GICALE, Deanna Mae T.

ACT1107 – Sec 5

Webinar #1: Audit Risk and Response: Insurance Industry

Speaker: Mr. Dexter Tolenada, CPA

If you talk about Insurance, people will probably think it is a scam or just a sort of a networking.
Unfortunately, it become a toxic stigma under Insurance Industry. In our webinar, Insurance was defined
as a means of protection from financial loss. The speaker even joked us that Insurance is a sign of
adulting, and I agree with it as Insurance protects us from tragedy whereas we are paying a company to
assume our risk. Its purpose is to spread the risk of loss to person or property.

In insurance, it involves three things. The Policy Holder, the Event of a Covered Loss, and the
Insurer. Technically, Insurer is the company that accepts significant risk from Policy Holder by agreeing
to compensate the policyholder if an Insured event adversely affects the policyholder. To identify
whether it is an uncertain future event; it should be uncertain whether an insured event will occur when
it occurs and how much the insurer will need to pay if it occurs.

I have learned in the webinar that in Insurance Industry it only involves Premiums and Claims.
Premiums are the payment made by the Policyholder to the insurance company. Claims are the amount
that insurance company gave to the policyholder. With the scenario given in the webinar, the speaker
gave us an example that if you enter a car insurance with having a car valued 5 million, most probably
the risk that you might be able to encounter will cost you 5 million but through the help of the insurance
company, they will be assumed that 5 million risk and the policyholder will just have to pay for its
premium. The thing here is in insurance industry, the probability of having the risk to happen or occur is
what makes the insurance become a business.

There are some key audit considerations highlighted from the webinar. The key risk under
underwriting which is the risk of segregation of duties over the underwriting process could fall into
different assertions such as completeness, accuracy, existence and through inspection of organizational
chart and observation of the process performed is the possible test of controls to test the assertions.
Under premiums, the premium revenues and unearned premium reserve may not be recorded properly,
and this assertion would into valuation and by having a test of details through understanding of revenue
recognition methods used and subsequent receipts testing are the possible ways to test the valuation
assertion.