Insurance Company Operations
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Purpose of the Module
Give you an insight into the inner-workings of an insurance company Help you appreciate how secure insurance really isand whyso you can reassure families that their preneed insurance dollars are safe with you and companies like Homesteaders
Competition in the Life Insurance Industry
Competitive environment has dramatically changed in the past 25 years
Competition for life and annuity customers
Many insurance markets are near saturation
Not the case with preneed insurance Weve barely scratched the surface
Gramm-Leach-Bliley Act of 1999
GLB Act, also known as the Financial Services Modernization Act
Promotes integration among financial services providers Allows banks, insurance companies, etc. to affiliate in a holding company structure
Holding Company may or may not have controlling interest in one or more other companies (subsidiaries) Larger holding companies are also known as financial conglomerates
Regulation
Most insurance laws can be classified into two broad categories
Solvency laws Market conduct laws
U.S. Insurance Regulators
Insurance regulation is divided between federal and state governments Insurance regulation is primarily governed by the states
The Bottom Line
Asset requirements ensure that insurers invest sufficiently and wisely Reserve requirements ensure that companies set aside enough money to pay anticipated policy benefits Minimum capital and surplus requirements help guarantee that the amount of money each insurer has available comfortably exceeds what it owes to its customers
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Ethics in Life Insurance
Ethics
A system of accepted standards of conduct and moral judgment
Combines the following elements
Honesty Integrity Fair treatment
Life Insurance A Business Built on Trust
Insurance is a long-term promise If a policy doesnt deliver on its promises, surviving loved ones will suffer financially
Ethics in Life Insurance
Includes the following for insurers
Upholding promises to customers Operating in a responsible manner Treating customers equitably Doing high-quality work in a timely fashion Keeping private information confidential
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Replacement
Cashing in an insurance policy to help pay for a new policy Legal and ethical issue Agent has duty to disclose all pertinent information to the client and to the insurance company and to act in the clients best interest
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Importance of Disclosure
Completeness and accuracy of life insurance information is critical Provide proper disclosure then, let the client decide
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Functional Areas of Life Insurance Companies
Marketing Actuarial Underwriting Customer Service Claim Administration Annuity Administration Investments Accounting Information Technology Legal Compliance Human Resources
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Product Pricing
Results in setting a premium rate
Charge per unit of life insurance coverage
Objectives:
Allow the company to pay all of the products benefits and associated expenses Return a modest profit
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Underwriting Overview
The process
Assess and classify the proposed insureds degree of risk Make a decision to accept or decline the risk
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Underwriting and Guaranteed Issue Products
With guaranteed-issue products, such as Homesteaders, the underwriting is built into the product risk and its pricing
Does not take anti-selection into account Relies on the agent to consider the insurance companys interests before recommending the product to a high-risk, proposed insured
The applicant satisfies the underwriting guidelines by meeting the products broad eligibility requirements
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Who Are Our Customers?
External customers
Policyowners & beneficiaries Funeral homes Agents
Internal customers
Company employees Company departments
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Steps to Good Customer Service
Delegate more authority and accountability to front-line employees (empower them) Provide employees with tools to do their job
Technology Training Education
Create customer-oriented systems Measure customer satisfaction
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E-Commerce
Using the Internet and other computer networks
To deliver commercial information To facilitate business transactions To facilitate the delivery of products and services
Eliminates some of the limitations of traditional commerce
24/7 availability Instant Claim Processing at Homesteaders Order processing
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Insurance Financial Objectives
Every life insurance company has two basic financial objectives:
Solvency: Being able to meet all of their financial obligations as they come due Profitability: Attempting to maximize the value of the company for the benefit of the owners (policy or stock) by earning a profit
Risk is an important consideration for setting solvency and profitability goals
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Compliance: Other Issues
Claim Administration Complaint Handling Consumer Privacy Market Conduct Exams
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