The Vehicle Insurance Underwriting Based on Risk Control Elaborating Management Research
|School||Southwestern University of Finance and Economics|
|Keywords||motor vehicle insurance underwriting risk control fine management|
During2012, which is the second year of China’s "12th Five-Year Plan", Chinese economy has experienced sustained and stable development, and simultaneously severe challenges. From an international perspective, the world economy is still grim. Sovereign debt crisis has shown more uncertainties, and displays a trend of continuation and deterioration. The default risk of euro zone sovereign debt is skyrocketing and its financial system is in a very fragile condition. Global capital markets and commodity market is in turmoil. The prospects of economic recovery remain unclear, and a long-term trend of low growth-gradually forms.Viewed from inside, China’s economy faces challenges of a weak market of both domestic and foreign demands; continuously rising prices of raw materials; climbing labor costs; furthermore, environmental costs intensify the situation. At the same time, world economic growth slows down as the dividends of globalization, bonuses of the market reforms and elements bonus decrease. Automobile insurance, as the primary insurance of insurance companies, is still low growth on the big stage of the domestic economy in2012, although it does show an increase compared with2011. Automobile liability insurance has loss of more than100billion RMB nationwide. Commercial insurance companies are facing reform initiatives of auto insurance products. How do the insurance companies respond so that the auto insurance industry can take the road of sustainable development? In this paper, which consists of six sections, I discuss the refinement and professionalization of auto insurance business, and the main contents are as follows:Section I States the aim and significance of this study, and discusses what is and how to conduct fine management of auto-mobile(auto) insurance industry; Section Ⅱ Existing problems in China’s motorized vehicle development and inspirations from foreign experience. Starting from the status quo of China’s motor vehicle insurance development, this chapter analyzes emerging novel features of China’s auto insurance during the rapid development in recent years and series problems in operating management, and finally concludes that major obstacles currently in auto insurance business include issues of the auto insurance market, auto insurance marketing system, the claim risk control and regulatory aspects. Foreign auto insurance industry began developing nearly a hundred years earlier than China’s. And we can learn a lot from its advanced experience in auto insurance management, claim processing and underwriting techniques. it gives a brief introduction of auto insurance status quo and existing problems, as well as the basis of theoretical studies of domestic and foreign auto insurance business. In this section, I compare and contrast practices of auto insurance underwriting, risk management and control in two representative countries, namely the United States and United Kingdom, in order to identify what China can learn from the experience of foreign auto insurance industry, to improve legislation and to provide protection to practitioners in auto insurance industry;Section Ⅲ The management system of auto insurance underwriting should include smooth and systematic base management, process management, and data analysis and risk management and control processes, this Chapter points out that the main purpose of auto insurance fine management is to establish organic interactions between the three processes above, this Chapter describes the first element of the fine management of auto insurance business, which is the underwriting risk management. Detailed descriptions are given to the subordinate processes, including basic management, process management, data analysis and so on. Details are covered especially for the underwriting policy/guideline.Section IV Research of the fine management of motorized vehicle insurance cover age policy. The chapter specifically studies auto insurance underwriting policy and is divided into two parts:the first part analyzes risk factors of underwriting policy and discuses risk characteristics of auto insurance underwriting processes; the second part conduct in-depth analyses of risk points that need more attention among different models of vehicles and insurance coverage policies and give a detailed discussion of existing problems of insurance underwriting for cars, buses, trucks and special vehicles insurance underwriting, as well as the underwriting policy formulation. This Chapter points out that underwriting processes of motor vehicles in China should pay attention to the underwriting policies differentiation, and should have differentiated management by the class which encourages development, the class that needs prudent underwriting and the class that needs strict control. This chapter also proposes underwriting policies to improve risk is one of the important content of differentiated underwriting policy.Section V analyzes the most important factors of the fine management of auto insurance business, including the reported loss ratio, the IBNR accrual and its affecting factors and sale/cost ratio, and points out that the key factors affecting the comprehensive claim rate of auto insurance and operating cost rate are the reported loss ratio, IBNR and sale/cost ratio; Combined with actual operating data from insurance companies, this Chapter discusses how to utilize these indicators to adjust auto insurance business structure, to guide the sales staff to take the initiative to find high-quality business service resources, in order to effectively get rid of the auto insurance long-lasting loss, and eventually take the road of profits.Section VI, which is the last section, summarizes the analysis and research conducted in this entire paper and concludes that the only way to reduce loss and eventually make auto insurance profession profitable is to consider auto insurance claim ratio, sale/cost ratio and comprehensive cost rate together.Research in this paper has characteristic novelty and innovations as following:①this paper is specifically aimed at the fine management of the auto insurance and investigates relationships between auto insurance risk management, auto insurance policy underwriting and the insurance companies’ key business performance indicators, which forms a relatively unique perspective. Starting from the comprehensive cost ratio, operating cost rate, marginal cost rate and reported loss ratio, IBNR factors and sale/cost ratio, this paper explores the relationships between these indicators and risk management and control, underwriting policy of insurance companies, and analyzes specific factors that influence risk factors of motorized vehicle insurance;②this paper suggests that the establishment of an evaluation mechanism, which is based on the loss ratio, sale/cost ratio and the company’s comprehensive cost ratio, operating costs, marginal cost rate, is required. This mechanism may link all these factors above systematically and effectively, thus can optimize the auto insurance business structure and profit model, which is important for insurance companies to change the business philosophy "from scale to profit", and to strengthen the level of auto insurance professional management.