Insurance Domain Fundamentals, What is Insurance?, Types of Insurance, Insurance Software Projects, and Important Terms in Insurance Domain.
Insurance Domain Fundamentals are essential for Business Analysts, Software Developers, and Software Testers.
Insurance Domain Knowledge
What is Insurance?
Types of Insurance
Types of Insurance Software
Important Terms in Insurance Domain
1. What is Insurance?
Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
Insurance is a form of risk management in which the insured transfers the cost of potential loss to another entity in exchange for monetary compensation.
Insurance allows individuals, businesses, and other entities to protect themselves against significant potential losses and financial hardship at a reasonably affordable rate.
Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party.
2. Insurance Components
There are three components of any type of insurance (premium, policy limit, and deductible) that are crucial.
A policy’s premium is its price, typically expressed as a monthly cost. The premium is determined by the insurer based on your or your business’s risk profile, which may include creditworthiness.
The policy limit is the maximum amount an insurer will pay under a policy for a covered loss. Maximums may be set per period (Ex: annual or policy term), per loss or injury, or over the life of the policy, also known as the lifetime maximum.
The deductible is a specific amount the policy-holder must pay out-of-pocket before the insurer pays a claim. Deductibles serve as deterrents to large volumes of small and insignificant claims.
3. Types of Insurance
Different types of insurance policies available nowadays can be broadly divided into two categories:
1. General Insurance
i. Health Insurance
ii. Motor Insurance
iv. Fire Insurance
v. Travel Insurance
2. Life Insurance
i. Term Life Insurance
ii. Whole Life Insurance
iii. Endowment Plans
iv. Unit-Linked Insurance Plans
v. Retirement Insurance Plans
vi. Money Back Insurance Policy
vii. Child Plans
4. General Insurance
Health insurance is a type of insurance that covers medical expenses that arise due to an illness. These expenses could be related to hospitalization costs, cost of medicines, or doctor consultation fees.
Types of Health Insurance policies
Individual Health Insurance
Family Floater Insurance
Critical Illness Cover
Senior Citizen Health Insurance
Group Health Insurance
Maternity Health Insurance
Personal Accident Insurance
Preventive Healthcare Plan
Benefits of Health Insurance
Motor insurance refers to policies that offer financial assistance in the event of accidents involving your car or bike. Motor insurance can be availed for three categories of motorized vehicles, including:
Car Insurance – Personally owned four-wheeler vehicles are covered under such a policy.
Two-wheeler Insurance – Personally owned two-wheeler vehicles, including bikes and scooters, are covered under these plans.
Commercial Vehicle Insurance – If you own a vehicle that is used commercially, you need to avail of insurance for the same. These policies ensure that your business automobiles stay in the best of shape, reducing losses significantly.
Types of Motor Insurance Policies
Own Damage Cover
Any building or immovable structure can be insured through property insurance plans. This can be either your residence or commercial space. If any damage befalls such a property, you can claim financial assistance from the insurance provider. Keep in mind that such a plan also financially safeguards the content inside the property.
Types of Property Insurance in India
Travel insurance policies ensure the financial safety of a traveler during a trip. Therefore, when compared to other insurance policies, travel insurance is a short-term cover.
Depending on the provider you choose, travel insurance may offer financial aid at various times, such as during loss of baggage, trip cancellation, and much more.
Different types of travel insurance plans:
Domestic Travel Insurance
International Travel Insurance
Home Holiday Insurance
5. Life Insurance
Life Insurance refers to a policy or cover whereby the policyholder can ensure financial freedom for his/her family members after death. Suppose you are the sole earning member in your family, supporting your spouse and children.
Types of Life Insurance Policies
Term Plan – The death benefit from a term plan is only available for a specified period, for instance, 40 years from the date of policy purchase.
Endowment Plan – Endowment plans are life insurance policies where a portion of your premiums go toward the death benefit, while the remaining is invested by the insurance provider. Maturity benefits, death benefits, and periodic bonuses are some types of assistance from endowment policies.
Unit Linked Insurance Plans or ULIPs – Similar to endowment plans, a part of your insurance premiums go toward mutual fund investments, while the remaining goes toward the death benefit.
Whole Life Insurance – As the name suggests, such policies offer life cover for the whole life of an individual, instead of a specified term. Some insurers may restrict the whole life insurance tenure to 100 years.
Child’s Plan – Investment cum insurance policy, which provides financial aid for your children throughout their lives. The death benefit is available as a lump-sum payment after the death of parents.
Money-Back – Such policies pay a certain percentage of the plan’s sum assured after regular intervals. This is known as survival benefit.
Retirement Plan – Also known as pension plans, these policies are a fusion of investment and insurance. A portion of the premiums goes toward creating a retirement corpus for the policyholder. This is available as a lump-sum or monthly payment after the policyholder retires.
6. Types of Insurance Software
1. Policy Administration System
Policy Administration Software Functionality
• Customizable screens and workflow enable the recording of all data elements and coverage specific risk information for all lines and all transaction types… all without programming
• Transaction workflows for new business, renewals (including automated renewals), endorsements (including out-of-sequence endorsements), cancellations, and reinstatements.
• Rating and underwriting rules engine is easy to configure, allowing you to:
o Calculate all premiums, taxes, commissions, and any other applicable fees based on a configurable rating engine
o Validate all data entered as the user progresses through the workflow to trigger warnings, referrals, compliance notifications and other workflow events
o Trigger applicable insuring conditions, warranties, exclusions, or other wordings from a clause library or form database
o Generate all quote and policy documents based on intuitive MS-Word templates
• Underwriters benefit from a standardized quoting process enhanced through on-line collaboration and messaging. Working with broker portals, our policy-administration system can deliver fully automated quote-bind-issue functionality to brokers, agents, and clients out in the field.
• A wide range of billing and invoicing methods, including a powerful tax calculation engine to support centralized management of multinational programs.
• Plug-in integration points with 3rd party data providers, rating engines and integration with Business Intelligence for reporting. Native support for ACORD standards.
2. Policy Issuance Software
Insurance Document Software Functionality
• Create and maintain insurance document templates using MS-Word.
• Quickly and easily build business rules within the insurance document without any programming.
• Use business rules to determine which documents can be issued and when.
• Generate documents in editable docx format or as a secure PDF, combine multiple forms within a single PDF, or make each document available for separate issuance.
• Maintain a library of industry clauses that can be pulled into issued documents.
• Automatically generate and/or e-mail insurance documents based on the transaction type or triggered by a workflow event.
• Preview generated insurance documents which, once accepted, are automatically stored with the policy, for on-demand retrieval and review.
3. Insurance Claims Software
Insurance Claims Software Functionality
Capture First Notice of Loss
• Validates data against the policy
• Captures specific data elements to facilitate integration
• Automatic multi-level email notifications
• Escalating alerts for unacknowledged loss reports
Build the Claim File
• Capture all relevant shipment information
• Track reserves, expenses, indemnities, salvage and recoveries
• Record unlimited text notes from multiple users
• Upload and store related files of all types (e.g. survey reports, bills of lading)
• Generate template-based correspondence (e.g. acknowledgment letters, subrogation)
Integrate with External Systems
• Standardized XML message structures and custom adapters that match specific workflows and external system requirements
• Imports Excel Spreadsheets Without Programming
• Multiple transport protocols (MQ Series, MSMQ, VPN, Web Services, FTP, HTTP, SMTP)
• Link to in-house claims adjustment systems as well as to 3rd party systems
Provide Status Updates to Claimants
• View claim status at any time
• Upload documents and messages
4. Declaration Management
• Customizable screens and workflow enable the recording of all data elements and coverage-specific risk information for all types of declarations including turnover declarations, property declarations, location or geographic declarations, bulk declarations, etc…
• Monitoring of periodical declarations with automated notifications when reports are overdue based on the frequency of reporting expected by the policy
• Ability to validate declaration details and calculate premium per declaration or schedule line item
o Calculate all premiums, taxes, commissions and any other applicable fees based on a configurable rating engine
o Validate all data entered as user progresses through the workflow to trigger warnings, referrals, compliance notifications and other workflow events
o Triggering of applicable insuring conditions, warranties, exclusions or other wordings from a clause library or form database
• Generation of all declaration documentation including inventory forms, bordereaux, invoices or certificates
• Plug-in integration points with 3rd party data providers and rating engines
• Built-in Business Intelligence for analysis of risk exposure and aggregations based on actual exposures derived from reported values in the declarations modules as compared to total exposure/policy limits
• Comprehensive out-of-the-box Marine Insurance functionality for shipment and storage declarations
5. Insurance Agent Portal Software
Agent Portals Features
• Workflow management determines the business rules for Straight-Through-Processing and the rules by which business is referred to specific underwriters.
• Personalized portal welcome screen and co-branding for each agent
• Complete Quote-Bind-Issue workflow for multiple insurance products
• Process bordereaux declarations from Excel, ACORD XML, etc.
• Process endorsements from end to end with pro-rata premium calculation
• Process renewals with notification & alerts
• Access invoices and commission statements instantly
• Receive first notice of loss and track claim status
• Control functionality and access rights for each agent with decentralized user management
• Deliver multi-lingual, multi-cultural, and multi-currency support to your agents around the globe
• Manage decentralized users using role-based access security
Insurance Billing Functionality
• Automatically generates premium invoices in PDF format, Excel or through an internal accounting system which is then delivered by email based on specific client/policy rules and billing dates.
• Automatically calculates adjustments for storage and shipment declarations.
• Records individual premium bookings and miscellaneous charges.
• Calculates charges and taxes based on specific countries associated with the risk and the assured.
• Calculates TRIA premiums and numerous government and internal charges against premiums.
• Provides billing period reports, including commissions and taxes associated with each policy.
• Tracks accounts receivable; management system has the ability to query into individual invoices, payments and shipments.
• Supports Direct Bill and Agency Bill Invoice methods.
• Produces monthly, quarterly, semi-annually or annually branded invoices for brokers and underwriters for selected policies and present line item details.
• Choose to record payments against these invoices per line item or on complete invoices.
6. Underwriter Workstation
• Submission queues, task management, diaries and reminders help underwriters stay on top of your business.
• Rating engine that calculates all premiums by coverage and tracks or validates the variance from standard or guideline rates when overriding rating or applying discretionary factors
• Generation of all quote and policy documents based on intuitive MS-Word templates
• Built-in collaboration tools and e-mail correspondence to improve communication with agents and other parties.
• The underwriter workstation records a history of all communications, documents, activities and more, providing a full audit trail for internal and reporting purposes.
• Validation and enforcement of underwriting authority with escalation and collaboration to resolve blocks
• The underwriter workstation seamlessly pulls data from third-party providers for inclusion in the underwriting process.
7. Insurance Reporting & Analysis
Insurance Reporting Functionality
• Real-time alerts of important events through dashboards and email notification
• Access to vital metrics for decision making
• Review of workflow controls and exceptions for system maintenance and audit
• User customized dashboards displaying KPI data for exception management
• Ad hoc reporting flexibility and scheduling for up to the minute vital data sharing across the organization, with minimal training or IT requirements
• User-defined queries and business reports can be prompted to a professional authoring environment for further formatting and distribution
• Multiple report outputs (Screen, Excel, PDF) can be stored, edited and shared
• Profit & loss by broker, product, coverage & year
• Insurance analysis of submission-quote success ratio to help guide underwriting
• Detailed and searchable audit trail of all changes
• Automatic filters allowing individual users to utilize reporting features without accessing unauthorized data
7. Important Terms in Insurance Domain:
Agent -an individual who sells and services insurance policies.
Annuity – An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.
Assets – Assets refer to “all the available properties of every kind or possession of an insurance company that might be used to pay its debts.”
Balance Sheet – An accounting term referring to a listing of a company’s assets, liabilities and surplus as of a specific date.
Benefit Period – In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents.
Broker – Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.
Case Management – A system of coordinating medical services to treat a patient, improve care and reduce cost.
Casualty – Liability or loss resulting from an accident.
Claim – A demand made by the insured, or the insured’s beneficiary, for payment of the benefits as provided by the policy.
Commercial Lines – Refers to insurance for businesses, professionals and commercial establishments.
Commission – Fee paid to an agent or insurance salesperson as a percentage of the policy premium.
Coverage – The scope of protection provided under an insurance policy.
Dividend – The return of part of the policy’s premium for a policy issued on a participating basis by either a mutual or stock insurer.
Liability – Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense.
Liquidity – Liquidity is the ability of an individual or business to quickly convert assets into cash without incurring a considerable loss.
Loss Ratio – The ratio of incurred losses and loss-adjustment expenses to net premiums earned.
Medical Loss Ratio – Total health benefits divided by total premium.
Net Premium – The amount of premium minus the agent’s commission. Also, the premium necessary to cover only anticipated losses, before loading to cover other expenses.
Personal Lines – Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
Policy – The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
Premium – The price of insurance protection for a specified risk for a specified period of time.
Renewal – The automatic re-establishment of in-force status effected by the payment of another premium.
Risk Management – Management of the pure risks to which a company might be subject.
Secondary Market – The secondary market is populated by buyers willing to pay what they determine to be fair market value.
Surplus – The amount by which assets exceed liabilities.
Umbrella Policy – Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance.
Underwriter – The individual trained in evaluating risks and determining rates and coverages for them.
Underwriting – The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned.
Whole Life Insurance – Life insurance which might be kept in force for a person’s whole life and which pays a benefit upon the person’s death, whenever that might be.
Domain Knowledge for IT Professionals.