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8/13/2019 Chap 4 - Insurance Industry
http://slidepdf.com/reader/full/chap-4-insurance-industry 1/45
Haniza/PB502/PSA1
CHAPTER 4
INSURANCE
INDUSTRY
8/13/2019 Chap 4 - Insurance Industry
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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
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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
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Haniza/PB502/PSA4
Insurance mar!et com'onents
8/13/2019 Chap 4 - Insurance Industry
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Haniza/PB502/PSA(
Insurance mar!et com'onents
8/13/2019 Chap 4 - Insurance Industry
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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)
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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+
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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
Haniza/PB502/PSA,
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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-
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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$, the bro"er should act as an adocate on behalf of their
client !ith respect to issues surrounding the reporting of potential
claims to the insurers, and in the settlement of claims under the
insurance coerage%
Haniza/PB502/PSA1/
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Haniza/PB502/PSA11
0rganiationa# structure
'nsurance companies ma$ be categorised in
arious !a$s : # epartmentalization base
# 9unctional base
8 hen companies is organized b$ functionsperformed, the departments commonl$ found are:
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Haniza/PB502/PSA12
Te %e'artments
IN3EST"ENT
UNDERRITIN5
CLAI"S
"AR6ETIN5
SALES
CUST0"ER
SER3ICE
ACTUARIAL
ACC0UNTIN5
EDP
AD"INISTRATI0N
INSURANCE
C0"PANY
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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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Haniza/PB502/PSA14
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
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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
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Haniza/PB502/PSA1)
Sa#es 8 Agenc$ %e't7
'dentif$ field officers,
recruiting, agents6
contract, motiating ;
superising the sales
force
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Haniza/PB502/PSA1+
"ar!eting %e't7
Proides support to
sales eelop sales
promotion
programmes, literature
and "its 3raining of the sales
force
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Haniza/PB502/PSA1,
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
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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
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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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Haniza/PB502/PSA21
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
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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
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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
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Haniza/PB502/PSA24
Centra#isation
Head -ffice
1nder!riting >laims Sales
4orthern >entral Southern
Branch -ff% Branch -ff% Branch -ff
Agenc$ Agenc$ Agenc$
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Haniza/PB502/PSA2)
Centra#ise s Decentra#ise
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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+
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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
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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
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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
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"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
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"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
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"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
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"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 $eneral Meeting and monthly
Management %ommittee meeting
To hold dialogue with regulators and authorities to
study" review and implement policy regulations to the
industry Haniza/PB502/PSA4
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"IT.A
preiousl$ "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(
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"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)
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"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+
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"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,
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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
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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
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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
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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+
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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$are dissatisfied
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Haniza/PB502/PSA44
0rganiations Re#ate% to Li*e
Assurance
ife 'nsurance Association of ?ala$sia
&'A?+
4ational Association of ?ala$sian ife
'nsurance Agents &4A?'A+
3he Actuarial Societ$ of ?ala$sia &AS?+ 3he ?ala$sian 'nsurance 'nstitute &?''+
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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