INSURANCE OPERATIONS RMI 4700
Popular in Course
Popular in Risk Management And Insurance
CHM 1225 - 001
verified elite notetaker
This 6 page Class Notes was uploaded by Reagan Schaden on Monday September 21, 2015. The Class Notes belongs to RMI 4700 at Georgia State University taught by Robert Klein in Fall. Since its upload, it has received 14 views. For similar materials see /class/209907/rmi-4700-georgia-state-university in Risk Management And Insurance at Georgia State University.
Reviews for INSURANCE OPERATIONS
Report this Material
What is Karma?
Karma is the currency of StudySoup.
Date Created: 09/21/15
RMI 4700 Klein Semester Paper Overview Students are required to write a semester paper There are two basic categories of topics The rst category is a business and nancial analysis of a speci c insurance company You can choose any company other than Allstate Progressive or St PaulTravelers which are used in class to illustrate course content The second category for papers is a topic that addresses some aspect of insurance company operations or related issues More information on the expected orientation of the two categories of papers is provided below General Guidelines on Papers An appropriate semester paper should contain the following A cover page which provides the title of the paper and the name of the student 2 An introductory section which I brie y describes what the paper is about 2 motivates the reader s interest ie why is the topic interesting and signi cant 3 summarizes how the paper is organized Direct quotations should be identi ed with source Statements paraphrased from a speci c reference should be cited to the source The paper should be organized into reasonable sections with subject headings There should be a nal section that summarizesconcludes the paper A list of references should be provided at the end of the paper a E s or indenting and a citation to the 8094 Papers should re ect good writing good style and proper grammar Writing that presents information concisely is highly desirable Avoid unnecessary statements that do not convey anything signi cant or relevant to the paper or are redundant Use tables and gures where appropriate that can convey information and data more ef ciently than long narratives that list every piece of information or data Most importantly 7 a paper should re ect some original thinking analysis opinions etc of the author Simply repeating what has already been written will insuf cient Note however that distilling interpreting and commenting on what others have written can represent an original contribution by the author of the paper Also factual statements should be supported by sources and statements of opinions should be supported by the sources of those opinions andor the reasoning of the author of the paper Business and Financial Analysis A business and nancial analysis of an insurance company should include certain things It should assess the organizational structure business strategy and nancial conditionperformance of the selected insurance company More speci cally this analysis should contain the following elements I Introduction II Business Analysis 1 Brief History 1 paragraph 2 Organizational Structure brief 3 Major business lines products and market segments 4 Business strategy and plan of insurer what has it accomplished and what is it seeking to do 5 Assessment of insurer s success in implementing its business strategy III Financial Analysis 1 Overview 2 Capital and leverage 3 Structure of assets and liabilities 4 Reserve adequacy 5 Financial performance 6 Financial Risk and how well it s being managed IV Interactions between insurer s business objectives and its financial structure and risk V Summary and conclusions References Information and data for such an analysis can be obtained from a number of sources including the company s website SEC reports for publicly traded insurers Best s Insurance Reports located in Library and RMI Department Best s Key Rating Guide provided on course website National Association of Insurance Commissioners wwwnaicorg Things written by investment analysts General media and trade press articles To help guide your approach to this kind of paper you can approach it as a detailed analysis of the company written for someone who is considering investing in the equity or debt of the company Note that insurers are often organized into groups of affiliated companies The analysis may pertain to the group or the lead company of the group Insurance Company Operations Papers Students should consider a project focused on solving a business problem in insurance some aspect of insurance company operations or related issues Such a project could be divided into two parts 1 a general overview of the principles issues and institutions associated with the problemissue and 2 a case study for either a real or hypothetical insurance institution or an analysis of problems issues faced by a number of insurers For example a case study could be developed with respect to the situation faced by a nonstandard auto insurer seeking to improve its risk selection The overview portion could generally outline the issues and problems faced by nonstandard auto insurers in the area of risk classi cation and underwriting The associated case study could focus on solving a speci c business problem faced by a real e g Progressive or a hypothetical nonstandard auto insurer attempting to better distinguish and market its products to lowerrisk drivers within the nonstandard segment The primary goal of the project is to exercise course concepts and tools and demonstrate your understanding of the material and your ability to apply it Hence the product you produce does not necessarily need to look like or contain all of the elements of an analysis that would be presented to the senior management of an insurance institution Depending on your subject certain types of information that would be available to an employee of an insurer will not be readily available to you The idea here is to use information that is available to you and develop insights relevant to the problemobjective It will not be sufficient to simply describe an existing institution You must critically evaluate it and develop original insights In choosing a topic it should meet the following criteria 1 it is something that interests you 2 it is focused and not overly broad 3 the information you need is reasonably available and 4 it meets the goal of the project For those who may be struggling a bit in coming up with ideas below are some topics that you might consider These are only suggestions and should not constrain you in developing other ideas A separate document that lists a broader set of potential paper topics is also provided on the course website To get more ideas a student could review the readings for the course including the Media Articles section of the course website Organizational Issues In class we have talked about alternative organizational structures You could analyze the organizational structure of a real or hypothetical insurer in the context of the literature we have discussed in class and other literature Presumably you would assess the efficiency of alternative organizational structures and related issues Below are some possible topics within this general area Demutualization of a mutual insurer Alternative functional organizational schemes for an insurer Centralizing versus decentralizing geographically the managementoperations of an insurer Performance assessment and compensation schemes Organizing the affiliates and subsidiaries within a holding company structure Financial Management A significant part of the course is devoted to financial risk management You could analyze efficient risk financial risk management strategies for a particular type of insurance institution selected from a broad array of insurer types The particular characteristics of a given firm such as the types of products it provides and the structure of its liabilities will be important in developing an optimal risk management strategy You could also narrow your analysis to a particular element of a nancial management plan including Systems for measuring nancial risk Alternative assetliability matching strategies with or without use of hedging instruments 0 Alternative methods for diversifying risk arising from insurance contracts eg portfolio diversi cation reinsurance securitization pooling hedging etc Effective employment of capital Alternative strategies for raising capital Business Models and Market Strategies Many insurers may not be successful or survive with their current business model and market strategy Changing customer needs and tastes and new competition are among the factors affecting these decisions You could examine the situation of an insurer that needs to change its business model or develop a strategy for a new entity seeking to enter existing markets or respond tocreate new ones For example what are the prospects for a small life insurer with a shrinking pool of whole life contracts how might it revise its product lines and associated functions to be able to compete and survive in an evolving market Design of Products and Services Insurers continue to innovate in terms of modifying their products and developing new products subject to certain regulatory constraints for personal lines and workers compensation Ef cient bundling and unbundling of services is often an important aspect of product design You might examine a particular area of risk assess the current products available or not available and explore ideas on alternative products that might be attractive to some consumers or rms Potential areastopics include Longterm care Retirement products Enterprise risk management Risks to information systems Securitization of insurance contracts Multiyear propertyliability contracts Highervalue lowerexpense life insurance products for lowmiddle income consumers Greater risk sharing with the insured to improve loss control incentives Alternative risk transfer ART Marketing and Distribution Insurers are seeking ways to enhance their distribution of products and customer service as well as reduce distribution costs Ecommerce will play an increasingly important role in this area but it is not the only vehicle and the best strategy will vary among insurers For example Allstate is seeking to revamp its distribution system and is facing many challenges in doing so Farmers has recently acquired a direct writer 7 21st Century 7 to that will add to its exclusive agent and independent agent distribution channels One could analyze Allstate s or Farmers strategy or that of another insurer real or hypothetical Another topic would be the analysis of electronic marketplaces eg InsWeb and assessment of alternative structures they might use Risk Classi cation Pricing and Underwriting Good underwriting is critical to success in the insurance business Many probably view it as both an art and a science and tinkering and innovation in this area will continue Evolving information technology offers many opportunities but also raises social and political issues You could examine alternative underwritingpricing methods for a particular product or peril eg Progressive s experiment with GPS monitoring for pricing auto insurance in Texas Another possible topic would be to examine issues associated with existing emerging or future underwritingpricing factors eg credit scoring genetic information etc Also basing auto insurance premiums on the number of miles driven sometimes called PayGo is receiving increased attention and would be a good subject to analyze Another perplexing problem in commercial propertyliability insurance is how to respond to a soft market Insurers are faced with a Hobson s choice of meeting competitors low ball prices that are clearly inadequate or holding firm to adequate prices and facing the erosion of their customer base and agents There are many factors to consider such as and insurer s fixed and sunk costs franchise value ability to gain back customers when the market hardens etc What is the optimal strategy for an insurer in such an environment Other Topics The above suggestions hardly dent the realm of possibilities Other potential topics include but are not limited to Human resource andor information technology decisions The combination of private and public mechanisms for insuring certain types of perils such as hurricanes and earthquakes The use of cooperative or mutual insurance organizations group pooling etc for certain types of risks that face problems in securing adequate efficiently priced coverage from traditional insurers eg residential property risk in certain urban areas Strategies in dealing with regulators legislators and other government entities affecting an insurer s business Cross marketing of insurance and noninsurance financial products and services What works and what does not work what is the best strategy for a given institution Joint ventures partnering virtual insurance companies and other alternative organizational models Industry selfregulatory mechanisms as an alternative or complement to government regulation Entry and eXit from speci c markets Product development and marketing Sales of company units acquisitions and mergers Development of multiple distribution channels