INSURANCE BUSINESS AND FINANCE Bisnis Asuransi dan Keuangan

Dibuat untuk UJIAN LSPP AAMAI 103 dengan Kurikulum Baru

© The Chartered Insurance Insurance 2010

ii | A f r i a n t o B u d i , S S M M

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Jakarta, 1 Januari 2014

Salam hormat,

Afrianto Budi P, SS MM

akademiasuransi.org

Daftar Isi

iii | A f r i a n t o B u d i , S S M M

1. Struktur bisnis asuransi A. Perbedaan tipe perusahaan asuransi B. Perbedaan penjual asuransi C. Pentingnya pelanggan D. Pentingnya stakeholder asuransi E. Perspektif global F. Pertumbuhan perusahaan dan merger dan akuisisi G. Outsourcing (alih daya) H. Pendelegasian otoritas dalam underwriting

2. Manajemen bisnis asuransi: peran, tanggungjawab, dan gaya A. The board of director (Dewan direktur) B. Senior executives (Eksekutif senior) C. Manager and Supervisor D. Non-managerial Staff E. Gaya manajemen

3. Manajemen bisnis asuransi: perencanaan dan kontrol A. Proses perencanaan B. Perencanaan dan kontrol anggaran C. Pengambilan keputusan D. Informasi manajemen E. Manajemen pengetahuan

4. Aspek utama dalam tata kelola perusahaan A. Struktur peraturan B. Penggabungan usaha C. Persyaratan pelaporan yang berlaku D. Fungsi audit internal dan eksternal E. Rapat dan fungsinya F. Agenda, menit, dan dokumentasi terkait G. Kunci laporan tata kelola dan persyaratan H. Kerahasiaan

5. Pemasaran A. Fungsi pemasaran dan bisnis B. Konsep kunci pemasaran C. Riset pasar dan proses pengembangan produk D. Komunikasi dan promosi

6. Sumber daya manusia A. Fungsi manajemen sumber daya manusia B. Rekrutmen dan seleksi C. Penilaian dan penghargaan D. Pelatihan dan pengembangan E. Motivasi dan moral F. Peraturan ketenagakerjaan dan tempat kerja

7. Prinsip dan praktek utama akuntansi

A. Tujuan dan fungsi akuntansi keuangan B. Akuntansi manajemen dan keuangan C. Pengguna informasi keuangan dan kebutuhan informasi mereka D. Konsep keuangan dasar dan persamaan akuntansi E. Tanda terima dan pembayaran F. Neraca keuangan G. Laporan laba-rugi H. Laporan arus kas

iv | A f r i a n t o B u d i , S S M M

I. Catatan wajib untuk akun

8. Standar akuntansi dan akun perusahaan asuransi A. Peran Dewan Standar Akuntansi Internasional (International Accounting Standards Board –

IASB) B. Standar Pelaporan Keuangan Internasional (International Financial Reporting Standards –

IFRS) C. Prinsip Akuntansi yang diterima secara umum di UK (UK Generally Accepted Accounting

Principles) D. Dafar autran FSA Inggris (FSA UK Listing Rules)

9. Pencadangan klaim

A. Pentingnya cadangan yang akurat B. Incurred but not reported (IBNR - Dikeluarkan namun belum dilaporkan) dan perannya

dalam akun perusahaan C. Metode pencadangan

10. Rasio finansial A. Rasio yang sering digunakan B. Rasio dalam industri asuransi C. Menilai hasil kinerja perusahaan asuransi

11. Kekuatan finansial perusahaan asuransi A. Lembaga penilai B. Margin solvabilitas dan ketentuan yang berlaku

1

Bab 1: Structure of the insurance business

Introduction Insurance companies have a valuable function to perform within society by insuring the wealth of the country. It will come as no surprise that no two insurance companies are identical in their structure and outlook. However within the UK, all insurance companies can be grouped into three broad types: A composite Company: an insurance company that transacts both long-term business (life)

and general business. A life company: a life assurance company that is only able to transact long-term business. A general insurance company: an insurance company that is only able to transact general

business. These three styles of companies do not make one single large market, since the insurance marketplace refers more to the mechanism by which buyers and sellers come together, rather than a physical location. However, every rule has an exception and the one exception is that the transaction of insurance business within the London Market, including Lloyd's of London, can be classified as a physical location. We shall look at the London Market in more detail in section E1. Structure and size of the UK insurance industry The UK insurance industry:

is the largest in Europe and third largest in the world (behind USA and Japan}; accounts for 7% of total worldwide premium Income;

in 2010 employed around 290,000 people- or 1% of the working population (Source ONS);

had total net investments of £1.7 trillion at the end of2010; accounts for 26% of the net worth of the UK economy;

is a major exporter- 28% of its net premium income comes from overseas business. As at 31 March 2010 there were 477 authorized UK insurance companies, of which Ill were life companies, 17 composites and 349 general insurance companies. (Source FSA.) Worldwide net premium income of UK insurers in 2010 was £200bn of which £61bn was general business and £139bn was long-term business. Activity Find out more about the insurance industry's role in the UK economy and society. See if you can find the answers to questions such as:

How does the industry help to promote investment in future economic growth?

How does it help public services and company expansion?

What role does it play in the following issues?

fighting crime; improving safety at work;

dealing with the effects of climate change;

and supporting the nation's health?

Chapter 1: Structure of the insurance business

© Chartered Insurance Institute www.AkademiAsuransi.org repro by: Afrianto Budi SS MM

The market for insurance Like any other market, the insurance market comprises:

sellers: insurance companies and Lloyd's; buyers: general public, industry and commerce, and public authorities; middlemen: insurance brokers and intermediaries.

In other markets the buyers, sellers and the middlemen come together to examine the merchandise that is for sale. With insurance it is not possible to bring a house, factory or ship to a marketplace, and in any event what is being insured is the financial interest in that asset which is at risk. The buyer is any person, company or organization wanting to purchase insurance. This may be a homeowner spending a few hundred pounds purchasing home insurance or one single company spending many millions of pounds per year on insurance premiums. They may he faced with many different insurance companies to choose from the buyer will often use an insurance broker or intermediary. An 'intermediary' is an agent who is authorized by a party, often a commercial company to recommend an insurance company and/or insurance policy. They may even be authorized to purchase it. An insurance broker is an individual or firm whose full-time occupation is the placing of insurance with insurance companies. A high standard of expertise is expected of insurance brokers. The broker shall place the interests of their client before all other considerations. The insured can obtain independent advice on a wide range of insurance matters from a broker, without direct cost to themselves. From the insurers' point of view, negotiations with brokers are easier and speedier because only the intricate points or special requirements require detailed discussion, thus saving time and money on routine matters. Lloyd's Lloyd's occupies a unique position in the world of insurance. A society incorporated by statute it provides premises, services and regulation to a marketplace ('the Lloyd's market') which has been trading in insurance for over 300 years. Lloyd's does not itself transact insurance, as this is the business of the underwriting members of Lloyd's (both individual and corporate) who make up the Lloyd's market. They underwrite for their own profit and loss and in administrative groups called syndicates. The underwriting members appoint independent companies known as managing agents to carry out the underwriting business (write the risk, pay the claims etc.) on their behalf. Since Lloyd's was first established in the late seventeenth century the Lloyd's market has develop a strong worldwide reputation for its ability to provide the finest risk solutions for its customers. These customers generally instruct to act for them one of the firms of Lloyd's brokers, all of whom have a good understanding of the Lloyd's market and many of whom specialize in particular risk categories. Lloyd's has a unique 'chain of security' to protect insurance policyholders, should any member be unable to pay a claim. A development in the modernization and reform of Lloyd's was the creation of a franchise structure, whereby Lloyd's acts as the franchisor and the managing agents and the members for whom they acted are the franchisees. The aim of this structure is to improve market profitability and to allow monitoring and guidance of franchisees, with the franchisor having ultimate power to eject businesses that are unable to respond. As franchisor, Lloyd's now pursues a much more proactive role than had been undertaken previously. A Franchise Board with members drawn from both inside and outside the Lloyd’s market carry out the franchisor's role. Activity Visit the Lloyd’s website at www.lloyds.com for more information on how the Lloyd’s market works.

Chapter 1: Structure of the insurance business

© Chartered Insurance Institute www.AkademiAsuransi.org repro by: Afrianto Budi SS MM

A Different types of insurance company

A.1 Proprietary companies The majority of insurance sellers come under this heading. Proprietary companies have an authorized and issued share capital to which the original shareholders subscribed, and it is to the shareholders that any profits belong after provision for expenses, reserves and, in the case of life business, with profit policyholders’ bonuses. The shareholders' liability is limited to the nominal value of their shares (hence the term limited liability}, but the company is liable for its debts and if the solvency margin (see chapter II) cannot be met the company will go into liquidation. The public can deal direct with these companies but often a broker or an intermediary is involved. In most classes of business there is keen competition among proprietary companies and also between proprietary companies and other sectors of the market. Most are composite or general companies writing issuance and reinsurance business. Insurance companies operate by charging relatively small premiums in comparison to the exposed risk to large numbers of the same type of customers- in other words the losses of the few are paid for by the premiums of the many (risk transfer). Good examples of insurance and reinsurance classes are:

accident and health; motor; aviation; fire and other damage to property; liability.

Reinsurance companies operate in a similar way to insurance companies, as they transfer risk. They allow insurance companies to pass risk onto them in return for a premium. There are many types of reinsurance contract but this course does not expect you to have a working knowledge of the reinsurance market, other than having an appreciation of the diversity of the term ‘insurance market’. However, you do need to understand why the reinsurance market exists. Insurers purchase reinsurance for two basic needs:

To limit ( as much as possible) annual fluctuations in the losses that affect their underwriting account, often referred to as 'smoothing the underwriting result’.

To be protected in case of a catastrophe (both man-made and natural). Reinforce Before you move on, make sure you know how reinsurance companies help general insurance companies. Make some notes below:

A.2 Mutual companies Mutual companies have been formed by Deed of Settlement or registration under the Companies Acts. They are owned by the policyholders, who share any profits made. Most mutual companies operate in the long-term sector (life) offering their customers the full benefits of saving over a long period - often between 10 – 25 years. The shareholder in the proprietary

Chapter 1: Structure of the insurance business

© Chartered Insurance Institute www.AkademiAsuransi.org repro by: Afrianto Budi SS MM

company receives their share of the profit by way of dividends, but in the mutual company the policyholder owner may enjoy lower premiums or higher life assurance bonuses than would otherwise be the case. Many companies, which were originally formed as mutual organisations, have now registered under the Companies Acts as proprietary companies, although they have retained the word mutual in their title. Others, registered as companies limited by guarantee and without the word mutual in their title, are actually owned by the policyholders. Mutual companies may transact life or general insurance business. A feature of mutual status is a difficulty in raising additional capital since they cannot issue additional shares in the way that proprietary companies can. 'The 1990s saw growing pressure on mutuals to convert to the status of proprietary companies (a process known as 'demutualisation'). Good examples of long-term business are as follows:

life and annuity permanent health; pension fund management; linked long-term.

As with reinsurance, this course does not expect you to have a working knowledge of the life insurance business, other than having an appreciation of the diversity of the insurance market. Be aware A mutual firm will concentrate on getting the best returns for its members as there are no shareholders to take a share of the profits through payments or dividends.

A.3 Captive insurance companies Captive insurance is a tax-efficient method of transacting risk transfer, which has become more common in recent years among the large national and multinational companies. The parent company forms a subsidiary company to underwrite certain of its insurable risks. The main incentives are to obtain the full benefits of the group's risk control techniques by paying premiums based on its own experience, avoidance of the direct insurers' overheads and obtaining a lower overall risk premium level by purchasing reinsurance at lower cost than that required by the conventional or direct insurer. Many captives are operated from offshore locations such as Bermuda, Guernsey and the Isle of Man. This does give the captive certain fiscal advantages, but it also reduces the volume of paperwork associated with registering as an insurer and, because so many captives are off- shore, allows the captive to tap into all the necessary ancillary services such as investment management, banking and accounting. Reinforce Make some notes on the key benefits of having a captive insurance company below.

A.4 Takaful insurance companies Takaful is a basis of insurance that has its roots in the Islamic financial services industry. The model has been developed over a period of time and it is based on the rulings of Sharia law on

Chapter 1: Structure of the insurance business

© Chartered Insurance Institute www.AkademiAsuransi.org repro by: Afrianto Budi SS MM

financial and commercial transactions. It works on the principle that in any transaction, risk and profit (and loss bearing) should be shared between the participants. The reason for this business development is to meet a newly identified customer group for both insurers and intermediaries with a need for products to meet their particular religious principles. Under Islamic (Shariah) law, traditional insurance policies are seen by Muslims to be contrary to some of the fundamental principles of Islam, as they involve: Gharar – uncertainty. Islamic law forbids sales where there is risk to the buyer, unless the risk is of a normal or reasonable proportion. Some believe that traditional insurance policies do not remove uncertainty because how much and when, if at all, a policy will pay out remains uncertain; Maisir - gambling. Traditional insurance policies are seen to be a sort of gambling because some policyholders receive payouts whilst others do not. Gambling is forbidden under Islamic law; Riba - interest. Islamic rules also forbid making money from money, such as through interest. Wealth can only be made through the trade of assets and investments. To respond to the specific needs of these customers a new type of product - takaful insurance - has been developed. Takaful is an Arabic word meaning 'guaranteeing each other'. Takaful insurances embrace the Islamic principles of:

mutuality and co-operation; shared responsibility; joint indemnity; common interest; and solidarity.

They are similar to those which underpin mainstream mutual insurance and involve a number of participants sharing risk on a co-operative basis. This avoids policyholders gambling on the fortunes or misfortunes of others, as customers pay money into a communal fund and take out what they need in the event of a claim. Insurance companies charge a fee for managing the fund. Any money left over at the end of the year, after payment of claims and business expenses incurred by the insurer, is distributed to policyholders, who are treated as shareholders. Policies also need to be carefully worded so that no cover is provided for areas prohibited by Islam. For example, there is no cover for items connected to alcohol or pork. Products need to be approved by Islamic scholars to ensure they are compliant, and many providers consult special Shariah advisory committees during the development process. There is a significant potential market for products developed to meet the needs of those with specific religious preferences. For example, the total value of takaful premiums is predicted to be anywhere between US$ 7.5bn and US$ 20bn by 2015. While takaful insurance has been in existence for at least 20 years, it was only in 2005 that a major high street bank became the first to offer Islamic insurance policies for buildings and contents. This is a trend, which has continued since, with an ever-increasing number of providers entering the marketplace. Therefore, with the instrument funds that the Middle East has available, these funds are now being used to buy and take over companies that are established in the Western World. Consequently takaful as a means of underwriting risk is growing at a very rapid pace in many Middle Eastern insurance sectors and also it is being taken into other parts of the world. The current key centres of takaful activity are Dubai, Bahrain and Kuala Lumpur, but London is now also recognised as an emerging centre for Islamic finance and there is at least one takaful insurer that has gained FSA approval. There will no doubt be others shortly. In addition, banks are also developing takaful products.

Chapter 1: Structure of the insurance business

© Chartered Insurance Institute www.AkademiAsuransi.org repro by: Afrianto Budi SS MM

The following articles on takaful have appeared in the en Journal (available to en members at www.knowledge.cii.co.uk): ,.

'Divine intervention' by Timothy Evershed in the Oct/Nov 2009 edition. 'The nearly A-Z of takaful insurance' by Liz Booth in the Feb/Mar 2011 edition.

Activity

Identify how takaful premiums have grown on a worldwide basis over the last five years and the expected growth over the next five years. Make some notes below. Question

Takaful companies have a similarity to another type of company. Which is it?

B Different sellers of insurance Think

Before moving on, how many different sellers of insurance can you think of? Insurance is now sold through an extensive list of distribution channels which includes:

the types of insurance companies (proprietary, mutuals, takaful) mentioned above; Lloyd's of London, mentioned above; direct insurers; the internet; independent intermediaries; agents; building societies; banks; retailers and affinity groups; travel agents and tour operators; aggregators; the State; self-insurance.

B1 Direct insurers Use of the latest technology in telecommunications and telesales techniques means that the new 'direct' writers do not require extensive branch networks to service their business. Their administrative and underwriting centres may be located anywhere in the country and contact by customers only charged for on the basis of the cost of a local telephone call.

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