Monday, October 19, 2009
Pension Prospects Still High
Jakarta, Head of Pension Fund Bureau of Bapepam-LK said Mulabasa Hutabarat dapen insurance industry the opportunity to develop the old days because not all the labor pension program of the company. In addition, not all firms in the country is a good retirement plan benefits must be (DPPK) and the transfer of pension fund management to financial institutions (Pension Fund). He expects turnover administrators Indonesian Pension Fund Association (ADPI) as the container can DPPK dapen industry growth faster still remember the huge potential. "We as an authority expects the new management can run a program that is set at the time of General Assembly yesterday (Wednesday) because it is very open growth opportunities especially when this new 2.8 million which was the cover," he told the press yesterday. He compared the management of overseas dapen able to record assets under management of very large approximately USD 100 triliun.Kondisi abroad, he said, became one fund management drivers in the country. Dapen number Mulabasa admitted at this tends to diminish because of a number of factors shrink. However, the number of participants increased from dapen just 2.5 million participants at the end of 2007 to 2.8 million at December 31, 2008. "There is an increase from the participants despite the number dapen reduced. This increase was not significant because this industry must also be supported by all parties, "he said. Total number of active dapen per May 31, 2009, according to Section Institutional Pension Bureau, consisting of 282 reached 256 DPPK and 26 Pension Fund. As for the number 256 is 42 runs DPPK defined contribution retirement plan (PPIP) and 214 with retirement benefit programs
LEARNING FROM LIFE BAKRIE, Philosophy Ignore Insurance Industry
InfoBank Research Bureau Chief Eko B. Supriyanto, Thursday (1 / 10) in Jakarta, said that, despite the increase, it must be admitted that so far the Indonesian people are still reluctant to buy products because they feel loss insurance to pay premiums. "Usually people just do not feel loss pay premiums or to realize the importance of insurance as being ill or have accidents," said Eko. To address the public mind that Indonesia is still like that, go Eko, insurance companies in Indonesia to create insurance products combined with investment products. This product is attractive to the public because the investment yield so that the premium paid is considered not in vain in the future if the policyholder does not suffer from illness or a disaster. In fact, insurance companies competing to impress gives high yield, such as insurance products offered by Investa Bakrie Diamond Life, which is 13 percent per year. In that case, go Eko, both insurance companies and the people who buy a product that has violated the philosophy of insurance products as protection or protection against life, health or property. "To get the protection it must have cost a premium. This is to be delivered to the public. Not by manipulating the public mind which is still considered a loss to pay the premium, "said Eko. Bakrie Life insurance company in 2005 launched the Diamond Investa, a combination of life insurance products and investments. This product offers investment yields high enough, which is about 1 percent per year. To be able to give that much interest, Bakrie Life to invest more than 80 percent of customer funds in the stock market. Fall of stock prices following the global crisis of late 2008 resulted in Bakrie Life substantial losses. Since July last, Bakrie Life can not pay interest and principal investments maturing customers due to liquidity problems. Besides demanding the return of investment principal as soon as possible, the customer also protested Life Bakrie management policies that invest 80 percent more funds in the stock market. According to some customers, the previous management Bakrie Life declared 90 percent of customer funds will be invested into the bond market, 5 percent of the shares, and 5 percent in the form of deposits. Bakrie Life Director Timoer Soetanto said, what the management of Bakrie Life to invest 90 percent of customer funds in bonds are not binding and is not in agreement. Therefore, loss of Bakrie Life in the stock investment is the responsibility of the Company. But when the composition of the placement of customer funds provided for in the agreement and corporate customers, Timoer said the investment losses will be borne by the customer. Such agreements usually are on the unit-linked insurance products. Timoer added, the company policy to place more than 80 percent of customer funds in the stock market does not violate the rules of the Capital Market Supervisory Agency and Financial Institution. What is important, customer funds are placed in one type of stock no more than 20 percent. Bakrie Life can not specify when the customer funds can be refunded. Scheduling customers fund payment mechanism is being arranged direct management rejected its customers and request funds be paid as soon as they have matured (REI).
Wednesday, October 14, 2009
Services
ISO provides a number of risk-related services to its clients:
1. statistical, actuarial, and claims data
2. development of standardized insurance policy language
3. risk-management information about specific locations
4. fraud identification
5. marketing, loss control, and premium audit
6. catastrophe modeling systems
7. employment screening
8. rating and underwriting rules
9. motor vehicle records
10. litigation and regulatory support
11. mortgage fraud analytics
12. real estate
13. healthcare cost analytics
14. restoration and remodeling-estimation services and software
ISO's databases contain more than 11 billion detailed records relating to insurance and risk management, which form the basis for its information services. ISO employs many members of the Casualty Actuarial Society and other insurance professionals to develop its risk-related products and services.
1. statistical, actuarial, and claims data
2. development of standardized insurance policy language
3. risk-management information about specific locations
4. fraud identification
5. marketing, loss control, and premium audit
6. catastrophe modeling systems
7. employment screening
8. rating and underwriting rules
9. motor vehicle records
10. litigation and regulatory support
11. mortgage fraud analytics
12. real estate
13. healthcare cost analytics
14. restoration and remodeling-estimation services and software
ISO's databases contain more than 11 billion detailed records relating to insurance and risk management, which form the basis for its information services. ISO employs many members of the Casualty Actuarial Society and other insurance professionals to develop its risk-related products and services.
Overview
Founded in 1971 in a merger of smaller underwriting service organizations, ISO has developed enormous databases of information about hundreds of millions of individual insurance policies, along with a large volume of public records pertaining to fraud, real property, employment screening, and motor vehicles. ISO also monitors regulatory standards and insurance laws, and makes many filings and other communications with regulatory authorities on behalf of its clients.
ISO became a private, for-profit company in 1997. It is owned by its member insurers and employees, and it does not publish detailed financial statements. In the fiscal year ended December, 2008 ISO's revenues were reportedly over $893.6 million. The organization employs 3,500 people worldwide, and the current chairman, president and CEO is Frank J. Coyne
ISO became a private, for-profit company in 1997. It is owned by its member insurers and employees, and it does not publish detailed financial statements. In the fiscal year ended December, 2008 ISO's revenues were reportedly over $893.6 million. The organization employs 3,500 people worldwide, and the current chairman, president and CEO is Frank J. Coyne
Insurance Services Office
Insurance Services Office, Inc. (ISO), a subsidiary of Verisk Analytics, is a provider of data, underwriting, risk management and legal/regulatory services to property-casualty insurers and other clients. Headquartered in Jersey City, New Jersey, the organization serves clients with offices throughout the United States, along with international operations offices in the United Kingdom, Israel, Germany, India and China.
Tuesday, October 13, 2009
Underwriting and investing
The business model can be reduced to a simple equation: Profit = earned premium + investment income - incurred loss - underwriting expenses.
Insurers make money in two ways:
1. Through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks;
2. By investing the premiums they collect from insured parties.
The most complicated aspect of the insurance business is the underwriting of policies. Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them. Data is analyzed to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure. Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. Of course, from the insurer's perspective, some policies are "winners" (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are "losers" (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income); insurance companies essentially use actuarial science to attempt to underwrite enough "winning" policies to pay out on the "losers" while still maintaining profitability.
An insurer's underwriting performance is measured in its combined ratio. The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the company's combined ratio. The combined ratio is a reflection of the company's overall underwriting profitability. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss.
Insurance companies also earn investment profits on “float”. “Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out. The Association of British Insurers (gathering 400 insurance companies and 94% of UK insurance services) has almost 20% of the investments in the London Stock Exchange.[6]
In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held. Naturally, the “float” method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or insurance cycle. [7]
Property and casualty insurers currently make the most money from their auto insurance line of business. Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing. Additionally, property losses in the United States, due to unpredictable natural catastrophes, have exacerbated this trend.
Insurers make money in two ways:
1. Through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks;
2. By investing the premiums they collect from insured parties.
The most complicated aspect of the insurance business is the underwriting of policies. Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them. Data is analyzed to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure. Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. Of course, from the insurer's perspective, some policies are "winners" (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are "losers" (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income); insurance companies essentially use actuarial science to attempt to underwrite enough "winning" policies to pay out on the "losers" while still maintaining profitability.
An insurer's underwriting performance is measured in its combined ratio. The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the company's combined ratio. The combined ratio is a reflection of the company's overall underwriting profitability. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss.
Insurance companies also earn investment profits on “float”. “Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out. The Association of British Insurers (gathering 400 insurance companies and 94% of UK insurance services) has almost 20% of the investments in the London Stock Exchange.[6]
In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held. Naturally, the “float” method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or insurance cycle. [7]
Property and casualty insurers currently make the most money from their auto insurance line of business. Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing. Additionally, property losses in the United States, due to unpredictable natural catastrophes, have exacerbated this trend.
Indemnification
Main article: Indemnity
The technical definition of "indemnity" means to make whole again. There are two types of insurance contracts;
1. an "indemnity" policy and
2. a "pay on behalf" or "on behalf of"[3] policy.
The difference is significant on paper, but rarely material in practice.
An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000)[4].
Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language[5].
An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance 'policy'. Generally, an insurance contract includes, at a minimum, the following elements: the parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss covered in the policy.
When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a 'claim' against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the 'premium'. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims—in theory for a relatively few claimants—and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (i.e., reserves), the remaining margin is an insurer's profit.
The technical definition of "indemnity" means to make whole again. There are two types of insurance contracts;
1. an "indemnity" policy and
2. a "pay on behalf" or "on behalf of"[3] policy.
The difference is significant on paper, but rarely material in practice.
An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000)[4].
Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language[5].
An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance 'policy'. Generally, an insurance contract includes, at a minimum, the following elements: the parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss covered in the policy.
When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a 'claim' against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the 'premium'. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims—in theory for a relatively few claimants—and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (i.e., reserves), the remaining margin is an insurer's profit.
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