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Chapter 1 Overview of Insurance Administration Insurance Administration - administering insurance policies - UW, reinsurance, claims & customer service

Producer - person or entity that 1. Sells insurance, including agents, brokers, financial advisors, and bank personnel, or 2. involves in insurance sales made through direct marketing or internet. Applicant - person or entity that submits an app for indiv insurance & seeks to purchase the insurance coverage. Insured/assured (PI). - person whose life, health, property, or income is covered by an insurance policy. Policyowner - person / entity that owns an indiv ins policy. 3P policy

when one person purchases an indiv ins policy on the life of another person. Master Group Ins Contract/ Group Ins policy - insures a # of people. Policyholder - ER or other ORG that DECIDES what kind of coverage to purchase for the group & NEGOTIATES the terms & ENTERS into the master group insurance contract with the insurer. Group Prospect/ Proposed Group (GI) - group that has applied, but has NOT yet been approved for group coverage. Certificate of Insurance 1. coverage 2. rights Beneficiary - named to receive the policy benefit. Ethics system of accepted standards of conduct and moral judgment that combines the elements of honesty, integrity and fair treatment. Ethical Duties for Insurance Administration Equity in Risk acceptance

Prompt & Equitable Claim Handling accdg to term of contract & paying only eligible claims Honest, Objective, and Fair Customer Service -producers & customers Privacy and Confidentiality of Customer Information -restrict access to personal info only to those who have lawful business & specific need. Adequate Financial Resources Equity in Risk Acceptance -evaluates every application consistently -charges each policy owner a premium rate based SOLELY on factors that affect the degree of risk -Factors age, sex, health, occupation & avocation -Risk refer NOT ONLY to the possibility of LOSS to an insurer, but also the actual person(s) being insured. Insurance Administration Functions Underwriting -investigates, assesses and classifies degree of risk - decides accepts / declines risk Claim Administration -evaluates -pays eligible claims -denies ineligible claims Reinsurance -transfers a portion of the risk to another insurer Customer Service -answers customer's ques -provides requested info to customers -process customer's policy changes and transactions -solves customer's problems Insurance Administration Functions 1. Underwriting process of assessing & classifying the degree of risk represented by the PI/GI with respect to a specific ins product making a decision to Accept or Decline that risk. Field Underwriters producers in the U.S. Underwriter

an ins company HO or regional office EY who performs risk assessment, classification, and selection process. New Business refers to activities an insurer undertakes in receiving applications, underwriting applications and issuing policies. 2. Claim Administration process of evaluating each submitted claim of the decision, and authorizing the payment of each eligible claim accdg the terms of the policy. 3. Reinsurance -insurance that one ins company obtains from another ins company on risks associated with the ins policies issued by the 1st company. Risk possibility of financial loss Reinsurance Arrangement 1st insurer TRANSFERS a portion of a risk to a 2nd insurer, which agrees to pay part of the claims of the 1st insurer in exchange for a reinsurance premium. 4. Customer Service broad range of activities that a company and its Eys perform to keep customers satisfied so they will continue doing business with the company and speak positively about it to other potential customers. Policyowner Service all service activities performed for people /entities that own individual insurance policies. Member Service all service activities performed for group insured. Other Insurance Functions 5. Marketing identify the insurer's prospective customers and what they want, as well as planning the promotion and distribution of the insurer's products. improve insurer's competitive position by a. gathering info about insurer's business environment, data about competitors b. assessing the insurer's sales performance in the market place c. assisting in the development of competitive, profitable insurance products.

6. Actuarial composed of actuaries technical experts in insurance, annuities, and financial instruments who apply the mathematical knowledge to industry & company statistics to calculate various financial values. Activities of Actuarial Staff -statistics predict rate of death -calculate premium rate -legal reserve liabilities -research on trends in mortality rates, policy lapses, policy loans, company expenses, and interest rates -financial reporting activities 7. Accounting collects, records, summarizes, analyzes and reports data about the company's financial condition. Treasury Operations manages cash as it flows through the company. -setting up bank accounts -managing lockboxes for collection of premium payments -disbursing policy proceeds via checks or automatic deposits -some companies -separate unit in customer service premium billings 8. Legal or law department handles all legal matters of the company. Advise on claim disputes, represent company in litigation, review forms. Compliance ensures that insurer adheres to all applicable laws and regulations in each jurisdiction in which the company does business. Some combine/separate these departments 9. Human Resource recruits and screens job applicants, select qualified employees, plans and presents appropriate orientation, training and devt for each employee, administers EYs benefit programs, maintains ey records. Some companies have separate Training & Development. 10. Information Technology develops and maintains the company's info systems and oversees info mgt throughout the company.

Information System interactive combination of technology, people, and processes that Collects, Manipulates and Disseminates info. Information Management use of info systems to provide a company's info users with the info when they need to carry out their job responsibilities. Administration Systems uses to manage information about insurance policies. Technology Components Technology Platform combination of hardware & operating system software on which an administration system runs. -harware mainframes, servers, personal computers -OS windows, Unix, Mac Application Software performs specific business related tasks - quotes, issuance, loans & dividends, policy value statements, benefit payments, print benefit checks Databases organized collections of data and information Communications Technology uses telecommunications to communicate and transfer data electronically Hardware types of computers the insurer uses Software computer programs that provide sequences of instructions for a computer and that govern its operation. Operating System Software controls the basic operations of a computer, saving date to different storage. Ex. Microsoft Windows. Transaction Processing System organized collection of procedures, software, databases & devices used to perform high volume, routine, and repetitive business transactions.

Transaction any business related exchange- death benefit paid in exchange for proof of death received or payment of renewal premium for continuation of coverage. Data unprocessed facts Information data are combined, manipulated, and analyzed collection of data that has been converted into a form that is meaningful / useful for the accomplishment of some objective. Telecommunications electronic transmission of communication signals Network group of interconnected computers & computer devices, including telecommunication equipment and software that connect them. Internet worldwide network among unrelated users. Intranet - org's internal computer network that uses Internet Technology but is accessible ONLY to people WITHIN the org. Extranet - portion of an org's intranet that is accessible to people WITHIN the org & to SELECTED external parties to allow home office eys & producers to communicate electronically. Email allows users to type a message into a computer and then send message to other computers connected to a network Electronic Data Interchange (EDI) computer to computer exchange of data between orgs using a data format agreed upon by the sending and receiving parties -to allow the org to transmit data directly from its computers to the computers of other orgs on the network. -transfer med lab results, deposit policy benefits, & exchanging data with reinsurers. E-Commerce use of the internet and other networks to deliver commercial info and to facilitate business transaction and delivery of products and services. -ex. Sale of products over internet

****** Technology that enhance Insurance Administration Processes Business Process Management (BPM) strategy for optimizing business processes / adapting them to meet changing needs. Straight Through Processing (STP) electronic processing of every step of a transaction w/o manual intervention. -ex. Completion & Submission Application electronically Pure STP paperless environment, forms and records are maintained electronically. Advantages: increased efficiency, reduced expense decrease error rate decrease need for data entry & human input improved consistency and quality increase Ey productivity Faster service to customers and producers Critical Components of STP database management system data mining predictive modeling business rules engines document management systems automated workflow systems Centralized Data Repository database that houses all relevant data contained in the insurer's separate admin systems. Database Management Systems (DBMS) insurers use this to access centralized repository group of computer programs that organizes data in a database and allows users to obtain information they need. -manipulates data in response to queries from users in different functional areas of the company and allows them to access and share the data in the centralized repository. Ex. Uw can obtain data based on Policy app. Claims staff can access data on benefits and policy terms customers service Rep can retrieve information necessary to answer customer's questions Database Warehouse type of DBM

that collects data from company's existing databases and possibly form sources OUTSIDE the company, screens and edits data, puts data in a standard format, and then stores the data in the centralized repository. Data mining analysis of large amounts of data (external & internal sources ) to discover previously unknown trends, patterns, and relationships. Ex. Payment History Data and Claims Experience Predictive Modeling automated technique for predicting future behavior or events. -collecting patterns and relationships unearthed by data mining, formulating statistical model and generating predictions based on the model. Business Rule Engine (BRE) application software that automates the decision making process by creating and applying rules to all available information. if... then... -useful in UW process. Exception based UW in which rules are applied to process all applications electronically except difficult ones that require human judgment. -identify missing information Document Management systems stores, organizes, and retrieves documents that have been converted to digital images. Document Imaging/Document Scanning process of converting printed characters or graphics into digital images on a computer by inserting paper documents in a type of hardware called SCANNER. Scanner reads the document and translates them into electronic files which are converted to digital images, indexed, and store in the insurer's Document Management system. Advantages elimanates expense of storing papers avoid complicated logistics of storing papers increased efficiency reduce frustration, delay, waste time, lost misfiled docs facilitate document sharing Automated Workflow Systems / Workflow Application technology used to create computer based records pertaining to the status and processing of specific transactions.

-tracking sheet that accompanies a transaction through the entire workflow process from initial receipt through completion & filing. -route docs automatically to staff members for processing, placing the jobs in work queue so that the jobs are available when staff members are ready to work on them. -can use business rules engine for purpose o 1. gauging priority of work item & placing priority items in front queues 2. determine what skill set is needed for a particular work & routing the work to an employee with those particular skills Shows: 1. Type of Transaction 2. Ey to whom it is assigned 3. When it was received 4. Questions that arose 5. Actions taken 6. Docs created 7. Completion dates and Time 8. etc. audit log record of the work that has been completed on a case. System Integration Middleware enable 2/m incompatible systems to work together. Centralized Data Repository houses all the relevant data contained in the insurers separate administration system. -disadv- expense of maintaining multiple copies of same data & complexity Security physical, technical & procedural steps a company takes to prevent the loss, wrongful disclosure (accidental/ intention), or theft of data or info. Major Types of Security Risks Security Risks
Unauthorized persons might intercept data traveling over the Internet/private network Hackers might gain access to company databases and view, manipulate,/ steal data. Unauthorized persons might gain access to private customer information by impersonating authorized persons. Technological Tools: Encryption. Virtual private network (VPN) Firewall Intrusion detection software

Authentication. Cookie Biometric authentication

A virus or worm might destroy data and/or programs or disable computers.

Antivirus software - software application that detects viruses and prevents them from infecting a computer and/or helps an infected computer recover. Data backup software Disaster recovery software

*Security Risk: A natural or manmade disaster might destroy data or the systems ability to function.

*Security Risk: Unauthorized persons might intercept data traveling over the Internet/private network. Technological Tools: 1.Encryption. - Technology that encodes data so that ONLY an authorized person, Who possesses the required hardware and/or software that contains the decryption key, Can decode the data. 2.Virtual private network (VPN) -. An orgs network that uses public telecommunications infrastructure such as the Internet to provide authorized individual users *Security Risk: Hackers might gain access to company databases and view, manipulate,/ steal data. Technological Tools: 1.Firewall. -combination of hardware and software that creates an electronic barrier between the public and private areas of a companys systems. -ONLY those individuals who ______ 2.Intrusion detection software -sequences of commands that indicate an unauthorized user is attempting to access the organizations systems or databases. *Security Risk: Unauthorized persons might gain access to private customer information by impersonating authorized persons. Technological Tools: 1.Authentication. -combination of technology and procedures designed to verify a users identity before giving the user access to a system or database. - The typical authentication procedure calls for someone trying to access the system or database to provide a user name and password.

2.Cookie - users personal computer that enables the server to recognize the personal computer. 3.Biometric authentication *Security Risk: A virus or worm might destroy data and/or programs or disable computers. Technological Tools: Antivirus software - software application that detects viruses and prevents them from infecting a computer and/or helps an infected computer recover. *Security Risk: A natural or manmade disaster might destroy data or the systems ability to function. Technological Tools: Data backup software - Companies use systems to back up data to the Internet or intranets while the data is being created and then store the back-up copies off site. Disaster recovery software - Software applications are available that can aid insurers in developing disaster recovery plans. --Insurers regularly conduct disaster recovery tests to Practice the recovery of key systems and data.

**** Quality Control process of ensuring that an organization accomplishes its objectives & follow its standards. Performance Measurement process through which a company 1. decides what activities are the key to achievement of the companys goals and objectives, how to measure performance of this activities, and what performance standards it hopes to achieve 2. gathers the information 3. communicates the result. Performance Standard established level of performance against which a company or an individual compares actual performance. Benchmarks performance standards often based on standards achieved by leading companies, that represent a companys goals for performance. -FALSE: use only internal performance standards


Joyce Michelle H. Genuino

ApplicationCoordinator JHLifeNewBusiness ManulifeBusinessProcessingServices Joyce_Genuino@jhancock.com