Life Insurance

Operations
February, 2009

CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.

Course Agenda
Quick recap

Module 1: Financial aspects of Insurance

Module 2: Value Chain

Module 3: Insurance Departments and Process

Module 4: Reinsurance & Coinsurance

CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.

Risk and Insurance

Only

Pure Risks are insurable

Insurance

results in the risk being transferred to

the insurance company

Sharing

of risk among large groups is the basis for

insurance

Loss of some, when borne by many, will not break any

CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.

Characteristics of Insurable Risks

Occur

by chance

Quantifiable

(measurable)

Not

against Public policy

Not

Illegal

Not

be catastrophic to the insurer (example:

Terrorism)

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Copyright 2008 by Infosys Consulting, Inc.

Essential elements of Insurance

Offer &
Acceptance

Agreement
between
parties

Consideration

Legality
of contract

Capacity
of parties

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Copyright 2008 by Infosys Consulting, Inc.

Principles of Insurance

Contrib
ution

Utmost
Good
Faith

Subrog
ation
Indemn
ity

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Copyright 2008 by Infosys Consulting, Inc.

Insurab
le
Interest
Proxim
ate
Cause

Insurance industry segments

Life &
Annuities

Loss of Life
Savings for
future
Retirement
benefits
Individual and
group

Property &
Casualty

Loss of Assets /
Property
Loss due to
Liability
Personal /
Commercial
Individual and
group

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Copyright 2008 by Infosys Consulting, Inc.

Health

Health Risks
Disease &
Disability
Healthcare in old
age
Individual and
group

Insurance jargon
Insured

Peril

Insurer

Physical

/ Insurance
Company
Liability
Insurable Interest
Insurable Risk
Agent
Application
Broker

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Copyright 2008 by Infosys Consulting, Inc.

hazard
Moral Hazard
Policy
Cover Note
Coverage
Endorsement
Indemnity
Exclusion

Course Agenda

Quick recap

Module 1: Financial aspects of Insurance

Module 2: Value Chain

Module 3: Insurance Departments and Process

Module 4: Reinsurance & Coinsurance

CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.

Financial model of Insurers

Where Money
comes from

Where Money goes

Claims Outgo
Premium

Cost of operation
Taxes

Investment income
Reserve funds

Operating Surplus = Premium Claims - Operational

Costs - Reserves

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Copyright 2008 by Infosys Consulting, Inc.

10

What is Premium?
For

the Customer: The cost of securing insurance benefits

For

the Insurer: The cost of providing insurance cover

The

consideration for an insurance Contract

First
Year
Premiu
m

Yea
r0

Renewal
Premiums
Yea
r1

Yea
r2

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Copyright 2008 by Infosys Consulting, Inc.

Yea
r3

11

Yea
rn

What determines premium? (Components)

Mortality
Assumptions
Premium

Expenses
Interest
Assumptions

Age
Sex
Physical condition
Personal History

Family History
Occupational details
Habits

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Copyright 2008 by Infosys Consulting, Inc.

12

Course Agenda

Quick recap

Module 1: Financial aspects of Insurance

Module 2: Value Chain

Module 3: Insurance Departments and Process

Module 4: Reinsurance & Coinsurance

CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.

13

Insurance Value Chain

Brokers

Reinsurers

TPAs

Banks /FSIs

Business Associates
Insurance Company
Investment Management
Develop
Maintain Personal Relations
&
Pay
Manage
Develop Enhanc
Write
Claims
Sell
Contracts
&
Markets
e
New
&
Business
Administer
Product
Business
Benefit
Accounts
s
s
Compliance Management
Financial & Actuarial Management
HR Management
Information & Technology Management
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Copyright 2008 by Infosys Consulting, Inc.

14

Consumers

Course Agenda

Quick recap

Module 1: Financial aspects of Insurance

Module 2: Value Chain

Module 3: Insurance Departments and Process

Module 4: Reinsurance & Coinsurance

CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.

15

Sell Business / Write New Business process

flow
Needs Analysis

Applicatio
n
Data
Capture

Applicatio
n
Collection

Underwritin
g

Pre-sales Quote
Premium
Collection

Policy
Issue
Reinsurance

Commission
Release
Accounting
Entries
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Copyright 2008 by Infosys Consulting, Inc.

16

Underwriting
Assessment

Standard, Sub-standard, Preferred Risks

Need

and classification of risk

for underwriting

Avoid anti-selection
Price product optimally
Detect Moral Hazard
Ensure existence of Insurable Interest

Underwriting

methods

Numerical Method
Judgmental Method

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17

Customer services (aka Policy owner services)

End customers

Intermediaries

Insurer
Regulator /
Financial Institutions/
Stockholders

Consultants/
Service providers

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18

Span of Customer Services

Information to all interested stakeholders
Customer initiated changes to the policy records

Change of premium
Addition of a rider

Insurer

initiated changes to the policy records

Lapsing of a policy for non-payment of premium

Expiry of a benefit at the end of its term

Financial

Movements

Change of sum assured

Administrative

Movements

Change of address

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Copyright 2008 by Infosys Consulting, Inc.

19

Claims process flow

Claims
Notification
(Maturity,
Installment,
Death, Disability
Claims)

Policy
Updation

Accounting
Entries

Claims
Registratio
n

Requirement
s
gathering

Claims
Investigatio
n

Claims
Payment

Claims
Adjustments
(O/s Premiums,
Loans etc)

Claims
Approval

Intimation to
Marketing/NB

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Copyright 2008 by Infosys Consulting, Inc.

20

Client
Details
Updation

Actuarial
Conduct

trends in mortality
policy lapse
company expenses

Develop

research on

products based on

market feedback
financial feasibility

Calculate

Legal reserve, Liabilities & Premium rates

Liaise with regulators, Prepare and submit all
relevant reports to Regulators
Review product /company performance

Suggest course correction, if needed

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Copyright 2008 by Infosys Consulting, Inc.

21

Finance & Accounting

Bill

and Collect premiums

Monitor the flow of funds
Disburse approved payments
Maintain General Ledger (GL) for various financial
transactions
Prepare

Revenue Accounts
Balance Sheets
MIS Reports
Statutory reports

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Copyright 2008 by Infosys Consulting, Inc.

22

Investments
Collect
Invest

and pool funds at Home Office level

funds in multiple investment vehicles

Maintain
Prepare
Deal

& update books of accounts

& submit financial statements and reports

with fund managers

Comply

with regulatory requirements

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Copyright 2008 by Infosys Consulting, Inc.

23

Course Agenda

Quick recap

Module 1: Financial aspects of Insurance

Module 2: Value Chain

Module 3: Insurance Departments and Process

Module 4: Reinsurance & Coinsurance

CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.

24

Reinsurance
Insurance
Insured

Insurer

Transfer

Reinsurance

of Risk

Between Insurer and

Reinsurer

basic
arrangements

Reinsure
r

Facultative
Treaty

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Copyright 2008 by Infosys Consulting, Inc.

Retrocession
aire

Various Types
Proportional

Two

Retrocession

Surplus
Quota Share

Non-proportional

25

Excess of Loss etc

Coinsurance
Joint

assumption of the same risk

Usually on percentage basis

Between

One insurer acts as the leading insurer

Lead insurer responsible for policy administration
Proportionate sharing of premiums & claims

Between

more than one insurer

insured & insurer

Percentage of total value is insured

Reduced premium rates
Proportionate claims
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Copyright 2008 by Infosys Consulting, Inc.

26

The contents of this document are proprietary and confidential to Infosys Consulting Inc. and may not be disclosed in whole or in part at any time, to any
third party without the prior written consent of Infosys Consulting Inc.

2008 Infosys Consulting Inc. All rights reserved. Copyright in the whole and any part of this document belongs to Infosys Consulting Inc. This work may
not be used, sold, transferred, adapted, abridged, copied or reproduced in whole or in part, in any manner or form, or in any media, without the prior written
consent of Infosys Consulting Inc.

CONFIDENTIAL
Copyright 2008 by Infosys Consulting, Inc.

27