Unit 5
1.Concept of Insurance Intermediaries
2. Role/Importance of Insurance Intermediaries
3. Insurance Intermediaries
3.1.Agent
3.1.1. Role of Agent
3.1.2. Authority of Agent
3.2.Broker
3.3.Surveyors
3.3.1.Role of Surveyors
3.4.Third Party Administrator(TPA)
3.4.1. Role/Function of TPA
3.5.Bancaasurance
3.5.1. Features of Bancaasurance
3.5.2.Models of Banccasurance
3.5.3.Advantages of Bancaasurance
**********************************************************************
Concept of Insurance Intermediaries
Insurance is considered a complex product, and it is not easy for the insurer to take care of all the processes involved in sales and administration of related services. An insurance intermediary acts as a bridge between the insurer and the insured. They could be involved in the sales process like an
insurance agent or an insurance broker, or the claims process like a surveyor or a third-party administration.They are engaged mainly in selling insurance products, providing information and advice and arranging contracts for potential policy holders, and assisting policy holders with claim applications.There is a wide variety of insurance products in the market. Most policy holders learn about them and their relevant clauses through insurance
intermediaries. As insurance policies are contracts between insurance companies and policy holders, before considering taking out an insurance policy, policy holders should have a clear understanding of the policy and the role of insurance intermediaries to protect their interests.
Role/ Importance of Insurance Intermediaries
1.Innovative marketing
2.Dissemination of information to consumers
3.Dissemination of information to the marketplace
4.Sound competition
5.Spread insurers’ risks
6.Reducing costs
1.Innovative marketing:
Insurance intermediaries bring innovative
marketing practices to the insurance marketplace. This spreads insurance markets by increasing consumers’
awareness of the protections offered by insurance, their awareness of the multitude of insurance options, and their understanding as to how to purchase the insurance they need.
2.Dissemination of information to consumers:
Intermediaries provide necessary information to the customers about insurance company and the products to make decision about which of the policies are suitable for them. Intermediaries try to know what a consumer needs and their financial position and offer them the products according to their needs and budget.
3.Dissemination of information to the marketplace:
Intermediaries gather and evaluate information regarding rate of premiums, claims settlement timing experience etc. With the help of such knowledge , intermediaries encourage to purchase insurance product which helps to be attracted insurance sector in the market. In addition, dissemination of knowledge and expansion of markets within a country and internationally can help to attract more direct investment for the insurance sector and related industries.
4.Sound competition :
Increased consumer knowledge ultimately helps to increase the demand for insurance which creates healthy competition among the insurance companies. It encourages the insurance companies to offer the best insurance policies including many features. They starts to provide coverage of a lot of risks. They set comparatively lower rate of premium.
5.Spread insurer's risk:
Quality of business is important to all insurers for increasing customers, being stable within the market and ultimately making profit. Insurance companies need to make sure that the risks they cover are insurable. Intermediaries help insurers in the difficult task of spreading the risks in their portfolio. Intermediaries work with multiple insurers, a variety of clients, so they properly know what type of risks are very risky. They help to spread the risks according to the industries and geographical area. This helps insurers from becoming over-exposed in a particular region or a particular type of risk.
6.Reducing costs:
Intermediaries helps to aware customers about insurance. As a result a result they purchase insurance policy themselves. So there is no need to meet the customers. Thus the commission that should be paid to the agent or broker will be reduced.
Insurance Intermediaries
1.Insurance Agent
2.Insurance Broker
3.Surveyors and Loss Adjustors
4.Third Party Administrator
5.Corporate Agents(Bancassurance)
1.Insurance Agent:
An agent is a person who is licensed by the Authority to solicit and procure insurance business including business relating to continuance, renewal or revival of policies of insurance. An agent is an individual who is an intermediary representing an insurance company. A Composite Insurance Agent means an insurance agent who holds a license to act as an insurance agent for a life insurer and a general insurer. Depending on the terms of the agency agreement, an insurance agent may be authorized to solicit insurance business, collect premiums and issue cover notes on behalf of the insurance company. Some insurance agents also do provide an after sales service in assisting their clients in the event there is a claim to be made with their insurance company.
According to insurance Act, "insurances Agent" means a person other than a salaried employee of an Insurer who has obtained a license pursuant to Section 30, to work on behalf of the insurance on the basis of commissions.
Role of Agent
1.Pre-sale functions
2.Post sale functions
Pre-Sale functions:
These role are the activities that should be done before selling the insurance product.They are :
- Contact to the customer
- Study their insurance needs
- Persuade them to buy
- Completion of formalities for proposal of new insurance
- Filling of forms
- Arranging for medical examination
- Collecting proof of age and income etc
- Any other information required by the underwriter.
- Collection of first premium deposit.
Post sale Functions:
These roles are the responsible that should do after selling the insurance product. They are :
- Ensure payment of renewal problems
- Help if any changes should be done in the policy
- Assist policyholder in case s/he wants to get loan against the policy
- Keep regular touch with the customers
- Helps the policyholders to settle the claim in time.
Authority of Agents:
1. Express Authority
2. Implied Authority
3. Apparent Authority or Ostensible Authority
Express Authority:
It is an actual authority given to the agent by the principal whether verbally or in writing. For e.g. Agent is authorized to collect the first premium.
Implied Authority:
An agent having an authority to do every lawful things which is necessary to do business. It is not express or written in the time of contract.
Apparent Authority:
Apparent authority refers to an act or situation where a person is believed to have the power to act on behalf of an insurance even though the person does not possess any legal authority.
2.Insurance Broker:
According to insurance Act, "Broker" means a person who has obtained license pursuant section 30B, to work as an intermediary between an Insurer and Insurer relating to the insurance Business. Insurance brokers typically work for the policyholder in the
insurance process and act independently in relation to insurers. Brokers assist clients in the choice of their insurance by presenting them with alternatives in terms of insurers and products. Insurance brokers are the professionals who assess the specific
insurance needs of the client, evaluate risk and suggest a suitable insurance cover for the clients. Brokers are extremely important in commercial property and casualty insurance.
3.Surveyors:
Surveyors or Loss Assessors are professionals hired by insurance companies to assess the actual loss arising on the occurrence of fortuitous events such as fire,
burglary and so on for settlement of claims. They act as intermediaries between the
insurer and the insured in settling the claims. Surveyors operate in general insurance
business area. Surveyors operate in multiple lines of business, for example - a fire insurance surveyor can function simultaneously as a marine surveyor. Some of the responsibilities entail carrying out surveys for buildings, machinery, ports and other financially viable items that need insurance protection. The surveyor prepares reports to assess the actual loss and to verify the amount claimed by the insured. Insurance companies settle claims based on the reports submitted by surveyors.
Role of Surveyors:
i) Initial loss advices
ii) Assessment of Loss
iii) Subsequent to First Inspection
iv) Admissibility of the Loss
v) Cause of Loss
vi) Claim of the Insured
vii) Adequacy of Sum Insured
viii) Salvage
Initial Loss Advices:
After the first visit it is the duty of the surveyor to issue an Initial loss advice to the insurer giving the detail of loss is not covered under the policy or there is any other violation in the policy terms and conditions the same may immediately be brought to the notice of the insured/insurers.
Assesment of loss:
The actual assessment of loss starts only after the required documents are received from the insured, the following should be kept in mind while making the assessment report. a) details-Like name of the insured address of the insured location of loss if not same as the registered address name and contact number of the contact person.
b)Particulars of loss-date of loss, occurrence of loss as stated by the insured.
c) details of Insurance-like name of the insurer policy number, type of policy, sum insured, coverage and special conditions, if any, mentioned in the policy.
Subsequent to First Inspection:
Subsequent visits may be required to the insured site to prepare inventory of the safe and damaged stocks, to quantify the loss or to verify the documents of the insured. in case the insured has more than one premises where their interest lies, the surveyor should visit all the premises even if they are not held covered under the given policy. it is important to maintain regular written correspondence with the insured to keep the matters transparent and to avoid being misquoted and to avoid any controversy.
Admissibility of the Loss:
It is the duty of the surveyor to comment regarding the admissibility of the loss. under any situation the loss may either be admissible the survey report must clearly indicate whether the loss is admissible or not admissible under the policy and detailed reason for the same. In case the loss is partly admissible the surveyor should clearly indicate which portion of the claim of issue is admissible.
Cause of loss:
Always provide the detailed commentary on likely cause of loss, this should be covered under three heads
1) cause of loss as per the insured
2) cause of loss as may be mentioned in any of the fire reports police report or third party evidence.
3) the surveyors perception regarding the proximate cause of loss.
Claim of the Insured:
The claim of the insured should be discussed giving details as to the basis on which the claim has been made. the quantity and value of the claimed items be discussed separately. A detailed commentary be given regarding the claim of the insured, the total claim of the insured be further divided into the claim for the building, stocks, plant and machinery or any other head as per the coverage in the policy.
Adequacy of Sum Insured:
It is important to work out the adequacy of the sum insured the same should be done separately for all the heads coved under the policy and covering the heads under which the claims of the insured falls. The sum insured the reference should be made to the average clause and under insurance factor-sum insured/value at risk be defined.
Salvage:
The nature and quantity of salvage should be discussed and value of the salvage should be arrived at logically either supported by the quotations or by providing the quantity of the scrap and giving the per kg scrap rate. it is always advisable to discuss the salvage aspect with the insured and the insurer and obtain approval before adjusting the same in the report along qualification of salvage and how the same was arrived at.
3.Third-Party Administrators:
A third-party administrator is a company that provides operational services such as claims processing and employee benefits management under contract to another company. Insurance companies and self-insured companies often outsource their claims processing to third parties. Thus, such companies are often called third-party
claims administrators. The use of third-party administrators is now common in many businesses, and the range of tasks they undertake is growing. They have distinct roles in the health insurance industry, commercial liability insurance, and investment company operations. Some firms are moving into new areas such as accounting services, workers' compensation audits, and emergency response planning. A third-party administrator (TPA) is an organization that processes for insurance. This can be viewed as outsourcing. TPAs are prominent players in the managed care industry and have the expertise and capability to administer all the claims process. They are normally contracted by a health insurer or self-insuring companies to administer services, including premium collection, number of enrollments, Claims
administration and other administrative activities.
Functions/Role of Third Party Administrator (TPA)
1) TPA issues ID cards to all their policyholders in order to validate their identity at the time of Claim
2) In case of a claim, policyholder will have to inform TPA on their 24 hour toll free line. In
case a network hospital the TPA Issues authorization letter to the hospital for admission of policyholder and also pays for treatment. At the time of discharge all the bills are sent to TPA for processing the claim.
In case of Emergency hospitalization in a hospital outside the network, cashless facility
can't be extended and claim is reimbursed after submission of documents.
3) After making the payment to the hospital, the TPA sends all necessary documents of
clams to insurance company and the insurance Company then reimburses TPA.
Other Roles Of Third Party Administrator (TPA):
1.Documentation and Policy Issuing
2.Legal services and claims recovery services under subrogation rights.
3.Record verification under adjustment policies
4.Medical examination services for life insurance policies and overseas Medical claim policies.
5.Co-insurance recovery services for both premiums and claims.
6.Follow up of recover from the reinsurance companies.
4.Bancaasurance:
Bancaasurance is a relationship between a bank and insurance company that is aimed at offering insurance products or insurance benefits to the bank's customers. It is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank's clients. By doing this both companies earn a profit.
Features of Bancaassurance:
1. Bank cannot pay a premium on behalf of the customer.
2. It can use only two insurance companies in one bank.
3.All commissions are disclosed in the annual accounts report.
4.A bank always focuses on its banking business.
5.For an insurance company, the network of a bank is useful for the sale.
6.It improves profitability.
7.It increases customer lifetime value.
8.It can offer all the financial facilities under one roof.
Models of Bancaasurance:
1. Full integration Model
2.Joint Venture Model
3.Strategic Alliance
4.Financial Service Group
Full Integration Model:
This model entails a full integration of banking and insurance services. The bank sells the insurance products under its brand acting as a provider of financial solutions matching customer needs. Bank controls
sales and insurer service levels including
approach to claims. Under such an
arrangement the Bank has an additional core
activity almost similar to that of an insurance
company.
Joint Venture Model:
In this model, the bank participates
in product and distribution design. There are
joint decision making and high system integration for infrastructure utilization.Bank may be able to realize higher profitability as an insurance distributor rather than a
producer.
Strategic Alliance Model:
Under this Model, there is a tie-up between a bank and an insurance company. The bank only markets the products of the insurance company. Except for marketing the products, no other insurance functions are carried out by the bank.
Financial Service Group:
In this, all the facilities of financial activities are under one roof.Bank may be able to realize higher profitability as an insurance distributor rather than a producer.
Advantages of Bancaasurance:
*Advantage to customers:
1. One-Stop-Shop For All Financial Needs
2. Improved Application And Policy Processing Time
3. Ease of Renewals
4. Trust
5. Expert Advise
One-Stop-Shop For All Financial Needs:
The advantage of bancassurance is
just that:
a) Right Product: It provides the end users a customized insurance solution.
b)Right Time: At a location, they already are for their financial needs – their banks.
This improves the overall experience
of the customers. They are more likely to opt for a complete financial solution from their banks, thus making bancassurance a success.
Improved Application And Policy Processing Time:
Bank already has the data and documentation of customers. This real- time information accessibility makes sure that the turnaround time is reduced – in application
processing and claims management.
Ease of Renewals:
With the help of bank insurance renewal process will be easy for customer.
Trust:
Customers trust their banks to sell them the right product. The trust they would place on insurance carriers and independent agents is comparatively lesser. Therefore, the propensity to buy insurance products from their banks is higher.
Expert Advise:
Banks sit on mounds of customer data.
This, along with insurance carriers’ expertise in packaging insurance products helps the alliance suggest the right products. Customers also recognize this expertise, majorly because of their trust in their banks.
*Advantages to Banks:
1. Diversification of Customer Portfolio
2. Improved Profitability and Non Interest Fee Income
3. Customer Loyalty and Retention
4. Cost- Effective Use of Existing Resources
5. Increased Customer Life Time Value.
Diversification of Customer Portfolio:
Banks already have a relationship with their customers selling them an amalgamation of financial products. With Bancassurance, insurance is added to the banks’ product mix, diversifying their customer portfolio and increasing their penetration in the market.
Improved Profitability and Non Interest Fee Income:
In Bancassurance models, banks can easily
generate risk-free income in the form of the
commissions from insurance carriers. Multiple studies have been done in Indian
bancassurance context to prove its positive
impact on the bank’s profitability.
Customer Loyalty and Retention :
Banks enjoy the benefit of being able to provide yet another product to their customers. Providing integrated financial services strengthens customer relationships and builds better customer loyalty and retention levels.
Cost- Effective Use of Existing Resources:
Banks use their existing premises and employees (tellers and branch staff) for the sale of the new insurance products. This means that there’s no additional cost of operation in selling insurance. They also utilize the insurance company’s expertise in training bank employees and packaging
insurance products. This reduces the cost of distribution for both insurers and the banks,
increasing the channel’s profitability.
Increased Customer Life Time Value:
With increased loyalty and stickiness,
comes higher life time value per customer which is a very important metric for banks.
*Advantages to Insurer:
1) The insurance company can increase their business through the banking distribution channels because the banks have so many customers.
2) Greater geographical reach through bank's network at relatively lower cost.
3) Ease for renewals and lower lapse incidence.
4) Increase premium turnover
5) Increase in profit.
0 Comments