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 Underwriting department
 Motor Claims department
 Accounts
 Non-motor claims
 Risk management


Underwriting department can be termed as the backbone of any insurance company. The employees in
this department experience more work pressure than those of the rest.

Literal meaning of under writing:

The name is derived from the Lloyd's of London insurance market. Financial bankers, who would
accept some of the risk on a given venture (historically a sea voyage with associated risks of
shipwreck) in exchange for a premium, would literally write their names under the risk information
which was written on a Lloyd's slip created for this purpose.


Assistant Vice


Deputy Manager



 Decide how much coverage the client should receive.

 Measure risk exposure and estimate magnitude of losses.
 Assessing how the risk & a peril produce potential losses.
 Whether to even accept or decline the risk.
 Prescribing rates, terms & conditions.
 Deciding on retention & risk transfer


My observations of this department have led me to draw a final picture of the under writing process at
AICL which is as follows:
 Process starts with the prospective employee’s intimation about his intention of buying
insurance from AICL.
 After obtaining the particulars of the subject matter through risk inspection report
underwriter rates the risk looking at the market practice or by taking guidance from the
Tariff rates as given by Tariff Guide of IAP (Insurance Association of Pakistan,(especially
in case of fire)
 All risks falling under the limit of Branch are rated and approved in branch. For special
rating approval is obtained from the head office.
 After rating if customer agrees then cover note is issued for a period of 30 days.
 In 30 days if the customer pays the amount of premium then the underwriter issues the
policy document.
 Any alterations are made through the endorsements.


Each insurance company has its own set of underwriting guidelines to help the underwriter determine
whether or not the company should accept the risk. The information used to evaluate the risk of an
applicant for insurance will depend on the type of coverage involved. For example, at AICL, in
underwriting automobile coverage, an individual's driving record and claim ratio statement prepared
by the claims department is critical and is given much importance at the time of renewal of the policy.
Similarly, the premium statement of each client is also considered important in this regard.


While underwriting the motor policy the underwriter needs to be very careful as the loss ratio
and fake claim ratio is very high in motor class of insurance.


A. Third party liability

B. Comprehensive Cover for private motor vehicles.

Comprehensive policy covers the following risks;

• Theft
• Total Loss
• Partial Loss
• Third Party Property Damage
• Third party bodily injury
• Loss/Damage to vehicle in transit by Road, Rail and Air.
• Terrorism(optional)

Clauses to be attached with Motor policy

• Transfer of Interest
• Terrorism clause
• Market Value Clause
• Car laid up concession clause
• Depreciation Clause

Rating Factors of Motor Policy:

The main rating factors which are considered by the underwriters are as:
♦ The Proposer and the other drivers
♦ Type, size, value of the vehicle
♦ Use to which the vehicle is put
♦ Area or district of use Scope of the cover required
Premium discounts are given by AICL when:
♦ Driving is restricted to the insured or to insured and a named person;
♦ Insured selects the option of Excess;
♦ Driver’s age over thirty;
♦ No Convicted record from last five years;
♦ Upon renewal, when client has a good claim history


The motor vehicle insurance process is different from the independent customers and the customers
who lease the vehicle from bank.

a). Independent Customer Proces:

This is quite a simple process. The independent customer directly goes to the insurance company for
the insurance of its vehicle; the insurance company evaluates the vehicle of the insured and gives the
motor policy to the owner.
b). Bank Leased Vehicle Insurance Process



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1) Customer requests the bank to lease the vehicle.

2) After proper evaluation of lessee, before giving the actual possession, bank asks the
customer to provide the insurance certificate of the vehicle
3) Customer requests the insurance company for the motor insurance policy.
4) The insurer issues the motor policy certificate to the insured.
5) The insured takes that certificate and deposits to the vehicle dealer.
6) After taking motor vehicle insurance certificate, the vehicle dealer gives possession of the
leased vehicle to the customer.


• In case of any damage to the vehicle, the company gives the insured the amount after
deducting depreciation of that part.
• In case of theft, the company pays the insured according to the current market value of the
car not the price of the new car.
• For repairs /damages of the vehicles, the company has some workshops on its panel.
• For small losses, company tells the insured that he should shall it repaired from any
workshop and give them the bill for the recovery.
• For big losses, a team first inspects the vehicle and then after proper investigation they act


Property and fire under writing has proved to be one of the most technical sides of under writing
throughout my internship period. Property insurance provides protection against most risks to
property, such as fire, theft and weather damage. Fire under writing is mostly guided and governed by
the Fire Tariff that lays down the terms of coverage, the premium rates and the conditions of the Fire

Rating Factors in Fire Underwriting:

In fire underwriting, the main factors which are account for by the underwriters are as:
 Class of Construction including Wall, Roots and Floors (the construction is classified as
 Location of Property
 Entry and Exit points of Godowns and Premises.

The perils covered are as follows:

• Fire & Allied Perils

• Burglary
• Explosion
• Riot & Strike Damage
• Malicious Damage
• Storm & Flood
• Earthquake
• Impact Damage
• Aircraft Damage
• Spontaneous combustion
• Business Interruption following Fire & Allied Perils
• Terrorism



• Electrical clause A & B

• Bank mortgage clause
• Atmospheric disturbance clause
• Impact damage clause
• Pro-rata condition of average
• Premium paramount clause
• Declaration clause
• No loss till date clause
• Tariff warranties

Discounts available

Construction of Class A 10%

Fire extinguishing 5%
Hydrant system 20%

Fire Policy Schedule

At AICL the fire policy schedule is prepared by the software (GENERAL INSURANCE SYSTEM)
used by the underwriting department in which each warranty and covered risks are embedded in the
computer. Only rates and warranties are given by the user. Premium is also calculated automatically
by the software. Each Company has different format for the Fire policy schedule, in AICL a fire
insurance schedule consists of the following information:
 Policy Number
 Sum Insured
 Risk Location
 Situation
 Items Insured
 Fire Rate
 Fire Extinguisher Discounts
 Fire Premium
Refund of Premium in Fire Insurance
In case of cancellation of the policy, refund of premium is based on three ways as:
 Normal Basis;
 Pro rata Basis
 Short Period Basis

The marine under writing department of any insurance provider holds a great deal of importance to the
country’s foreign trade sector. Importers and exporters depend much on it for smooth running and
security of their business. This is the most profitable class of business for AICL because of minimum
claim ratio. A prudent and compact marine under writing ultimately adds value to the country’s
foreign trade environment.

AICL’s marine under writing in Lahore Zonal Office is performing its services with full dedication
and in complete harmony with the Head Office.

Main covers mostly provided are:

• Marine cargo import
• Marine cargo export
• Marine inland transit
Rating Factors in Marine Cargo:
The main factors which are considered by the underwriters at the time of issuing the marine cargo
policy are as:
♦ Source (From______)
♦ Destination (To_____)
♦ Path Followed (By Air, By Sea, By Road (Motorway etc.)
♦ Packing (Plastic / Leather / Wooden etc.)
♦ Type of Cargo (Liquid / Small hard Goods etc.)

Clauses of Marine Policy:

Basically the main three clauses are available in marine insurance under which policy covers the
different types of risks.
These clauses are classified as:
♦ Institute Cargo Clause ‘A’
♦ Institute Cargo Clause ‘B’
♦ Institute Cargo Clause ‘C’
In Clause ‘A’ generally all types of risks are covered under this clause. Minor losses are not covered
under clause ‘A’. The premium is very high if this clause is attached in policy.
In Clause ‘B’ the cover is more squeezed as compare to the clause ‘A’, where generally theft and non-
delivery of goods are covered. Total loss and Partial losses are also covered under clause ‘B’.
In Clause ‘C’ the cover is only limited to the Non-Delivery of the goods and only total losses are
covered rather than partial losses. The premium is least in this case as compared to the Clause ‘A’ &
Risks Covered:
The risks under Clause (A), (B) and (C) together with the “General Average Clause” and “Both to
Blame Collision” are covered.
There are some exclusions in marine cargo policies as under:
1) General Exclusions Clause
2) Un seaworthiness and Unfitness Exclusion Clause
3) War Exclusion Clause
4) Strikes Exclusion Clause

Types of Policies in Marine:

All marine policies, whether valued or unvalued, come under the heading of one of the several ‘types’
as indicated by the typed or written wording in the policy:
• Time Policy
• Voyage Policy
• Mixed Policy
• Construction Policy
• Open Policy
o Revolving Policy
o Valued Policy
o Unvalued Policy

Marine Policy Premium:

The Marine Insurance policy premium is based on the following things:
♦ Covered Risks (Rates of Risks)
♦ A.S.C (Admin Surcharge) (5% of Gross Premium)
♦ F.I.F (Federal Insurance (1% of [Gross Premium + A.S.C])
♦ F.E.D (Federal Excise Duty) (5% of [Gross Premium + A.S.C])
♦ Stamps (Rs.1 / Depend upon the amount of premium)
After adding all the above factors premium is calculated in marine policies.
The process of premium calculation is same for all types of insurances.
Marine Cover Note:
Marine cover note is very important and acts in the same way as the policy in other classes. Marine
cover note is issued for 30 days and contains the following details:
 Branch
 Insured
 Interest
 Conveyance
 Voyage From
 Voyage To
 Sum Insured
 Conditions
 Validity
 Shipment Particulars e.g.
o Name of Vessel
o Port of Shipment
o Nature and Quantity of Consignment
o Marine Cover Note Number
o Invoice Value


Claims processing is one of the most crucial activities that the insurance companies perform. This is
one of those core areas that are considered to judge the overall performance of an insurer.
I worked for one week in the claim management department of AICL.


 To retain the existing customers and attract new ones and creating a strong good will in
terms of quick provision of insurance services.
 Pinpoint fraudulent claims to avoid and discourage criminal activities.
 Properly set reserves to maximize capital efficiency
 Identify opportunities for subrogation and salvage to recover losses.

Before initiating the formal claim process, the claim manager will check the following:
• Cover was in force at the particular time of loss.
• Validity of the claimant as the one of the authorized claimants.
• Whether the peril is a covered peril.
• The insured has complied with the conditions and warranties applied by the policy.

• Exclusion


This is the reporting (in prescribed format, e.g. by filling in the claim form supplied by the
insurer) of the claim by the insured to the insurer; it should be made as soon as possible. Such claim
notification will be sufficient to meet the needs of the insurer. Claim notification is the basic condition
of the insurance contract and any violation of this condition can give rise the option to the insurer to
terminate the policy and decline the claim even it is valid. Generally first notification is made through
telephone or any other such communication means immediately after the happening of the event which
enables the insurer to take the appropriate steps as required. After the reasonable time insured is
required to submit the proper written claim notification indicating all the incidents supported with the
relevant documentations like police report, medical reports, witness statement and other such
Claim review involves the analysis of the claim by the insurer in the light of such things as:
• The appropriateness of the amount claimed;
• The proposal form, to check whether there is any contradictions in earlier
statements or not.
• The exact terms of the policy, which are open to interpretations;
• Legal requirements;
• Economic considerations;
• Market practice;
• Corporate claims philosophy

The initial response from the insurer to the insured may be only an acknowledgement or a
request for further information. Depending upon this further information the insurer must then convey
their “claim decision” which can be one of three choices:

• Payment
• Negotiation
• Rejection

Claim decision must be made within a specific time period to meet the statutory requirements
this decision can be for the admission or denial of liability.
Insurer may not be able to make a claim decision and there may be a need for further probing for fact
finding. For this purpose insurer may refer the case to the internal claims inspector or appoint loss
adjuster to undertake an independent investigation. Investigations must be:

• Swift, yet efficient

• In depth
• Proactive
• Productive
• Organized

After completion of investigation insurer must respond to the insured immediately of the
results.Investigation encourages both the parties to negotiate the claims because all types of
information/documents are in their knowledge along with merits and demerits of the case. Negotiation
may be through arbitrator/mediator. If these are failed then last resort is litigation for the commercial
clients and insurance ombudsman for private clients.
Where the liability is accepted by the insurer, the claim is paid immediately. Where the liability
is denied even after thorough investigation, insurer may pay the claim on ex-gratia basis although
legally he/she is not bound to do so.

Claim recoveries can be made from;

• Third party, who may be liable in full or partly to the incident under
subrogation right.
• In case of reinsurance, from the re-insurer.
• Contribution may arise if another insurer is also involved.

Insurers are required to review theire performance periodically to learn a lesson from past
experience and for improvement in the future.


• My discussions with the AVP claims have led me to sum up the salient features of marine claims
which are given below.
• Marine claims are document based claims and the documents included in the marine claim file are
much more important than the documents of other claim files.
• Loss assessment, document collection, document verification are the most important issues and
need to be dealt with great care by the claim manager.
• Marine import claims sometimes rely upon the joint survey conducted by port authorities during
investigation. For example Marine Bulk Consignment ship shortage cases do not involve the
appointment of surveyor by AICL.
• Some times a copy of joint survey report is also issued to the client on request and a fee is also
charged for that.
• Marine loss assessment is done by the claim manager himself because marine claims focus more
on documents. This is not the case with the motor and fire claims hence the surveyor’s fee in fire and
motor is higher than that of marine.


 Letter Of Credit
 Commercial invoice (issued after Performa invoice/provisional invoice. Quotation is
exchanged before Performa invoice)
 Packing list (most important for inland transit cases)
 Non-negotiable copy of BILL OF LADING
 Triplicate copy of BILL OF ENTRY
 Original policy document
 Debit Advice issued by Bank
 Original Bank Cost Memo
 Claim bill
 Weigh mint note
 Inward / outward gate passes
 Sale receipts (used in inland cases)
 Final short lending certificate(issued at port of discharge on confirmation of ship
 Original Inland Transit Receipts (Bilty)
 Original port survey report
 Joint survey report
 Letter of subrogation
 Loss vouchers(evidence from client that he has received the claim amount)
 Survey report of appointed survey

The claim management for motor cases depends largely upon the type of cover obtained by client.
Third party motor claims
Salient features:
a. Submission of claim forms(Along with copy of driver's driving license of driver's I.D.
Card Vehicle Registration Document)
b. Consent of insurance company prior to admitting liability toward third party.
c. Submission of court orders to insurance company
d. Police reference number should be informed to the company, incase third party injury is
Comprehensive Cover
 Submission of claim forms (Along with copy of driver's driving license of driver's
I.D. Card Vehicle Registration Document).
 Signing of Letter of Authorization to let the insurer take the driver’s statement.
 Submission of repair quotation to the insurer for approval
 Appointment of surveyor to investigate the claim
 Completion of repairs
 Discharge Form signed by client, repair charges made by insurance company after
deduction of depreciation.
In case of third party injury or property damage under comprehensive cover, the claim
handling will be the same as discussed in the “Third Party Only” cover.


In case of loss the clients should report the case to the insurance company immediately.
Describe the time, date, cause etc of the fire in detail.
• Insurance company will then appoint an adjuster / surveyor to investigate the fire. A detailed
adjuster's report will be made. Client is not supposed to discard or remove any destroyed
items without the Company's prior approval.
• If the loss is minor, insurance company would probably not appoint a loss adjuster. Instead,
clients will be asked to submit the relevant quotation for repair or receipts of goods damaged
to the insurance company. In that case, clients should also send original photos showing the
extent of loss to the insurer.
• If there is damage to building:
 Clients should obtain a quotation from the builder on the cost of restoring the
building to its state immediately before the fire. Clients must make sure that
Company’s interest is notified.
 Company will then pass the quotation to the loss adjusters for assessment.
 Company has the sole discretion on how to provide an indemnity.
• If there is damage to furniture, stock or other contents:
• Clients should provide a full list of articles destroyed or damaged. Clients should not
admit liability for damage to third party without Company's approval and clients should
submit any court order of claim letter to the Company as soon as possible.
• If there are other insurances in force, clients should also inform the Company about the
name, sum insured etc. of the co-insurance company.
• The clients should submit the following to the Company:
 A copy of the Fire Department Report (if available)
 A full list of articles destroyed or damaged
 All accounting records, including all stock records, record of last renovation, rental
record etc.
 All documents received concerning third party liability losses
 Claim form



The risk management department of AICL consists of a Senior Manager and two deputy managers. All
three of them, being engineers, are highly skilled for serving this department well.
The main functions being performed by t hem are:

 Conducting Pre-Insurance Risk Inspection Surveys

 Providing a thorough risk assessment of the respective proposal supported with


 Reporting to the under writing departing department and discussing the important areas of
the report presented.

It’s important to note that:

 The risks amounting to below 10 million are managed by the branch itself and the rest are
forwarded to the zonal office.

 The risk manger is only supposed to give his logical opinion about any risk being
considered for under writing and does not take the responsibility for giving a straight away
decision of acceptance or rejection. R.M departments in other big organizations may be
the authority to take decisions but AICL does not practice it so far.

 The department can also outsource the duty to conduct survey from any reputable
surveyor’s company but this practice is found quite rare.
 The clients with relatively greater risk are:

• Textile industry
• Cotton Ginning and pressing factories(CGP)
• Chemical manufacturers
• Sugar mills etc.

The Risk Management department at AICL offers:

 a vast exposure of industry

 wide range of opportunities for learning

 development of analytical skills

Speaking in the global perspective, the history reveals various examples where the organizations had
to bear unlimited losses, catastrophic losses more precisely, merely because they practiced either no or
poor risk management tools.
In 1980’s, there has seen a dramatic rise in the number of insolvent insurers. The apparent causes of
these insolvencies were various. Some of the insolvencies were caused by rapidly rising or declining
interest rates. Mis pricing of insurance policies, natural catastrophes, and changes in legal
interpretations of liability and the limits of coverage hurt still others. The “churning” of policies by
unscrupulous sales agents, insolvencies among the reinsures backing the policies issued,
noncompliance with insurance regulation, and malfeasance on the part of officers and directors of the
insurance companies affected some as well.
But despite the numerous apparent causes of these insolvencies, the underlying factor in all of them
was the same: inadequate risk management practices. In response to this, insurers almost universally
have embarked upon an upgrading of their financial risk management and control systems to reduce
their exposure to risk and better manage the amount they accept. In short, the industry has turned to
financial risk management techniques as a way to improve performance.


Insurers are in the risk business. In the process of providing insurance and other financial services,
they assume various kinds of actuarial and financial risks. In many instances they will eliminate or
mitigate the actuarial and financial risk associated with a proposal by proper business practices; in
others it will shift the risk to other parties through a combination of reinsurance, pricing and product
design. Only those risks that are not eliminated or transferred to others are left to be managed by the
firm on its own account. This is the case because the insurance industry recognizes that it should not
engage in business in a manner that unnecessarily imposes risk upon it, nor should it absorb risks that
can be efficiently transferred to other participants.

There are only a few insurance companies in the local industry who practice a full fledged function of
risk assessment before under writing. AICL is one of those few prudent companies who have learned
to consider risk management as a pre-requisite for efficient under writing.


The core function of this department is the risk assessment for the ultimate purpose of under writing. It
starts when there is an intimation about a new proposal. The prospective risks amounting to above 10
million are normally forwarded to the risk manager for proper inspection as said earlier.
Risk inspection survey serves as the best tool for the assessment of any risk.

The report generated as a result of the survey provides an objective opinion about the risk as being
low, medium or high. The historical information about losses also helps in assessing the severity and
frequency of losses. However complete statistical information is normally not available therefore
prediction in terms of statistical analysis is sometimes difficult for the risk managers.
ESIMATED MAXIMUM LOSS is an important term to assess the risk statistically and provides much
guidance to under writers while taking decisions.


The first obvious outcome of risk management in AICL or any insurance company is that the under
writing function becomes standardized and creates value for the company as well as clients. This leads
to an increased prudence and efficiency involved in under writing. Where competition cannot be
tackled in terms of pricing, prudent under writing comes to the company’s rescue and its found at the
end of the day that the claim ratio was much better than the company who performed under writing
only to survive the competition and without sticking to any risk measures.


This is the second major benefit of risk management that was observed during my work in AICL risk
management department. My findings in this regard are a result of the assignments given by the
relevant instructor and are described as below:

History reveals many catastrophic incidents that became possible only because of insufficient risk
measures. Such incidents include:
The need and importance of risk management was felt after these catastrophes actually hit hundreds
and thousands of people and assets. Likewise in insurance companies, the risk management is thought
to be one of the tools to reduce or at least minimize such huge losses.
Since the risk manager performs all necessary steps to evaluate the frequency and severity of expected
losses, any probabilities of future catastrophes can be estimated which can help in catastrophe
management to a certain extent.