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RISK MANAGEMENT AND INSURANCE

RISK MANAGEMENT AND INSURANCE. TOPIC 5 INSURANCE OCCUPATIONS. INSURANCE OCCUPATIONS. Insurance Agents Insurance Brokers Loss Adjusters Underwriters Actuary. INSURANCE AGENT.

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RISK MANAGEMENT AND INSURANCE

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  1. RISK MANAGEMENT AND INSURANCE TOPIC 5 INSURANCE OCCUPATIONS

  2. INSURANCE OCCUPATIONS • Insurance Agents • Insurance Brokers • Loss Adjusters • Underwriters • Actuary

  3. INSURANCE AGENT • The insurance agent is the link in the marketing chain connecting the insurance company with the insurance consumer. • Agent: is authorised to act for another person • Principal: is the person that an agent act on behalf.

  4. Duties of Agents • Loyalty • Not to be Negligent • Obey Instructions • Inform Principal • Reasonable Care

  5. Authority • Actual Authority is given to agents form their principals. • Express Authority provides details of the agent’s duties and responsibilities. • Incidental Authority is to do things normally required to accomplish the specified acts accompanies express authority.

  6. Types of Insurance Agents • General Agents: have the authority fo bind their principal to insurance contracts. • Specialor Soliciting Agents: have the authority to solicit. • The principal is bound to agent’s actions. If agents go beyond the scope of thier authority, substantial legal issue may be present.

  7. Two Fundamental Doctrines • 1.Knowledge given to the agent is considered knowledge provided to the principal. • 2. Payment made to the agent is considered payment conveyed to the principal when there is actual authority.

  8. Direct Writing System or Exclusive Agent • Insurers call property insurance companies selling insurance through their own employee-agents direct writers. • Exclusive agents are not employees of the insurer but agree to place all their business with one insurer. • Direct writing agents are employees of one insurer. They are paid salaries plus commission or bonus.

  9. Independent Agency System • They represent several different insurance companies. • The independent agent may place a client’s homeowner’s insurance with one company and the same client’s automobile insurance with another company. • They earn only commission .

  10. Life Insurance Agents • Duties of Life Insurance Agents • Simply sell and provide information on insurance contract. • Inform clients, motivate to take a specified course of action. • Provide service before and after losses. • Exercise judgement in selecting clients for insurance company. • Must be familiar with social security and other government benefits.

  11. Life Insurance Agents contn’d… Life Insurance Agents and Brokers • Life insruance agent is under contract to one company. • Unlike the property agent representing the direct writer, however, life insurance agent is not technically an employee of the company. • A contract between general agent and insurance company specifies the authority and rights.

  12. Life Insurance Agents contn’d… An Important Distinction Between the Life Insurance Agents and Property Insurance Agents • An important distinction between the life and property insurance agent’s activity is the limitation on the life insurance agent’s authority. Although the property agents can, and often does,have the legal authority to bind a principal to an insurance contract, the life insurance agent NEVER has this authority. • The reason for this difference in authority is that property insurance contracts typically may be CANCELLED by the insurer at any time after a short notice period. Life insurance companies CAN NOT CANCEL contracts after a brief initial period except for non payment of permiums. • To minimize the fraud and misunderstanding, the power to bind the life insurance company remains with the home Office.

  13. INSURANCE BROKERS • An insurance broker is an agent with the limitedauthority to find an insurer willing to accept a transfer of the principal’s risk. • The principal is NOT the insurance company in case of insurance brokers.

  14. Advantages and Disadvantages • There is a possibility of both the principal and the broker do not pass along the facts to the insurer. • There is a possibility of the fact that the insurance contract can be voided because of concelement of material facts.

  15. Broker • Broker can not bind insurer to contracts. Some brokers are licenced as agents and have the capacity to bind authority from a particular insurer. However, this is outlawed. • The duties of principal are the same as agents. • The brokers are especially useful in commercial insurance. • Business firms have unique properties or liability exposures and require insurance contracts written to their own specifications.

  16. The Dillema of Brokers • The broker earns a commission as a percentage of the premium charged the principal. • The Dillema: • The principal’s choice would be served by the lower cost insurer but the broker’s interest would be met by the higer-cost insurer.

  17. Types of Brokers • General Broker • Surplus Lines Brokers • A Lloyd’s Authorised Brokers

  18. LOSS ADJUSTERS – (Insurance Investigators) • After a loss, the insured must notify the insurance company. • The notice represents a CLAIM for payment. • Before settling the claim, the insurer conduct an investigation. • Investigation is done by a LOSS. ADJUSTER(claims auditor or claims agent).

  19. Loss adjusters Contn’d… • In property insurance, this investigation is very important where losses are partial or the damage is not clear. • Life insurers use loss adjusters to investigate some claims for accidental death benefits, disability income benefits and health insurance benefits. • Most of the work is done outside the Office. • In some cases only fire marshal`s report or police reports are needed.

  20. Loss adjusters Contn’d… • Sometimes the adjuster may determine for a fact that fraud by an insured was involved in the loss. Such as faked accidents, business and vechile arsons etc. • Sometimes insured and adjuster cannot agree on the amount of the claim. • If the claim is denied and then the insured can hire a lawyer and sue the company for the breach of contract.

  21. Loss adjusters Contn’d… • Insurance companies often use loss adjusters who are not their own employees. • They hire the services of an independent adjuster or an independent adjustment bureau. • Independent adjusters are hired when loss needs specialization. • Independent adjusters are agents of insurer but a public adjuster is an agent of the insured.

  22. UNDERWRITER • Reviews applications for insurance and then either accepts them at an appropriate rate or rejects them. • Makes decisions based on criteria established by the company`s top management and personal experience and judgement. • Possibility of adverse selection

  23. ACTUARY • An insurance company mathematician who complies: • Statistics of losses, • Develops insurance rates, • Calculates dividends and • Evaluates the financial standing of the insurance company.

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