Business Functions In Insurance Companies

Well! Most people think insurance company is all about marketing and  claims handling which is not very true. While these two are the functions that are visible to general public, there is a lot that goes behind the scenes and there are enabling functions and departments. So, let us learn a little more on various business functions that play a critical role for insurance companies.

 

• Underwriting: This is the most important and critical function of any insurance company. This department is responsible for accepting or rejecting a risk for underwriting. Underwriters are responsible and authorized to charge premium and set policy wordings based on company standards and experience/judgement.

 

• Risk Engineering or Loss Control Department: This department enables underwriters to make informed decisions by reviewing risk quality and providing recommendations for improvement. Typically, they work for the insurance companies, but even broking or consulting firms hire Risk Engineers to work on behalf of clients. Broadly, there are two categories of Risk Engineers-Field Engineers and Account Engineers. As the name suggests, Field Engineers visit client locations to review the risk quality. They assess the construction, occupancy, protection(Sprinkler and hazards protection) and exposure. They generate Risk Engineering reports and also provide Risk quality score for a particular location which is further used by Account Engineers and Underwriters. When they see a deficiency which can have a engineering solution, they raise Risk improvement recommendations for the client  will lower the risk. On the other hand, Account Engineers are usually located in insurance company offices and will review the reports generated by field engineers. They also provide the holistic view of bunch of locations which forms an Account.( for example,  TATA group is an account while individual plants within TATA froup are locations/sites.) They also serve as a key contact for clients and UW. Another key role of Engineers is to calculate loss expectancies arising out of locations that are proposed to be insured. They calculate Maximum Foreseeable loss, Probable maximum Loss and Normal Loss expectancy for each location. Few Engineers also develop loss expectancies for natural catastrophes like EQ loss, Wind Loss, Flood Loss, Hail Loss etc based on company guidelines.

 

• CAT Modelling: With increasing catastrophic events like Earthquake, Flood, Cyclone etc,it is very important for insurance companies to truly understand the exposure before they insure any account or facility. There are various software that Risk Engineers use to evaluate the exposure at site level, but this is not feasible when the volume of locations increase. Hence, there are various models available in market like AIR or RMS that calculate loss expectancies based on models that are developed based on historical events. These models can generate AAL or annual average loss by factoring in various factors like Construction and Occupancy as well as secondary modifiers. AAL is ultimately used by underwriting to determine minimum cat pricing that needs to be charged to cover Cat Losses.

 

• Portfolio Modelling: Portfolio modelling is similar to Cat modelling, but provides further holistic view to the leadership team of insurance companies on Portfolio. They generate loss calculations for various portfolios. Portfolio can be based on geography, occupancy or any other group. This is also used to understand overall exposure insurance company has in a particular geography or to calculate reinsurance needs. 

• Claims: This is one of the key function for any insurance company. Insured buys insurance to cover their expenses/receive necessary support at the time of loss/unforeseen event. A good claims team will ensure that Insured will receive adequate support while keeping in mind the interest of insurance company as well by effectively investigating the time to nsure it is not fraudulent.

• Actuary: Actuaries are responsible for determining the rate/price of insurance products by application of actuarial science. There are multiple verticals within Actuary dept like Rate Monitoring, Pricing, Product development,resrving etc.

• Sales//Marketing: Insurance is a unique product and is hard to sell  since no one likes to understand that they will be in a difficult situation sometime in future. No one would ever like to imagine their home/office will be on fire and they can cover the losses with Insurance. Hence it is a nightmare for Sales/marketing dept and they play a critical role to bring new business to UW.

• Human Resources: Like every other industry, HR plays the similar role in Insurance industry as well. Various verticals could include Talent Acquisition, Training and development, HRBP/ER.

• Finance: This is the backbone for insurance company and they are responsible for every single penny. From Employee salary to Premium collection, office expenses to claims , finance will play a critical role.

• IT:  Responsible for managing IT equipments, development of new software products etc.

• Admin: All support functions can be considered under this vertical. This would include managing office facilities, staff transport, vendor management, legal, corporate relationship, govt relations and anything else

The above list is not exhaustive and there could be multiple sub functions in a large company.