Insurance

Overview
Data Hub
1. Overview of Data Hub
Features of Data Hub

Data Flow architecture

Insurance Operation

Entities in Insurance Value Chain

Life Cycle of an Insurance Policy

Insurance Distribution Channels

Insurance Regulations
 Risk refers to the possibility
Risk- What is it? of a Financial Loss due to an
event taking place
Why is Risk Important
Risk also refers to the
for Insurance? subject matter of Insurance

Risk is what makes you

decide whether or not you
need Insurance

Risk is what Insurance

Companies measure when
determining whether to offer
you Insurance and how
much it will cost

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Speculative Risk Pure Risk

A Risk that may result in A Risk that may result in

Gain or Loss or No Change Loss or No Change

Non Insurable Insurable

e.g. Gambling or investing in e.g. Fire, Wind Damage,

the stock market Flood etc.
Why do we need
Insurance?
Life is full of uncertainties

Financial losses can happen to anyone at

any time

Individuals and businesses are exposed to

financial risks arising out of death, accidents
or natural & manmade calamities

When these risks take place they create

financial and economic losses

Insurance provides financial protection in the

event of a loss incurred from a covered peril

© 2020 Capgemini. All rights reserved. 5

Risk Management Techniques

Avoidance
Choosing not to participate in an activity because of
the risk involved, e.g. Not owning a vehicle.

Retention
Saving money in case of future losses, e.g. putting
$1000 in a savings account in case of a car accident.

Prevention
A risk control technique that reduces the frequency of a
particular loss, e.g. Installing video camera, patrolling
security guards etc.

Reduction
A risk control technique that reduces the severity of a
particular loss, e.g. Installing safety equipments like
airbags in your vehicle and water sprinkler at home etc.

Transfer
Passing the risk on to an insurance company, e.g. paying
a monthly fee for an insurance policy and expecting the
insurance company to protect your assets.
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 Insurance is a contract between two parties whereby one party agrees to undertake the risk
of another in exchange for consideration known as premium and promises to pay a fixed sum
of money to the other party on happening of an uncertain event.

Insured Premium Insurer Benefit Insured/

Beneficiary
A risk management As a business, which includes
technique that enables a various operations that must be
person or an organization to conducted in a way that
deal with the loss exposure generates sufficient revenue to
and their financial pay claims and provide a
consequences. reasonable profit for its owners.

As a contract between that the

A transfer system, in which
insured and the insurer that
one party (the insured)
states the potential cost of loss
transfers the chance of
that the insured is transferring
financial loss to another
to the insurer and express the
party (the Insurance
insurer’s promise to pay for the
company or the insurer)
cost of loss in exchange for a
stated payment by the insured.
 Loss Prevention
A risk control technique
Risk that reduces the frequency
of a particular loss.
Management
is the process of
evaluating the risks Loss Reduction
faced by a firm or A risk control technique
an individual and that reduces the severity
then minimizing of a particular loss
the costs involved
with those risks.
Insurance is a system that enables a person, a family,
or an organization to transfer the costs of losses to an
insurer. The insurer, in turn, pays for covered losses
and, in effect, distributes the costs of losses among all
insured. Insurance is a system of both transferring
& sharing the costs of losses.

Transferring the Costs of Losses

By transferring the costs of their losses to insurers,
insured's exchange the possibility of a large loss
for the certainty of a much smaller, periodic
payment (the premium that the insured pays for
insurance coverage).

Sharing the Costs of Losses

Insurance involves sharing the costs of losses
through pooling the premium paid by insured, &
insured's who incur covered losses are paid from
the insurer’s pooled funds. The method the
Insurance Company use for making predictions
about losses is the mathematical principle of Law
of Large numbers.
Business of Insurance is regulated by the state
government. Private insurer must be licensed to sell
insurance and should follow all the insurer operations,
state government regulators, review insurance rates,
policy forms, underwriting practices, claim practices
and financial performance.

Insurers financial performance is very important to run

the Insurance business in order to meet the needs of
all Insured's.
 An insurance policy is a contract between the insurer
and the insured. Insured's transfer the possible costs
of losses to insurers. In return, insurers promise to
pay for the losses covered by the insurance policy.

Insurance policy has the below Principles:

An obligation to act in complete honesty and to disclose

Utmost good faith all relevant facts.
Contract

Any contract is which one party must either accept the agreement
Adhesion as written by the other party or reject it.
Insured should stand to lose financially if the risk is
Insurable Interest damaged or lost.

A contract in which the insurer agrees, in the event of a covered

Indemnity loss, to pay an amount directly related to the amount of the loss

The process to recover the amount of claim (paid by the

Subrogation insurer to the insured) from the legally responsible third party.

Two or more insurers each liable for the covered loss should
Contribution participate in the payment of that loss
 The portion of the insurance contract which mentions
information such as the name and address of the insured, the
property insured, its location and description, policy period,
the amount of insurance coverage, applicable premiums, and
Declarations supplemental representations by the insured.

The portion of an insurance contract

which states the perils insured
Insuring against, the persons and/or property
A form attached to the policy Endorsements
Agreements covered, their locations, and the
which alters provisions of the
contract to make it better fit the period of the contract.
needs of the insured or the
insurer for that particular risk.
Insurance
Contract

The portion of an insurance contract

Contractual provisions that deny where important terms used in the
coverage for certain perils, Exclusions Definitions
contract are defined.
persons, property, or locations.

Conditions These are provisions of an insurance policy which state

the rights and duties of both Insured and Insurer. Typical
conditions have to do with such things as the insured's
duties in the event of loss, cancellation provisions, and
the right of the insurer to inspect the property.
Risks associated with Tangible properties Owning to an occasional Each country has several
human life. E.g. Personal having a physical shape error or omission laws, which each citizen
accident, Life, and and consistency like committed by us, our must follow. If there is a
Health buildings, apartments, clients or customers breach of any of these
vehicles, personal might suffer a loss. In provisions, legal action
effects, household turn we might have to can be taken against the
goods, stocks etc. These pay them damages or person. These can be
are subject to many compensation out of our contracts specifically
entered into by a person
risks ranging from fire, own personal resources
or under the common law
allied perils to theft and
of the country. E.g. a
robbery.
doctor is liable for the
proper treatment of
his/her patients. A lawyer
is expected to give proper
advice to his clients.

Insurance of Insurance of Insurance of Insurance of

Persons Property Interest Liability
Pure risk Independent and Not Catastrophic
Involves pure risk, not speculative risk. Eg: Fire Independent means that a loss suffered by one
explosion, theft, burglary insured does not affect any other insured or
group of insured's. A catastrophic loss is severe,
involves numerous exposure units, with
significant financial consequences for insurer.

Fortuitous Losses Affordable

The loss exposure should be fortuitous Insurer seeks to cover only loss exposure that
( occurring by chance) from the insured's are economically feasible to insure and charge
standpoint an economically feasible premium. And Insured
can afford to pay.

Definite and Measurable Large Number of similar

Definite in terms of time, cause and location. Exposure units
Measurable in terms of frequency and severity
E.g.: Homes, Offices and Automobiles. All
these units can be at risk when exposed to
risk
Insurance is a prominent risk management technique, and several risk
financing measures involve the use of insurance to some degree.

Paying for losses

Managing Cash Flow Uncertainty
Meeting Legal Requirements
Promoting Risk Control
Enabling Efficient Use of Resources
Providing Support for Insured's credit
Providing Source of Investment Funds

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The benefits of Insurance are not cost-free. Insurance has benefits that outweigh the costs, and
insurance is considered to have a meaningful economic and social purpose

Premiums paid by insured's Opportunity costs

Insured charge premiums to generate the The existence of insurance may
funds necessary to make loss payments encourage losses

Operating costs of insurers Increased losses

It includes salaries, advertising, building The existence of insurance may
expenses, taxes, licensing fees encourage losses
Insurance Product Lines
Insurance Business is broadly divided into
two categories:

Property-Casualty Life-Health
Insurance Insurance
It contains numerous Its contains numerous
types of insurance, most types of insurance that
of which cover the cover the financial
financial consequences of consequences of death,
damage to one’s own injury or sickness.
property or legal liability
to others

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Personal Insurance policies cover for Personal Property and Liability loss exposures.

Property Insurance- Liability insurance -

Protects an insured’s assets by It provides for payment on behalf of
paying to repair or replace property the insured for bodily injury and
that is damaged, lost or destroyed. property of others for which the
insured is legally responsible

Common types of Personal Insurance are:

Homeowners policy– Renters Policy- Personal Auto Policy- Personal Watercraft Personal Umbrella
Covers the home’s Covers the occupant’s Provides coverage for Policy- Policy-
structure (house) and personal belongings that Liability, Medical Also known as Boat Extra liability coverage
the belongings in the are in the home or on Payments, and Damage and personal watercraft that goes beyond the
event of a covered loss the property to the vehicle etc. insurance; Provides limits of home, auto or
such as fire. coverage for Liability, watercraft insurance.
Medical Payments, and
Damage to the
watercraft etc.
Commercial insurance policies cover for-profit business or not for-profit organization against
their commercial loss exposure.

Common types of Commercial Insurance are:

Commercial Package policy (CPP) – Policy that covers
two or more lines of business by combining ISO’s commercial
lines coverage parts.
Business Owners policy (BOP) – A package policy that
combines most of the property and liability coverage needed
by small and medium sized business.
Commercial Auto policy – Insurance that covers a business
or a not for-profit organization against loss exposure arising
out of the ownership, maintenance or use of automobiles. It
covers auto physical damage (comprehensive) coverage.
Commercial property – Insurance that covers commercial
buildings and their contents against various types of
property loss.
Commercial Inland marine Insurance – Insurance that
covers many different classes of property that typically
involve an element of transportation.
Commercial Crime insurance - Insurance that covers money and securities against
numerous perils, property other than money and securities against crime perils such as
employee theft, robbery, theft by outsiders and extortion.
Commercial general liability (CGL) Insurance - Insurance that covers many of the
common liability loss exposures faced by an organization, including its premises,
operations and products.
Ocean marine Insurance – Insurance that covers vessels and their cargoes, including
various vessel-related liability exposures.
Professional liability Insurance - Insurance that covers persons engaged in various
occupations against liability resulting from their rendering or failing to render professional
services.
Environment liability Insurance – Insurance offers business owners protection against
environment damage that may occur as a result of business operations.
Commercial umbrella liability coverage – Insurance that provide additional limits
beyond those provided by CGL, commercial auto and other policies and protects insured
in the event of a large liability loss.
Workers compensation Insurance – Insurance that provides coverage for benefits an
employer is obligated to pay under workers compensation laws.
Life Insurance is a product designed to protect the family and loved ones who are
dependent on the income of insured for financial support

Life insurance can be taken Amongst all the insurance

to mitigate risk of products only Life policies
• Dying early have an element of
• Living Long investment
 There are 3 parties involved in Life Insurance Contract

Insurance Carrier who provides the coverage

Insurer
Insurance
Life

Insured Person whose life is covered

Owner Person who owns the policy

Insured and Owner are the same in most of the cases

Beneficiary is also an important party who receives the insured amount in the event of death of insured
Brad took a life policy for $100000 on his wife- Emily from Aviva Insurance.
When Emily died their daughter April received the policy proceeds

Insurer ?

Insured ?

Owner ?

Beneficiary ?
Brad took a life policy for $100000 on his wife- Emily from Aviva Insurance.
When Emily died their daughter April received the policy proceeds

Insurer Aviva Insurance

Insured Emily

Owner Brad

Beneficiary April
Life Insurance Products

Term Life Whole Life

• Policy for specified no of years (Term) • Offers death protection for
for specific amount of premium insured’s entire life

• Offers protection only against event • Offers fixed face value, set level
of death and nothing else of premiums

• Key factors in designing the term • Also offers savings by the feature
policy are of cash value to the insured
1) Policy Amount
2) No of years • Policy holders can also avail the
3) Premium amount loan against the cash value of the
policy
• It is considered as Pure Insurance as
it does not build any cash value for
the insurer

• Two types of common term policies

1) Annual Renewable Term- can be
renewed annually
2) Level Term – The premium is
same for a given a period of years

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Life Insurance Products Continue…

Endowment Universal
• Offers death protection • Offers low cost coverage for death
and also adds savings by building
• Once the policy period expires the Cash Value
policy amount is paid to the insured
even if he is surviving • An account is set up with the insurer
and every month interest is credited
• Offers Investment element in policy and the cost of insurance is debited

• The insured has to pay the premium • A single premium policy is also
amounts which are considerably available as long as the interest
higher for the whole policy duration earned is sufficient to cover cost of
insurance

• Allows flexibility in premium

payment. The amount paid is
according to the wish of the insured

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Health Insurance
Health insurance pays for medical and
surgical expenses incurred by the insured in
times of illness or disability.

Health Insurance products can be classified

into the below two types of coverage:

Medical Expense Disability Income

Coverage Coverage

Provides benefits to Provides income

pay for the replacement benefits
treatment of an to an insured who is
insured’s illness or unable to work
injury because of sickness
or injury

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Health Insurance
Different Health Insurance Plans available in the market:

Individual Plans Group Plans Government Plans

• Private Plans that can be • Generally offered by • Government offers

taken by an individual Corporates as part of insurance to its citizens
and family employee benefits to meet medical
expenses
• Covers the cost of • Premium is less
hospitalization, surgeries compared to Individual • e.g. Medicare and
and medications Plans Medicaid by US
thereafter Government

• Renewed annually

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Pension Plans
The pension plans offered by the Employer are
referred as Qualified Plans.

The employers while offering these plans must

operate these in accordance with Internal
Revenue Code (IRD) and Department of Labor.

Qualified Plans are divided into two

categories of plans:

Defined- Defined-
Benefit Plan Contribution Plan

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Employer Funded Pension Plans

Defined- Defined-
Benefit Plan Contribution Plan
• The contribution by • Both Employer and
Employer is significantly Employee contribute to
higher in this plan the plan
• The retirement benefits • Employer may match the
to the employees are contribution up to a limit
based on the number of it sets
years of service,
• The definite pension
compensation and age
amount can not be known
• It defines the benefit in advance
ahead of time
• The benefit will depend on
• Employer takes how the investments have
responsibility for the fared from the fund
investment and for its
distribution to the
employees
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Insurance Operations

Actuarial Analysis

Underwriting

Policy Servicing

Billing and Collection

Claim Management

Fund Management

Reinsurance
Actuarial Analysis is done by specialist called as “Actuary”.
An Actuary is a professional statistician who calculates insurance risks and premiums.

Main responsibilities of an Actuary are:

To develop & evaluate insurance products

using financial and mathematical techniques

To forecast the mortality rates among a

particular age group

To define the basis of premium calculation

Compute reserves to undertake the

financial risk
Actuaries use the below data or techniques to calculate the premium

1 Using Actuarial Science

2 Statistical Methods

3 Use of premiums and claims data over the years

4 Evaluate probability of the risk taking place

5 Actuaries also look at interest rate trends

6 Acquisition, Servicing and Administration costs

6 Claims trends

6 Other external factors that influence premium or

claim payment, like legal & market environment
 Life Insurance Auto Insurance Homeowner/Renter

• Age of the insured • Age and gender of driver • Home type (single family,
• Gender • Accident/Violation history town home, high rise)
• Medical History • Year, Make, Model of car • Square Footage
• Personal Habit (smoker, • Garaging address of car • Address (Location)
drinker, drug use) • Annual Mileage • Pets
• Occupation • Usage of Car (Business, • Pool
• Term of Policy Pleasure, Commute) • Proximity to fire station
• Sum Assured • Prior Insurance record of • Personal property in the
driver home
• Special safety features
• Safety features of car
(Security, alarm, sprinkler)
• Coverage Limits and
• Prior Insurance history
Deductibles
• Construction type
• Coverage Limits and
deductibles
Underwriting is the process of selecting An Underwriter is an insurance
insured, pricing coverage, determining company employee who evaluates
policy terms and coverages and applicants for insurance, selects those
monitoring underwriting decisions. that are acceptable to the insurer, prices
coverage and determines policy terms
and conditions.
 An underwriting process must be made on every
new insurance application as well as on the renewal
policies.

UW derives reports from several sources: Producers,

Gathering the necessary Government records, Financial rating services, Inspection
Information reports, Claim files, Premium audit report, Consumer
investigation reports etc.

Analyzed the gathered information to determine what

Making the Underwriting hazards the applicant presents. Hazards can be
Underwriting

Decision categorized as Physical, Moral, Morale or Legal

hazards
Process

Options available for UW while evaluating each

application are as below:
Implementing the UW • Accept without any modification
Decision • Accept with some modification
• Reject the application
• Finally implementing the UW decision

• Reevaluation of decision in relation to claims

Monitoring the UW Decision • Modify coverage, rate, terms and conditions as and
when need arises
• Finally cancel or accept the renewal depending upon
the experience on the particular account.
 Offering Terms, Clauses,
Application form Risk Analysis by
Rating the Risk Conditions, Warrantees to the
submitted by Proposer Underwriter
Proposer

Proposer
Pre- No agrees to the
No Insurance
inception Granted offer in part
Survey or in full?
Renew
Yes
Renew/Cancel Cancel Terminate
Policy Policy Negotiate terms
if necessary

After completion of Policy Period

Generate Incept Policy

Send Policy Docs Proposer pays premium as
Policy (Insurance
to Insured per pay plan
Documents Commencement)
Policy servicing is the set of activities carried out on the system
that create, maintain, and amend client information and policy
related data during the currency of the policy.

Policy servicing is needed:

To manage client communication

To meet client expectation

Helps to keep track of all the changes made in

the policy

If the servicing is done properly, effort is rewarded

with client loyalty and new business opportunities
Update client record- Name & address,
Change in marital status
Restriction of coverage- Risk/peril deleted,
period shortened
Extension of policy- Longer term, addition
of perils, increase in sum insured
Cancellation/Termination of policy
• From Inception- Minimum premium charged
• Mid term cancellation- pro rata or short
period rate applied

Additional premium or refund premium

Policy Servicing Process

No

Client Request Request in Renewal

Client

Accept
Content/Status Writing Notice End
renewal terms
changes
Intermediary

Contact Type of
Fax/Mail/Internet
Inter, Change For Renewal

Yes
No

Informational changes
by phone Examine
Update Policy Calculate
Appl. Underwriting Validate
Yes Recalc Premium Information/ premium due/
Required? Information
Status Refund amount

Additional Info Required

Underwriting

Incept
Billing &
Renewed
collection All Others If Cancelled
policy

Generate
Notification of
Endr./New Scan and archive
cancellation
Policy documents
Insurance claim is a formal request by a policy
holder to an insurance company for coverages or
compensation for a covered loss or policy event.

Claimant is a person or business entity that files

a claim for benefits under the provisions of an
insurance policy.

First Party- The person or entity who has

purchased the insurance

Third Party- Who has suffered bodily injury or

property damage for which Insured is legally
responsible
 • First Notice of Loss-Initial Information about loss occurrence intimated through phone, fax, mail.
FNOL
• Claim form needs to be filled to process the claim

• Examine policy for coverage, Allot claim number, Gather more information regarding loss
Claim • Create Reserve
Registration • Claim is assigned to claim representative/loss adjustor depending upon claim, location and
estimate of loss value

• Conduct inspection of accident site, identify cause of loss and quantum of loss
• Investigators find out authenticity of claim
Investigation • Surveyors examine site, documents, interview clients/claimants, take pictures
• Submits report to Insurance company

• Examine all claim documents and policy coverages,

Assessment • Calculate claim payable for each coverage considering the limits and deductibles

• No payments can be made without approval of authorized persons

Approval • Claim moves from claim rep. to person authorized
• Offer made to client/claimant

• Intimate Accounts Dept. to pay claim, Issue cheque/ credit bank account
Settlement • Close claim, Update claim reserve
• Pay fees of surveyors/loss adjusters if applicable
Billing is the process of collecting money which is due to the company.
Billing Methods:

Direct Billing Agency Billing

• Insurer sends invoice to policy holder • Agent/Producer sends invoice to

policy holder
• Policy holder sends payments to Insurer
• Policy holder makes payment directly
• Insurer sends applicable commission to to Agent/Producer
agent/producer
• Agent/Producer pays the insurer
minus any applicable commission
Prior to due date
Premium plus interest/penalty
Includes Service/Insurance tax and
processing fee
Multi Currency billing
Payment Plan influences the invoicing
process:
• Down payment amount
• Total number of installments
• When to invoice the down payments
and all other installments
 In that view the
Insurance companies Fund management
receives large is a very important
amounts of funds aspect of an
through premiums at insurance
steady intervals. company.

Fund
management is
These premiums an activity through
received must be which the insurance
invested to meet company invests the
future claims that funds in various
may arise and other financial instruments
administrative that earns them
costs. a return.

Benefits of Premium Investment:

• Manages the insurance company’s assets
• Makes sure the insurance company remain solvent to meet the
regulatory requirements
1 Individuals transfer their risks by taking an
insurance policy. Similarly the insurance
companies may transfer their risk by taking
an insurance from other insurer.

2 Reinsurance is a form of insurance purchased

by one insurance company from another
insurance company in order to mitigate risk.

3 Ceding Company- The insurance company that

passes a part or all of its risks to the
reinsurance company

4 Reinsurer is the insurance company that

accepts the risk of other insurance companies
5 In case of large amount policy, it can be
reinsured with two or more companies.
Protect Capital/ Preserve/Increase
Asset base Solvency

Encourage Balance Encourage Profitability

Sheet growth

Stabilize Underwriting Cover Acquisition Costs

Results

Increase Underwriting Develop new Products

Capacity

Spread Risk, Aggregate Risk, Identify Accumulations

 Endorsement

Proposer
approaches Insurer
Quote Creation Policy Renewal

Non Renewal

Cancellation Terminate

Reinstatement Rewrite
Insurance Distribution Channels –
Ways or Channels through which insurance products are distributed to customers.
The aim of a distribution channel is to allow customers to access and purchase
products in the most efficient way.

Brokers
Direct
Agent
Sales

Insurance

Banks Internet
Affinity
Groups
Insurance regulations are meant to address the concerns of Insureds. To address these
concerns, Insurers are regulated primarily on below three areas:

Maintain Insurer Consumer

Rate Regulation
Solvency Protection
• Adequate- Rates should • Ensure Insurers are • Licensing Insurer and
be sufficient to pay all solvent to pay future Insurer representatives
claims and expenses payments • Appropriate insurance is
related to those claims, • Ensure Insurers do not sold to each customer
helping the insurer become insolvent • No misrepresentation on
maintain solvency. • Two major aspects to nature of coverage is
• Prevent destructive ensure solvency of made
competition Insurers are Insurance • Fair claim settlement
• Not Excessive- Insurer Company Examination • Investigating consumer
are entitled to a fair and Insurance Regulatory complaints
return but not excessive Information System
or unreasonable profits (IRIS) which is an early
• Not unfairly warning system to
discriminatory monitor overall
performance of Insurance
Companies in an
analytical way.
 About Capgemini

With more than 190,000 people, Capgemini is present in over 40 countries and
celebrates its 50th Anniversary year in 2017. A global leader in consulting, technology
and outsourcing services, the Group reported 2016 global revenues of EUR 12.5 billion.
Together with its clients, Capgemini creates and delivers business, technology and
digital solutions that fit their needs, enabling them to achieve innovation and
competitiveness. A deeply multicultural organization, Capgemini has developed its own
way of working, the Collaborative Business Experience™, and draws on Rightshore®, its
worldwide delivery model.

Learn more about us at

www.capgemini.com

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