Chap 4 - Insurance Industry

8/13/2019 Chap 4 - Insurance Industry

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Haniza/PB502/PSA1

CHAPTER 4

INSURANCE

INDUSTRY



Haniza/PB502/PSA2

Learning outcomes :

At the end of chapter, the students should

be able to :

Perform engagement in independentacuisition of ne! "no!ledge and s"ill inunderstanding the nature of insurance



Haniza/PB502/PSA

Categorise insurance mar!et in

"a#a$sia an% e&'#ain its ro#es

A mar"et : # the facilities for bu$ing and selling a

product

A mar"et is made up ofcomponents



Haniza/PB502/PSA4

Insurance mar!et com'onents



Haniza/PB502/PSA(

Insurance mar!et com'onents



Insurance Agent

Sect%2 &'ns% Act ())*+ : a person !ho :

Solicits or obtains a proposal for insurance on behalfof an insurer

-ffers or assumes to act on behalf of an insurer in

negotiating a polic$. or

oes an$ other act on behalf of an insurer in relationto the issuance, rene!al or continuance of a polic$

Haniza/PB502/PSA)



C#asses o* agent

Special agent

-ne is appointed to do a specific act or transaction

eneral agent

-ne !ho ma$ do an$thing for his principal !ithin the limits of a

general authorit$ conferred upon him

1niersal agent -ne !ho has unlimited authorit$

Haniza/PB502/PSA+



Duties o* an agent

3o render accounts to the principal as reuired

4ot to let his o!n interest conflict !ith his obligations to the

principal 4ot to disclose confidential information obtained during the

course of his duties

4ot to ta"e an$ secret profit or bribe from an$ part$ !ith !hom

he deals on behalf of the principal

4ot to delegate his duties to a subagent !ithout authorit$,

epress or implied

3o compl$ !ith his principal6s instructions and to notif$ him

!hen compliance become impossible

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Termination o* agenc$

B$ notice of reocation b$ the principal

B$ notice of renunciation b$ the agent

B$ completion of the transaction

B$ epiration of the period stipulated in the agenc$

contract

B$ mutual agreement B$ death, lunac$ or ban"ruptc$ of agent or principal

B$ operation of an$ la!

Haniza/PB502/PSA-



Insurance .ro!er

3he bro"er7s function is to:

8 full$ understand the client and the client7s business

8 adise on those areas !here insurance is reuired8 negotiate insurance coerage !ithin the chosen range of insurers

8 handle the sericing and administration of the insurance contracts

8 adise on changes in coerage and improements in !ordings as the

client7s eposure deelops or the insurance mar"et changes

8 adise and guide the client on ho! best to manage its ris" and preent, to

the greatest etent possible, future losses Additionall$, the bro"er should act as an adocate on behalf of their

client !ith respect to issues surrounding the reporting of potential

claims to the insurers, and in the settlement of claims under the

insurance coerage%

Haniza/PB502/PSA1/



Haniza/PB502/PSA11

0rganiationa# structure

'nsurance companies ma$ be categorised in

arious !a$s : # epartmentalization base

# 9unctional base

8 hen companies is organized b$ functionsperformed, the departments commonl$ found are:



Haniza/PB502/PSA12

Te %e'artments

IN3EST"ENT

UNDERRITIN5

CLAI"S

"AR6ETIN5

SALES

CUST0"ER

SER3ICE

ACTUARIAL

ACC0UNTIN5

EDP

AD"INISTRATI0N

INSURANCE

C0"PANY



Haniza/PB502/PSA1

A%ministration %e't7

Proides ; handles sericescommonl$ used b$ man$

departments <g% -ffice serices, building

serices ; personneladministration

=esponsible for matters relatingto the compan$6s emplo$ees

9ormulates compan$ policies !ithrespect to the hiring, training ;dismissal of emplo$ees,determines salar$ scale !ithlabour unions, ; ensurescompliance !ith releant la!s



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E#ectronic Data Processing %e't7

't seres other departments b$

establishing procedures ;

programs that enable them to

utilize the computer in their !or"

1nder!riting ; polic$ preparation,

performing calculations reuired

b$ accounting ; inestment dept%,

maintaining all "inds of compan$6s

records, preparation of financial

statements ; management

information reports



Haniza/PB502/PSA1(

Accounting %e't7

=esponsible for billing ;

collecting premium >ompan$6s general accounting

records, prepare financial

statements, maintain budgetar$

control oer departmentalepenses

>ompl$ releant goernment

regulations and ta la!s



Haniza/PB502/PSA1)

Sa#es 8 Agenc$ %e't7

'dentif$ field officers,

recruiting, agents6

contract, motiating ;

superising the sales

force



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"ar!eting %e't7

Proides support to

sales eelop sales

promotion

programmes, literature

and "its 3raining of the sales

force



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Un%er9riting %e't7

Sets under!riting

guidelines ; selectioncriteria, selects ris"s ;determines premiums,terms ; conditions ofne! businesses ;

rene!als 9ies the amount for

insurer6s retention andreinsurance



Haniza/PB502/PSA1-

Inestment %e't7

?ain function # to inest all aailable

funds in a manner !hich ensuressufficient returns, satisfies the compan$6s

reuirement for liuidit$ and securit$ ;

compl$ releant regulations

'nest in arious portfolio # goernment

securities, shares ; debentures, fieddeposits !ith ban"s, inestment in land ;

buildings



Haniza/PB502/PSA2/

C#aims %e't7

Processes claims @erif$ the alidit$ of claims,

determine the benefits and

amount pa$able, and

authorize pa$ment



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Customer Serice %e't7

Proides assistance to the

compan$6s polic$o!ners

and beneficiaries

uestions concerning polic$

coerage, ma"e changes

reuested b$ the

polic$o!ners # address,

beneficiaries designation,

mode of premium pa$ment



Haniza/PB502/PSA22

Actuaria# %e't7

?ainl$ found in life

insurance companies esign and pricing of

ne! life insurance

products, calculate

surrender alues, paidup polic$ alues, bonus

rates for participating

policies



Haniza/PB502/PSA2

Centra#ise s Decentra#ise

>entralization

# hen an insurance compan$ organizes its

department on functional basis, the basic

functions and decision ma"ing tend to be

centralized at the head office

# 3he branches act as sales outlets

ecentralization

# hen some functions are carried out at branches

and granted authorit$ to ma"e decision,

decentralization eists



Haniza/PB502/PSA24

Centra#isation

Head -ffice

1nder!riting >laims Sales

4orthern >entral Southern

Branch -ff% Branch -ff% Branch -ff

Agenc$ Agenc$ Agenc$





Haniza/PB502/PSA2)

Centra#ise s Decentra#ise



Haniza/PB502/PSA2+

0rganiations Re#ate% to 5enera#

Insurance

Persatuan 'nsurans Am ?ala$sia &P'A?+

ife 'nsurance Association of ?ala$sia &'A?+ ?ala$sian 3a"aful Association &?3A+ ?ala$sian 'nsurance ; 3a"aful Bro"ers Association

&?'3BA+ Association of ?ala$sian oss AdCusters &A?A+ ?ala$sian 'nsurance 'nstitute &?''+ ?otor 'nsurers6 Bureau &?'B+ 'nsurance ?ediation Bureau &'?B+



Haniza/PB502/PSA2,

PIA"

?embership is compulsor$ on all general insurers 'ts obCecties are to:

# <stablish a sound insurance structure in ?ala$sia

# >ollect and circulate information and statistics relating to

general insurance business

# ?a"e rules, regulations, tariffs and b$la!s

# ?anage 1?P and 9ire Protection Association

# Assist in !hateer !a$ !ithin its capacit$ to reduce losses

and / or accidents and to preent crime



Haniza/PB502/PSA2-

"I.

=3A ()DE reuires a motor ehicle user to be insured against

liabilit$ in respect of death or personal inCuries to an$ personcaused b$ or arising out of the use of motor ehicle on a road

>ompulsor$ motor insurance, to ensure compensation is paidto the accident ictim

Fet, an innocent ictim ma$ be still uncompensated because : #

3he negligent drier is uninsured # His motor insurance is not alid

# His insurer gone into liuidation

# 3he negligent drier cannot be traced



Haniza/PB502/PSA/

;LIA"<

<stablished in ()EG =esponsible for the registration of life insurance

agents 'ts maCor obCecties are to:

# Promote ; represent the interests of the membercompanies ; the life insurance industr$

# =ender serice ; assistance to member companies as ma$

be reuired # >irculate information li"el$ to be of interests to members,

collate ; publish statistics and other releant informationrelating to life insurance



"TA

Te Association 9as esta=#ise% to *oster

coo'eration an% mutua# un%erstan%ing amongst

its registere% mem=ers> 9i#st *urtering teinterests o* te ta!a*u# conce't in "a#a$sia =$

an$ or a## o* te *o##o9ing means an% =$ oter

suc means as %eem e&'e%ient in te interests

o* te Association

Haniza/PB502/PSA1



"TA ? o=@ecties

3o promote the foundation of a sound ta"aful structure in ?ala$sia !ith

cooperation and consult from the irectoreneral of 3a"aful%

3o promote and represent the interests of members registered orconnected to ?3A b$ all means and methods that is consistent !ith

the la!s and >onstitution of ?ala$sia%

3o render to members !hen possible, such adice or assistance ma$

be deemed necessar$ and epedient%

3o ta"e note of eents, statements and epressions of opinion

affecting member s, and adise them thereon and represent theirinterests b$ epression of ie!s thereon, on their behalf as deemed

necessar$ or epedient%

3o constitute strategic alliances and cooperation !ith other similar

associations both locall$ and internationall$%

Haniza/PB502/PSA2



"TA ? actiities

Haniza/PB502/PSA

Public Awareness Program - To embark on

regular promotional program and roadshow on public

awareness program

Education and Training - To enhance

professionalism and productivity of staff and agency

force through close working relationship with Islamic

Banking and Finance Institute Malaysia (IBFIM) in

evaluating industry’s training needs

To organi!e international conference on takaful and

its related discipline in collaboration with IBFIM and

relevant authorities



"TA ? actiities

Self-Regulation Program - To formulate

guidelines" rules and practices on agency and staff

Collaboration Effort - To collaborate with other

insurance related associations and authorities

towards areas concerning the industry

Dialogues and Meetings - To conductassociation’s #nnual $eneral Meeting and monthly

Management %ommittee meeting

To hold dialogue with regulators and authorities to

study" review and implement policy regulations to the

industry Haniza/PB502/PSA4



"IT.A

preiousl$ "no!n as 3he 'nsurance Bro"ers

Association of ?ala$sia &'BA?+

the onl$ national bod$ of 'nsurance and 3a"aful

bro"ers

!as registered !ith the =egistrar of Societies on rd

ecember, ()EG%

?'3BA is the collectie oice of the industr$

adising members, the regulator, consumers, trade

association and other sta"eholders on "e$ insurance

issues%

Haniza/PB502/PSA(



"IT.A

proides training, technical adice, guidance

on regulation and business support%

its role is to eleate the status of insurance

and ta"aful bro"ers through professional

deelopment and b$ establishing improed

standards of ualification and ethicalpractice%

Haniza/PB502/PSA)



"IT.A

3he members embrace strict standards of

conduct, professionalism, and practice

3o ensure that the$ maintain the highest

ethical standards and the utmost good faith,

the foundation of insurance business, in all

actiities in !hich the$ are engaged%

Haniza/PB502/PSA+



"IT.A

3he <ecutie >ommittee, consists of nine &)+

elected representaties !ho are elected eer$ 2

$ears during the A? from its membership, meetsmonthl$ to proide direction and ideas%

Subcommittees and Special 3as" 9orce are

established to loo" into a !ide range of interests and

allo! members to discuss releant topics !ith theirpeers, discoer more about issues of importance

and formulate business plans and strategies to

further promote health$ mar"et practices%

Haniza/PB502/PSA,



Haniza/PB502/PSA-

A"LA

'ts obCecties are to :

# Promote the establishment of a sound loss adCusting structure in

cooperation and consultation !ith the authorit$

# Promote ; represent the interests of its members b$ all means ;

methods consistent !ith the la!s

# >ooperate !ith other similar associations else!here in the !orld

# >irculate information li"el$ to be of interests to members, collate ;

publish statistics and other releant information relating to lossadCusting

# or" in conCunction !ith an$ legal bod$ or association appointed

for consideration, framing, amendment or alteration of an$ la!

relating to loss adCusting



Haniza/PB502/PSA4/

"II

<stablished in ()*G Promote human resource deelopment in the insurance

industr$ through eamination, training, informing, echange andideation 'ts obCecties are to :

# Proide ; maintain a central organization for promotion ofefficienc$, progress ; general deelopment among personsengaged or emplo$ed in the insurance industr$

# <ncourage ; assist in the stud$ of an$ subCects relating toan$ aspect of insurance business

# Publish an$ ne!spaper, Cournals ; leaflets desirable for thepromotion of the obCecties of the institute

# <stablish a librar$ for the purpose of the institute



Haniza/PB502/PSA41

"II ;cont7<

# -ffer mone$ or prizes for essa$s or research in an$ subCectrelating to insurance

# -rganize ; conduct courses, seminars, conferences ;!or"shops relating to insurance ; the management ofinsurance institutions

# 1nderta"e research in the fields of insurance ; otherrelated subCects

# <stablish ; operate trust funds for the purpose of promotingthe deelopment of the insurance industr$

# >onduct insurance ; insurance related eamination ;a!ard certificates, diploma, scholarship ; prizes



Haniza/PB502/PSA42

"I.

<stablished in ()*E ?ain function : to proide

compensations to accidentictims !here the uninsureddrier are unable to meet theirliabilit$ from their o!n personalresources

?a"ing egratia

compensation to ictims ortheir dependents of hit and runcases, !hich ceased in ()DG

9unds accumulated fromleies imposed on its members&motor insurers+



Haniza/PB502/PSA4

I".

'ts obCectie is to proide analternatie procedure toresole disputes arising out ofpolicies of personal insurance

't does not deal !ith third part$claims

3he bureau has the po!er toma"e a!ards up to=?(00,000%

3he a!ard binds the members Ho!eer, the polic$holder is

not bind !ith it% 3he$ ma$ see"remed$ in a court of la! if the$are dissatisfied



Haniza/PB502/PSA44

0rganiations Re#ate% to Li*e

Assurance

ife 'nsurance Association of ?ala$sia

&'A?+

4ational Association of ?ala$sian ife

'nsurance Agents &4A?'A+

3he Actuarial Societ$ of ?ala$sia &AS?+ 3he ?ala$sian 'nsurance 'nstitute &?''+



NA"LIA

Set up in ()ED

ife insurance agents ; their superisors

Safeguarding the interests of those engaged

in life insurance selling ; sales management

Promote professionalism among its membersthrough collaboration !ith similar

organizations

Documents

Chap 4 - Insurance Industry