Happiest minds insurance domain overview 1 2

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This presentation walks you through the theory and applicability of the insurance industry and it's functions.

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  • Less than 1 – Beating targetsGreater than 1 – Behind targets
  • Happiest minds insurance domain overview 1 2

    1. 1. Insurance Domain Overview Understanding How Insurance Works Author – Varun Arya Happiest People, Happiest Customers
    2. 2. 2 © Happiest Minds – Confidential Agenda • Money, Money & Money • What is Insurance? • Principles of Insurance • Business of Insurance • Types of Insurance • KPIs of Insurance
    3. 3. 3 © Happiest Minds – Confidential Money, Money & Money
    4. 4. 4 © Happiest Minds – Confidential • How big is this? $4300000000000
    5. 5. 5 © Happiest Minds – Confidential The Numbers • $4.3 trillion in premium collections globally $1.6 trillion – Europe $1.4 trillion – North America $1.16 trillion – Asia Thrice as big as India’s GDP - $1.43 trillion
    6. 6. 6 © Happiest Minds – Confidential Insurance Pie for the IT Industry • $140.2 billion in 2013 • Continued growth to $154.5 billion in 2015
    7. 7. 7 © Happiest Minds – Confidential Opportunity in India Abysmally low Insurance Penetration in India • Life Insurance – 4% • General Insurance – 1%
    8. 8. 8 © Happiest Minds – Confidential So, What is Insurance?
    9. 9. 9 © Happiest Minds – Confidential Insurance Defined • Risk transfer. Contract between 2 parties. Insurers and Insured. Insured pays a premium, insurer promises to pay for loss. • Can you transfer any risk ? Betting in a casino in Vegas? Jumping from a multistory building for adventure? • Some characteristics? So what are they?
    10. 10. 10 © Happiest Minds – Confidential Characteristics of Insurable Risk • Large number of similar exposure units • Definite loss • Accidental loss • Large loss • Affordable premium • Calculable loss • Limited risk of catastrophically large losses
    11. 11. 11 © Happiest Minds – Confidential Principles Governing Insurance
    12. 12. 12 © Happiest Minds – Confidential Principles Governing Insurance • Principle of Utmost Good Faith • Principle of Insurable Interest • Principle of Indemnity • Principle of Subrogation • Principle of Contribution • Principle of Proximate Cause
    13. 13. 13 © Happiest Minds – Confidential Principle of Utmost Good Faith • A positive duty voluntarily to disclose, accurately and fully, all facts material to the risk being proposed, whether requested or not. • Doctrine of “Uberrimae Fides” and not doctrine of “Caveat Emptor”
    14. 14. 14 © Happiest Minds – Confidential Principle of Insurable Interest • There must be some property, right, interest, liability or potential liability capable of being insured. • The insured must stand in a relationship with the subject matter of insurance whereby he benefits from its safety, well being or freedom from liability and would be prejudiced by its loss, damage or existence of liability
    15. 15. 15 © Happiest Minds – Confidential Principle of Indemnity • On the happening of the insured event for which the insurance policy is taken up the insured should be replenished the amount of loss.
    16. 16. 16 © Happiest Minds – Confidential Principle of Subrogation • Subrogation means the restitution of the rights of an assured in favor of the insurer against the third party for any damages caused by him in place of the assured after the insurer has indemnified him for the loss. • The principle of subrogation is invoked when a third party is responsible for the loss.
    17. 17. 17 © Happiest Minds – Confidential Principle of Contribution • As per the doctrine of contribution the indemnity provided for the loss occurring on the asset, which is insured with several insurers has to be proportionately shared among them according to the rateable proportion of the loss
    18. 18. 18 © Happiest Minds – Confidential Principle of Proximate Cause • The term “Proximate cause“ literally means the nearest cause or direct cause. In insurance parlance it relates to the immediate cause of the mishap, which resulted in the loss • Car damaged in house fire. Covered by Property Insurance and not Auto.
    19. 19. 19 © Happiest Minds – Confidential Business of Insurance
    20. 20. 20 © Happiest Minds – Confidential Value Chain of Insurance • Marketing • Risk Modeling • Sales • Policy Administration • Billing • Claims • Customer Service
    21. 21. 21 © Happiest Minds – Confidential Business Model Profit = Underwriting Income + Float
    22. 22. 22 © Happiest Minds – Confidential Types of Insurance
    23. 23. 23 © Happiest Minds – Confidential Insurance Life General Auto Property Marine Health
    24. 24. 24 © Happiest Minds – Confidential Insurance KPIs The Business Metrics
    25. 25. 25 © Happiest Minds – Confidential Net Income Ratio • This KPI measures the profitability of an Insurance company • NIR = Net Income/Earned Premium • The higher the better
    26. 26. 26 © Happiest Minds – Confidential Policy Sales Growth • This KPI helps us measure whether an Insurer is hitting sales targets or not • PSG = (Current Sales – Prev Sales)/ Prev Sales
    27. 27. 27 © Happiest Minds – Confidential Renewal Ratio • This KPI measures the policy renewals over a set period of time • Hints at the customer satisfaction level • RR= Renewals/Policies Sold
    28. 28. 28 © Happiest Minds – Confidential Claims Ratio • This KPI measures claims as a percentage of total earned premium. • Direct Impact on profitability • CR = Claims/Earned Income
    29. 29. 29 © Happiest Minds – Confidential Quotas Vs Production • This KPI measures the effectiveness of agents and sellers at meeting desired target sales • Calculation – Quoted Business/Revenue
    30. 30. 30 © Happiest Minds – Confidential Average Time to Settle a Claim • This KPI measures back office efficiency in claims processing • Differs according to the type of Insurance
    31. 31. 31 © Happiest Minds – Confidential Customer Satisfaction • No one standard measure across industry • Generally measured by doing surveys
    32. 32. 32 © Happiest Minds – Confidential Average Cost per Claim • This KPI is a cost measure. The lower the better • Calculation – Total Cost of Claims/No. of Claims • Important to categorize by the type of claim
    33. 33. 33 © Happiest Minds – Confidential Sales Ratio • This KPI helps an Insurer understand the results its pricing policy is yielding • No. of Quotes/ No. of Wins
    34. 34. 34 © Happiest Minds – Confidential Combined Ratio • Loss Ratio + Expense Ratio • More than 100% is red zone
    35. 35. 35 © Happiest Minds – Confidential Thank You

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