Chapter 02 - Management of Insurance Companies

Sri Lanka Insurance Institute
SL/DIP/IBF
Insurance Business Management and
Finance Aspects
Chapter 02:
Management of Insurance
Companies:
roles and responsibilities.
M Tharaka Perera
FCII, FIII, MBA- Finance
1
No. 93 Hunupitiya Lake Road, Colombo 02, Tel No.: 011 245 1426, 011 243 2050, 011 242 1404 , E-mail: slii@sltnet.lk Web: www.slii.lk
Management of Insurance Companies
The board of directors;

Senior executives;
Managers and supervisors;
Importance of the customer.;
Non managerial staff
Introduction.
How do we differentiate Insurance Business from the

counterparts?
 Tangible and Intangible
What is the main function of the management of an
Insurance Company?
Facilitate and sustain the positive interplay between:
1. The organization as corporate entity.
2. The employees.
3. External Environment.
A The Board of Directors.

How does Chairman of an organization get elected & what is
his role?
 Shareholders who appoint the board and the chairman
 Chairman’s role involved:
1. To ensure the meetings are run in an orderly and efficient
manner.
2. Represent company to outside world.
What are the types of directors.
1. Executive Directors – Work Full Time
2. Non Executive Directors:
 Chosen by particular area of experience.
 Members of sub committees providing independent view on matters
such as
1. Audit
2. Remuneration
3. Risk Management No. 93 Hunupitiya Lake Road, Colombo 02, Tel No.: 011 245 1426, 011 243 2050, 011 242 1404 , E-mail: slii@sltnet.lk Web: www.slii.lk

Who is CEO/MD?
 Board appoint one of the executive directors as CEO/MD accountable for
day today operations.
 It’s the CEO/MD who appoint the management.
What are the main responsibility of the board for an
insurance company?
1. Underwriting strategy.
2. Financial management.
3. Capital management
4. Risk Management
5. Operational Effectiveness.
What are the major concerns of the board of directors?
1. Review of past performance
2. Making plan for the future,
3. Formulation of policy to carry out those plans.
This will determine the firm’s strategy and resources and capabilities to be utilized.

What is Corporate Governance?
The set of processes and organizational structures through which the Board and senior
executives manage a company at the highest level.
What are the related issues addressed by UK Corporate
Governance Code?
1.Board composition and development.
2.Remuneration.
3.Accountability and audit.
4.Relations with shareholders.
All UK Listed companies should be compliant with the code
What are the other operating Structures?
 They are Trade Associations and Educational Bodies.
1. Association of British Insurers,
2. British Insurance Brokers Association.
3. Chartered Insurance institute.
They operate through councils, committees and sub committees.
B Senior executives.
Who are executives and what is their role?
They are the ones who take decisions to execute the strategy approved
and delegated by the board. Authority is delegated to executives by the
board to implement the business strategy.
What is the role of the CEO/ Managing Director ?
CEO is the link between the board and the management. CEO helps
to organize the resources and capabilities to translate the board policy
into operational activities.
Who is the Chief Financial Officer (CFO) and what is the
role?
CFO is responsible for:
1. Economic Capital Model.
2. Stress and Scenario Testing.
3. Preparation of Finance/ investing and distribution decisions.
4. Preparation of accounts in compliance to regulatory requirements.
5. Prepare management accounts.
6. Management of debt, cash flow, liquidity, solvency, budgets and forecast, audit
B Senior executives.
Who is the Chief Actuary and what is the role?

Is the one who responsible for:
1.Pricing of products
2.Calculation of claims reserves
3.Calculation of Risk Based Capital (RBC)
4.Valuations.
What other senior positions would an Insurance Company have?
Chief risk officer
Head of internal audit
Head of underwriting
Head of claims
Marketing director
Head of HR
Head of ITC
C Managers and supervisors.
What is the role of Management?

The is the process of planning, organizing, leading and controlling the resources and
capabilities of an organization.
Management actions?
Planning?
Is the process of documenting that covers the use of physical resources, allocation of
responsibilities, timetables and budgets, aiming the ultimate objectives.
Organizing?
Arrangement of resources and capabilities to utilize fully to achieve the ultimate
objectives on time.
Leading?
Conducting towards the mission guiding the capabilities in a responsible manner.
Controlling?
Systematic effort to determine performance to predetermined standards/plans.
What do we mean by business components?

They are the main three resources of a business: Physical; Financial; Human.
Physical resources: Office Space, ICT, Telecom, websites,
furniture fixtures and fittings.
 Financial resources: Cash, Bank loan facilities, share capital.
Human resources? Also known as human capital: workforce with
appropriate skills.
Manager’s Role:
In addition to correct decision taking ability, manager has to comply with the
style and culture of the organization.
What are the rewards of effective internal communication?

Awareness of business realities.
Motivated workforce,
Greater commitment to the organization,
Employee support for the management decisions.
What are the characteristics of effective internal communication?
Accuracy;
Clarity;
Relevance;
Reliability;
Credibility;
Timelines;
Barriers to effective communication?
What are the benefits of effective internal communication?

Able to bring about appropriate changers,
Encourage staff to be cooperative and innovative,
Focus to meet corporate objectives.
Who are Supervisors and team leaders?
They are front line managers who are directly interacting
with members of their team ensuring the building of
effective team, resolving conflicts and motivating the team
members.

Action Centered Leadership (ACL)
• Tasks achieved -> Individuals Happy -> Team Moral High

• High Team Spirit -> Affect individuals -> Help achieve Tasks
• Disgruntled Individual -> Reduce Cohesion ->Negative Achievement of Tasks
Management Styles:
Organizational culture is strongly influenced by personal values and
management styles of its CEO/MD.
It helps to effective supervision of its people.
Relationship between corporate culture and management style
Corporate culture (the way we do things) made up of:
Norms: Behavior mostly acceptable to the organization.
E.g.: Dress Code, Use of first names, Standards of performance.
Beliefs and values: E.g.: We do not test products on animals,
We stands for quality; The input of every employee is valued.
Management style: E.g.:
D Non – managerial staff.
There are two types:

Lower level /trainee staff: They are clerical or minor staff who are unable to take
responsible decisions as yet. E.g.: trainee officers, executive assistants
1.Specialist technical roles:
They are in advisory relationship to line management.
They do not have full authority to convert recommendations in to actions and
supervised by their line manager.
E.g.: Company Secretaries, loss adjusters.

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Sri Lanka Insurance Institute

Management of Insurance Companies

The board of directors;

How do we differentiate Insurance Business from the

A The Board of Directors.

A The Board of Directors.

A The Board of Directors.

Who is the Chief Actuary and what is the role?

C Managers and supervisors.

What is the role of Management?

C Managers and supervisors.

C Managers and supervisors.

What do we mean by business components?

C Managers and supervisors.

What are the rewards of effective internal communication?

C Managers and supervisors.

What are the benefits of effective internal communication?

C Managers and supervisors.

• Tasks achieved -> Individuals Happy -> Team Moral High

C Managers and supervisors.

C Managers and supervisors.

D Non – managerial staff.

There are two types:

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