6. risk management in insurance
Upcoming SlideShare
Loading in...5
×
 

6. risk management in insurance

on

  • 662 views

 

Statistics

Views

Total Views
662
Views on SlideShare
662
Embed Views
0

Actions

Likes
0
Downloads
26
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

6. risk management in insurance 6. risk management in insurance Presentation Transcript

  • RISK MANAGEMENT 6.0 Risk Management in Insurance KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 6.0 Risk Management In Insurance6.1 The Field of Insurance6.2 Types of Insurers6.3 Channels of Distribution in Insurance6.4 Functions and Organization of Insurers KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 6.1 The Field of InsuranceInsurance coverages can be divided into: 1. Personal vs Property 2. Government vs Private 3. Involuntary vs Voluntary KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Category Example Personal Life and health Property Buildings, houses, motorvehicleGovernment SOCSO Private Product liabilityInvoluntary Social security Voluntary Fire insurance KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • SOCIAL SECURITY ORGANISATION (SOCSO)• An organization set up to administer, enforce and implement the Employees Social Security Act, 1969 and the Employees Social Security (General) Regulations 1971• Provides social security protection by social insurance including: • medical and cash benefits • provision of artificial aids and rehabilitation to employees to reduce the sufferings and to provide financial guarantees and protection to the family KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Who is compulsory to contribute?• An employee employed under a contract of service or apprenticeship and earning a monthly wages of RM3,000 and below regardless of the employment status whether it is permanent, temporary or casual in nature Nevertheless, SOCSO does not cover the following categories of persons : – A person whose wages exceed RM3,000 a month and has never been covered before. – Government employees. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • – Domestic servants employed to work in a private dwelling house which includes a cook, gardeners, house servants, watchman, washer woman and driver.– Employees who have attained the age of 55 only for purposes of invalidity but if they continue to work they should be covered under the Employment Injuries Scheme.– Self-employed persons.– Foreign workers. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • SOCSO provides coverage to eligibleemployees through 2 schemesnamely:1. Employment Injury Insurance Scheme2. Invalidity Pension Scheme KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • invalidity means– A serious disease or disablement of a permanent nature that is either incurable or not likely to be cured, as a result of which an employee is unable to earn at least 1/3 of what a normally able person could earn.– Heart attack, kidney failure, cancer, mental illness, chronic asthma and other similar conditions are chronic ailments or diseases that could be considered for invalidity. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Personal Coverages Those related directly to the individual, the risk they cover is the possibility that some peril may interrupt the individual’s income. 4 such perils exist: – Death – Accidents and sickness – Unemployment – Old age Private insurance companies are active in providing insurance for death, accidents and sickness, and old age. Government via Employees Provident Funds active in providing insurance for old age. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Property Coverages Directed against perils that may destroy property Property insurance is distinguished from personal insurance in that personal insurance covers perils that may prevent one from earning money with which to acquire property in future, whereas property insurance covers property that is already acquired. Property insurance includes: – Fire – Marine – Liability KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Private and PublicTwo basic forms of insuranceinstitutions: 1. Private insurance – All types of coverage written by private insurance companies 2. Public insurance – All types of coverage written by government bodies e.g. SOCSO, MALAYSIA EXPORT CREDIT INSURANCE BERHAD (MECIB), Perbadanan Insuran Deposit Malaysia (PIDM) KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Voluntary and InvoluntaryVoluntary coverage Most private insurance comes under voluntary, although the purchase of some types is required by law. E.g. motorvehicle liability insurance and workers’ compensation insurance.Involuntary coverage Government insurance, required by law. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 6.2 Type of InsurersInsurance Companies– Life Insurance Companies– General Insurance Companies– General and Life Insurance Companies– Reinsurance CompaniesGovernment Agencies– Export Credit insurance Scheme operated by a governmental insurance corporation, Malaysia Export Credit Insurance Berhad (MECIB).– Perbadanan Insuran Deposit Malaysia (PIDM)Banks KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Life Insurance Companies1. Allianz Life Insurance Malaysia Bhd2. Am Life Insurance Bhd3. American International Assurance Bhd4. AXA AFFIN Life Insurance Bhd5. CIMB Aviva Assurance Bhd6. Etiqa Insurance Bhd7. Great Eastern Life Assurance (Malaysia) Bhd8. Hannover Life Re, Malaysian Branch KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Life Insurance Companies – cont’d9. Hong Leong Assurance Bhd10. ING Insurance Bhd11. Malaysia Assurance Alliance Bhd12. Malaysian Life Reinsurance Group Bhd13. Manulife Insurance Bhd14. Mayban Life Assurance Bhd15. MCIS ZURICH Insurance Bhd16. Prudential Assurance Malaysia Bhd17. TM Asua Life Malaysia Bhd18. Uni.Asia Life Assurance Bhd KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • General Insurance Companies1. ACE Synergy Insurance Bhd2. MUI Continental Insurance Bhd3. Allianz General Insurance Company (Malaysia) Berhad4. AIG General Insurance (Malaysia) Berhad5. AXA Affin General Insurance Berhad6. Berjaya Sompo Insurance Bhd7. BH Insurance (M) Bhd8. Jerneh Insurance Bhd9. Kurnia Insurans (M) Bhd10. Lonpac Insurance Bhd KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • General Insurance Companies – cont’d11. Mayban General Assurance Bhd12. MSIG Insurance (Malaysia) Bhd13. MUI Continental Insurance Bhd14. Multi-Purpose Insurans Bhd15. Oriental Capital Assurance Bhd16. Pacific & Orient Insurance Co. Bhd17. Progressive Insurance Bhd KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • General Insurance Companies – cont’d18. QBE Insurance (Malaysia) Bhd19. RHB Insurance Bhd20. Tokio Marine Insurans (M) Bhd21. The Pacific Insurance Bhd22. Uni.Asia General Insurance Berhad KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • General and Life Insurance Companies1. American International Assurance Bhd2. AmG Insurance Berhad3. Hong Leong Assurance Bhd4. ING Insurance Bhd5. Etiqa Insurance Bhd6. Malaysian Assurance Alliance Bhd KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • General and Life Insurance Companies – cont’d7. MCIS Zurich Insurance Bhd8. Overseas Assurance Corp. (M) Bhd9. Prudential Assurance Malaysia Berhad10. Tahan Insurance Malaysia Bhd KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Reinsurance Companies1. Asia Capital Reinsurance Malaysia Sdn. Bhd2. Hannover Ruckversicherungs - AG3. Malaysian Reinsurance Bhd4. Munchener Ruckversicherungs- Gesellschaft5. Swiss Reinsurance Company6. The Toa Reinsurance Co. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 6.3 Channels of Distribution in InsuranceMany kinds of arrangement may bemade to distribute the insurancecontract.2 type of channel: 1. Direct Distribution in Life Insurance 2. Indirect Distribution KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Direct Distribution in Life Insurance Life insurance is distributed in 2 main ways: 1. Through salaried group insurance representatives 2. Through individual insurance agents KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Group InsuranceLife insurers offer many of their products on agroup basis, that is, under contracts coveringgroups of persons rather than individuals.E.g. include group life insurance, group healthinsurance, and group pensions.The customers for group coverage are generallycompanies.Persons employed to sell and service thisbusiness usually receive a salary and bonus. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Individual AgentsPolicies sold to individuals are usuallyhandled by persons known as agents,underwriters or financial planners.The agent or underwriter contacts theultimate consumer and reports directly tothe insurer or to an intermediary,commonly called a general agent, who inturn reports to the insurer. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 6.4 Functions and Organization of Insurers The functions performed by any insurer depend on : 1. the type of business it writes; 2. the degree to which it has shifted certain duties to others; 3. the size of the insurer; 4. the type of organization used. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • Generally, the functions are: 1. Production (selling) 2. Underwriting (selection of risks) 3. Rate making 4. Managing claims and losses 5. Investing and financing KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 1. Production (selling)Securing a sufficient number of applicantsfor insurance.Similar to the sales and marketingfunction.The act of selling insurance is production.Insurance does not exist until a policy issold. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 2. UnderwritingUnderwriting is a process of determining whichapplicants are eligible for insurance coverage.The objective of underwriting is to see that theapplicant accepted will not have a loss experiencethat is very different from that assumed when rateswere formulated.For example, a company may decide that it willaccept no fire exposures situated in areas where nofire department protection exists or will not acceptanyone for life insurance who has had cancer withinthe past five years. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 3. Rate MakingIn general rate making involves the selection ofclasses of exposure units on which to collectstatistics regarding the probability and severity ofloss.In life insurance, the major task is to estimatemortality rates according to age, sex,smoking/drinking habits, occupation.Rate making also involves estimating cost ofincluding certain policy benefits or changingpolicy provisions. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 4. Managing Claims and Losses One of the tasks is settling losses under insurance contracts and adjusting any differences that arise between the company and the policyholder. In large organizations, risk managers are very involved with this process. The claims department of an insurer is responsible for : 1. ascertaining the validity of written proofs of loss 2. interpreting and applying the terms of the policy in loss situations 3. approving payment of claim. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)
  • 5. Investing and FinancingWhen an insurance policy is written, thepremium is generally paid in advance.This advance payment of premiums giverises to funds held for policyholders by theinsurer, funds that must be invested.Selecting and supervising the appropriateinvestment medium for these assets is thefunction of an investment department. KOLEJ UINIVERSITI ISLAM ANTARABANGSA SELANGOR (KUIS)