The document outlines the key components and organizations that make up the insurance industry and market in Malaysia. It discusses the roles of various departments within insurance companies and how they may be organized. It also lists and describes several important institutions related to both the general insurance market and life assurance market, including their objectives and functions.

1. 1
CHAPTER 4
INSURANCE INDUSTRY ANDINSURANCE INDUSTRY AND
MARKETMARKET

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:

4. 4
INSURANCE MARKET COMPONENTS

5. 5
INSURANCE PROFESIONALS

6. 6
OTHER MARKET COMPONENTS

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:

8. 8
THE DEPARTMENTS
INVESTMENT
UNDERWRITING
CLAIMS
MARKETING
SALES
CUSTOMER
SERVICE
ACTUARIAL
ACCOUNTING
EDP
ADMINISTRATION
INSURANCE
COMPANY

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.
10

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

17. CENTRALISATION
Head Office
Underwriting Claims Sales
Northern Central Southern
Branch Off. Branch Off. Branch Off
Agency Agency Agency
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18. DECENTRALISATION
Claims Underwriting
Sales
Branch Off.
18

19. 19
CENTRALISE VS DECENTRALISE

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
21

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
25

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.
27

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)
28

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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