT.
Responsible for billing & collecting
premium.
Company’s general accounting records,
prepare financial statements, maintain
budgetary control over departmental
expenses.
Comply relevant government
regulations and tax laws.
11
12. SALES / AGENCY DEPT.
Identify field officers,
recruiting, agents’
contract, motivating &
supervising the sales
force
12
Marketing dept.
• Provides support to sales
• Develop sales promotion
programmes, literature and kits
• Training of the sales force
13. UNDERWRITING DEPT.
Sets underwriting guidelines & selection criteria, selects risks &
determines premiums, terms & conditions of new businesses &
renewals
Fixes the amount for insurer’s retention and reinsurance
13
Actuarial dept.
Mainly found in life insurance companies
Design and pricing of new life insurance products,
calculate surrender values, paid-up policy values,
bonus rates for participating policies
14. INVESTMENT DEPT.
Main function – to invest all available
funds in a manner which ensures sufficient
returns, satisfies the company’s
requirement for liquidity and security &
comply relevant regulations
Invest in various portfolio – government
securities, shares & debentures, fixed
deposits with banks, investment in land &
buildings
14
15. CLAIMS DEPT.
Processes claims
Verify the validity of claims, determine the
benefits and amount payable, and authorize
payment
15
Customer Service dept.
Provides assistance to the company’s
policyowners and beneficiaries.
Questions concerning policy coverage, make
changes requested by the policyowners – address,
beneficiaries designation, mode of premium
payment.
16. 16
CENTRALISE VS DECENTRALISE
Centralization
When an insurance company organizes its department on
functional basis, the basic functions and decision making tend to
be centralized at the head office
The branches act as sales outlets
Decentralization
When some functions are carried out at branches and granted
authority to make decision, decentralization exists
20. ORGANIZATIONS RELATED TO
GENERAL INSURANCE
Motor Insurers’ Bureau (MIB)
Insurance Mediation Bureau (IMB)
Unplaced Motor Pool (UMP)
Persatuan Insurans Am Malaysia (PIAM)
Insurance Brokers’ Association of Malaysia
(IBAM)
Association of Malaysian Loss Adjusters
(AMLA)
20
21. MIB
RTA 1987 requires a motor vehicle user to be insured against
liability in respect of death or personal injuries to any person
caused by or arising out of the use of motor vehicle on a road.
Compulsory motor insurance, to ensure compensation is paid
to the accident victim.
Yet, an innocent victim may be still uncompensated because :
The negligent driver is uninsured
His motor insurance is not valid
His insurer gone into liquidation
The negligent driver cannot be traced
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22. MIB
Established in 1967.
Main function : to provide compensations to accident
victims where the uninsured driver are unable to meet
their liability from their own personal resources.
Making ex-gratia compensation to victims or their
dependents of hit and run cases, which ceased in 1984.
Funds accumulated from levies imposed on its members
(motor insurers).
22
23. IMB
Its objective is to provide an alternative
procedure to resolve disputes arising out of
policies of personal insurance.
It does not deal with third party claims.
The bureau has the power to make awards up
to RM100,000.
The award binds the members.
However, the policyholder is not bind with it.
They may seek remedy in a court of law if they
are dissatisfied.
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24. UMP
Provides insurance coverage at a reasonable cost
to certain classes of vehicles which insurance
companies are not willing to insure, due to adverse
claims experience.
High Risk Motor Inusurance Pool (1992).
Malaysian Motor Insurance Pool (1995).
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25. PIAM
Membership is compulsory on all general
insurers.
Its objectives are to:
Establish a sound insurance structure in Malaysia
Collect and circulate information and statistics relating
to general insurance business
Make rules, regulations, tariffs and by-laws
Manage UMP and Fire Protection Association
Assist in whatever way within its capacity to reduce
losses and / or accidents and to prevent crime
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26. IBAM
Registered under the Societies Act 1966.
Membership is mandatory to all insurance brokers.
To protect the interest of insurance brokers.
Its objectives are to :
Promote & establish a sound brokerage business in Malaysia
Promote & represent the interests of its members
Note events, statements & expressions of opinion affecting
members, advise them and represent their interest
Co-operate with other similar associations elsewhere in the
world
Work in conjunction with any legal body or association 26
27. AMLA
Its objectives are to :
Promote the establishment of a sound loss adjusting
structure in cooperation and consultation with the
authority.
Promote & represent the interests of its members by all
means & methods consistent with the laws.
Cooperate with other similar associations elsewhere in
the world.
Circulate information likely to be of interests to members,
collate & publish statistics and other relevant information
relating to loss adjusting.
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28. ORGANIZATIONS RELATED TO LIFE
ASSURANCE
Life Insurance Association of Malaysia (LIAM)
National Association of Malaysian Life Insurance
Agents (NAMLIA)
The Actuarial Society of Malaysia (ASM)
The Malaysian Insurance Institute (MII)
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29. LIAM
Established in 1974
Responsible for the registration of life insurance
agents
Its major objectives are to:
Promote & represent the interests of the member
companies & the life insurance industry
Render service & assistance to member companies as may
be required
Circulate information likely to be of interests to members,
collate & publish statistics and other relevant information
relating to life insurance 29
30. NAMLIA
Set up in 1978
Life insurance agents & their supervisors
Safeguarding the interests of those engaged in life
insurance selling & sales management
Promote professionalism among its members
through collaboration with similar organizations
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31. MII
Established in 1964
Promote human resource development in the insurance industry
through examination, training, informing, exchange and ideation
Its objectives are to :
Provide & maintain a central organization for promotion of
efficiency, progress & general development among persons
engaged or employed in the insurance industry
Encourage & assist in the study of any subjects relating to any
aspect of insurance business
Publish any newspaper, journals & leaflets desirable for the
promotion of the objectives of the institute
Establish a library for the purpose of the institute
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32. MII
Offer money or prizes for essays or research in any subject
relating to insurance
Organize & conduct courses, seminars, conferences &
workshops relating to insurance & the management of
insurance institutions
Undertake research in the fields of insurance & other
related subjects
Establish & operate trust funds for the purpose of
promoting the development of the insurance industry
Conduct insurance & insurance related examination &
award certificates, diploma, scholarship & prizes
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