Overview of GI Flashcards
Uncertainty of risk
- Whether an at risk event will happen
2. When it will happen
Examples of short-tail GI
Aviation, Commercial motor vehicle, Construction, Consumer credit, Domestic motor vehicle, Extended warranty(manufacturer’s warranty liability), fire, House owner/householders, Industrial special risks, Marine cargo, Marine hull, Sickness and accident, Trade credit, Travel, other
Example of Long-tail GI
compulsory CTP motor vehicle, Employer’s liability, loan,mortgage & lease, Product liability, Public liability, Professional indemnity
Insurance cycle
- Selling insurance
- Underwriting
- Collecting premium
- Investing funds
- Assessing and settling claims
Agents vs. broker
Agents are employed by on (or more) insurance company and sell only that company’s products
Not registered with ASIC
Role of underwriter
- Accept or decline the risk
- Set the policy terms and conditions (e.g. level of excess. or policy exclusion)
- Set the level of the premium
- Review the quality and spread of business
- Arrange reinsurance where necessary
Sources of revenue
- Premium income
- Investment income
- Reinsurance commissions
Main areas of expenditure
- Claims
- Commission and brokerage
- Reinsurance premium
- Business operation
How are agents paid
Commissions are paid as a set percentage of premiums paid by the insured or on an agreed fee with the insured
How are brokers paid?
Brokerage maybe paid by insured in addition to their premium on top of commissions paid by the insurer
Two types of recoveries
- Reinsurance claims recoveries
2. Third party claims recoveries
Stakeholders in any business
Customer, Supplier, Owner, Staff, Community, Industry
Community for the owner stakeholder
- The government instrumentalities that regulate the industry in the interests of the community
- The community as a consumer of insurance products
- Members of the community who may be affected by the company without necessarily being a customer of it
AASB 4 and AASB 2013
Standardize the accounting presentation of the industry for the benefit of analysis, regulators and the general public etc.
IT2663 and Division 321
Tax ruling specific to the General insurance industry
Nature of regulations and accounting standards governing GI
- GI companies must be authorized by APRA
- New prudential standards since 2002
- Accounting standards: AASB 4 and AASB 1023
- Taxation Legislation: IT2663 and Division 321
- Financial Services Reform Act 2001
Trade associations related to the insurance industry in Australia
ICA, IEC, FSAA, AII, NIBA
Why does the insurance industry need to be regulated?
Its liability are large and uncertain, its product is intangible and it touches the lives of most people in the community
the FSRA
The Financial Services Reform Act 2001 is the culmination of an extensive reform program examing regulatory requirements applying to the financial services industry
Stakeholders within an insurance company who need information from the accounting department
- Senior management
- Other recipient of the monthly management accounts
- Treasury or investment management
- Product manager
- The reinsurance department
- Staff reasonable for statutory returns that involves financial data
- Internal actuaries
- Internal auditors
Stakeholders providing information to the accounting department
- Claims department
- Underwriting department
- Brokers and agents
- Sales and marketing departments
- The reinsurance department
- The investment department
- Human resources department
Role of insurance accounting information
- An indication of performance
- A guide to achieving objectives
- A basis for budgets and negotiations
Why the insurance needs specific disclosure?
- Duration of insurance contracts
2. Risks involved in insurance transactions
Elements of premium income that need to be estimated
- Earning patterns
- Changing patterns of risk
- Unclosed business
Pattern of earned premium?
In accordance with the pattern of risk
Unclosed business
means an insurer is “on risk”
“On risk” claims
Claims which have been instigated, but not fully processed at the time the accounts balance is done
Retrieve all the string before the first comma from COLUMN location
SUBSTRING_INDEX(location, ‘,’, 1)
Retrieve part of string
SUBSTRING(your_string, start_position, length)
change to uppercase or lowercase
UPPER() LOWER()
reverse the order of letters
REVERSE(‘ ‘)
Trim from left or right
LTRIM() RTRIM()
Get LENGTH
LENGTH()
