Chapter 05 claims & internationa business


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Chapter 05 claims & internationa business

  2. 2. CLAIMS PROCEDURE <ul><li>Claim – a demand made by Insured on the Insurer to redeem the promise made by Insurer </li></ul><ul><li>Insurer to check – </li></ul><ul><ul><li>Happening of insured event </li></ul></ul><ul><ul><li>Obligations of Insurer </li></ul></ul><ul><ul><li>Performance by Insured </li></ul></ul><ul><li>Persons entitled to demand performance –nominees, assignees, prohibitory orders etc </li></ul>
  3. 3. Claims Procedure (Contd.) <ul><li>Notice of loss to IC – immediate notice to allow IC to investigate </li></ul><ul><li>Notice to others (i.e. Police, Railways) – where required </li></ul><ul><li>Insurer to check – </li></ul><ul><ul><li>Validity of policy on date of occurrence of loss </li></ul></ul><ul><ul><li>Loss/damage by peril insured </li></ul></ul><ul><ul><li>Notice of loss received without undue delay </li></ul></ul>
  4. 4. INVESTIGATION & ASSESSMENT <ul><li>Duly completed Claim form – to be submitted by Insured </li></ul><ul><ul><li>Loss is small – IC officer to investigate to determine cause and extent of loss </li></ul></ul><ul><ul><li>Other claims – entrusted to independent licensed professional surveyors </li></ul></ul><ul><ul><li>Personal Accident claims – Report from attending Doctor specifying cause accident or nature of illness with medical evidence </li></ul></ul><ul><ul><li>Third party claims personal injuries- medical opinion, Surveyors report property loss on </li></ul></ul>
  5. 5. SURVEYORS & LOSS ASSESSORS <ul><li>Licensed Surveyors to assess loss – IRDA Regulations in 7 classes of insurance –Fire, Marine Cargo Marine Hull, Engineering, Motor, Miscellaneous, Loss of Profit </li></ul><ul><li>Marine Claims – different line, </li></ul><ul><ul><li>Average Adjuster - General Average Loss </li></ul></ul><ul><ul><li>Surveyors - Other losses (total loss, partial loss) </li></ul></ul>
  6. 6. CLAIM DOCUMENTS <ul><li>Claim forms and all correspondence from IC marked `without prejudice ` - no liability admitted </li></ul><ul><li>Claim Forms – forms designed to elicit full information of circumstances of loss-date, time, cause, extent etc </li></ul><ul><li>Other documents to substantiate claims – Driving licence, RC, Police Report, (Motor), Metrological Office (Cyclone) etc </li></ul>
  7. 7. ARBITRATION, SETTLEMENT & RECOVERIES <ul><li>Arbitration Mechanism - prescribed in Arbitration and Conciliation Act 1996 </li></ul><ul><ul><li>Advantageous for both parties – Cost effective, expeditious, informal, private proceedings </li></ul></ul><ul><li>Settlement - Claim found in order – amount paid and entries recorded in books </li></ul><ul><li>Salvage – partially damaged property, upon claim settlement salvage belongs to IC </li></ul><ul><li>Recoveries – IC entitled under law of subrogation </li></ul>
  8. 8. INSURANCE BUSINESS ABROAD <ul><li>Life insurance market growing bigger and faster - </li></ul>1 2 5 3 4 7 19 443.41 356.73 55.63 152.72 75.15 14.1 2.46 1 2 3 4 5 10 30 460.61 89.11 68.05 65.66 38.45 14.1 2.46 USA Japan Germany UK France S Korea India Rank Life (US $ bn) Rank Non-life (US $ bn) Country
  9. 9. INTERNATIONAL COMPARISON <ul><li>PENETRATION </li></ul><ul><li>(PREMIUM AS % OF GDP ) </li></ul><ul><li>United States 4.32 </li></ul><ul><li>Canada 3.31 </li></ul><ul><li>UK 3.05 </li></ul><ul><li>Germany 3.55 </li></ul><ul><li>Japan 2.30 </li></ul><ul><li>South Korea 2.89 </li></ul><ul><li>China 0.61 </li></ul><ul><li>India 0.54 </li></ul><ul><li>DENSITY ( PREMIUM PER CAPITA) USD </li></ul><ul><li>USA 1474.4 </li></ul><ul><li>Canada 700.6 </li></ul><ul><li>UK 741.5 </li></ul><ul><li>Germany 913.5 </li></ul><ul><li>Japan 805.5 </li></ul><ul><li>South Korea 262.3 </li></ul><ul><li>China 5.0 </li></ul><ul><li>India 2.4 </li></ul>
  10. 10. INTERNATIONAL REGULATIONS <ul><li>Intense competition - Countries have moved more to less restrictive </li></ul><ul><ul><li>Flexible Market driven insurance regulations – UK, Chile, Hongkong, Netherlands </li></ul></ul><ul><ul><li>Intensive not only following prudential norms but also product pricing and content- Germany, Japan, Korea, Switzerland, India and developing countries </li></ul></ul><ul><ul><li>Canada – falls between extremes </li></ul></ul><ul><ul><li>USA - varies between States </li></ul></ul>
  11. 11. INSURANCE MARKET – USA & CANADA <ul><li>Insurance market shared by - Provincial Government and Federal Government </li></ul><ul><li>Federal Govt . – regulates Foreign insurers and Federally chartered insurers representing 90% market </li></ul><ul><ul><li>Federal Govt. – imposes Regulatory requirements of Financial reporting, Capital requirements, Investment constraints and solvency criteria </li></ul></ul><ul><ul><li>Provincial Govt. – deals with licensing of agents, Brokers matters relating to policyholders </li></ul></ul>
  12. 12. INSURANCE MARKET – SINGLE EU MARKET <ul><li>World's second largest non-life insurance market - share 31% </li></ul><ul><ul><li>Consists of big three markets – </li></ul></ul><ul><ul><ul><li>1 st Tier - Germany, France and UK </li></ul></ul></ul><ul><ul><ul><li>2 nd Tier – Italy, Netherlands, Switzerland and Spain </li></ul></ul></ul><ul><ul><li>Each other European country's share – 1% </li></ul></ul><ul><li>Three principles adopted (Unresolved) </li></ul><ul><ul><li>Home country control; Minimum harmonization of essential regulations; Mutual recognition </li></ul></ul>
  13. 13. INSURANCE MARKET – ASIA <ul><li>Japan – world's second largest market </li></ul><ul><ul><li>Follows closed non-life market- foreign IC have little opportunity; moving towards gradual liberalization </li></ul></ul><ul><ul><li>Non-life insurance market – 26% of Japan total insurance volume </li></ul></ul><ul><li>South Korea – regulated by Finance and Economic Bureaus and Insurance Supervisory Board </li></ul><ul><li>China – previously shrouded in secrecy, premier national insurer is Peoples Insurance Company; foreign companies also permitted now </li></ul><ul><li>Africa – continent in its entirety represents less than 1% world's non-life market. South Africa has significant history </li></ul>
  14. 14. MARKET INNOVATIONS <ul><li>Directors and Officers Liability Insurance – recent corporate scams and enactment of Sarbanes Oxley Act increased liability and accountability of Directors and Officers; recent survey (2002) shows 48% respondents declined to serve on Board due to stringent legal provisions and liabilities </li></ul><ul><li>FAIR (Fair Access to Insurance Requirements) or Market Assistance Plan (MAP) - emerged in USA in residual market to handle risks which IC reluctant to cover; set up on shared or voluntary basis by State regulators for high risks poor loss records, inadequate safety measures </li></ul>
  15. 15. Market Innovations (Contd.) <ul><li>Income Bonds – introduced in UK in 1988; provides guaranteed level of income of a predetermined period (usually 5 year) </li></ul><ul><li>Single Premium Bond – investment contract where lump sum is paid to IC; offers tax advantage </li></ul><ul><li>Universal Life Policies - flexible LI policies also called `variable` or `unbundled`; provides benefits of investment, health insurance, disability etc; level of cover and investment variable with premium; expensive with higher level of charges </li></ul><ul><li>Contingent Business Interruption Insurance – covers business losses due to damage to premises, machinery or other insurable perils </li></ul>