Insurance: Life Cycle of P&C Policy in simple steps
The term “life cycle” refers to the different phases of an insurance policy. The life cycle of an insurance policy for individuals and for businesses is similar, although the process is more complex for businesses
1.1. Application:
A producer (a person who sells insurance, such as an agent or broker) collects information about the person or business that wants to buy insurance. The document that contains the information is called the application.
Agent/ Broker - Enter the data in their system, pull various data from the internet about insured and set up Acord and supplemental documents; Send application form to different Managing Agents(MGA) / Carrier based on the risk coverage requirement.
2. Asses Risk: Underwriting Decisions
2.1. Submission:
A submission is a collection of information about the prospect that the producer sends to the carrier so that they can determine whether to provide insurance and how much to charge (i.e., premium)
MGA/ Carrier - Submission clearance helps to clear the accounts in the MGA or insurance company's system and send acknowledgement letters to brokers to indicate the processed prospects accounts are processed by this one broker already.
2.2. Quote:
A quote is a statement that tells the producer how much the premium will be for the different coverage that the carrier or MGA agree to provide. MGA/ Carrier enters the data to the rating system and prepare quote cover letter and send to agent.
If agent is agreed with the given quotation, then the MGA/ Carrier starts work on defining Proposal. In case agent is not agreed, then there will be negotiation and even after that, it does not work, and make the status of that submission as "Not Taken Up".
In case MGA/ carrier does not accept the risk, as it's exceeding their risk appetite, then status of the submission set as Void/ Cancelled.
3. Service: Prepare and Issue Policy
3.1. Proposal:
A booklet that highlights the important features, including the coverage, deductibles and policy limits of the insurance policy and premium cost that recommends.
3.2. Binder:
A Binder is a temporary contract between the insured and the insurance company that provides coverage for an insured before a policy is issued.
When the prospect finally accepts the proposal, the insurance coverage can begin, on a date that is agreeable to all parties. MGA/ Carrier receives and review binding request and issue binder/ invoice/ related documents to agent.
3.3. Policy:
A policy is an insurance contract between the insured and the insurance company that states the rights and duties for both parties.
4. Service: Changes in policy and Claims
4.1. Adjustments:
Change something in policy, no need to re-writing or issuing a new policy, an endorsement can adjust current policy. Agent/ Broker sends edit request to MGA/ Carrier before checking the changes, and then MGA/ Carrier does the processing of the endorsements and issue the same.
5. Asses Risk: Renewal/ Non- Renewal
5.1. Renewal:
Renew Policy based on the prior policy, no gap, no coverage difference. Carrier sends renewal notification letter well advance before the expiration data typically 90 days/ 120 days and premium audit. Broker generates loss run data for renewal process.
1. Sales: Find Prospects
1.1. Application:
A producer (a person who sells insurance, such as an agent or broker) collects information about the person or business that wants to buy insurance. The document that contains the information is called the application.
Agent/ Broker - Enter the data in their system, pull various data from the internet about insured and set up Acord and supplemental documents; Send application form to different Managing Agents(MGA) / Carrier based on the risk coverage requirement.
2. Asses Risk: Underwriting Decisions
2.1. Submission:
A submission is a collection of information about the prospect that the producer sends to the carrier so that they can determine whether to provide insurance and how much to charge (i.e., premium)
MGA/ Carrier - Submission clearance helps to clear the accounts in the MGA or insurance company's system and send acknowledgement letters to brokers to indicate the processed prospects accounts are processed by this one broker already.
2.2. Quote:
A quote is a statement that tells the producer how much the premium will be for the different coverage that the carrier or MGA agree to provide. MGA/ Carrier enters the data to the rating system and prepare quote cover letter and send to agent.
If agent is agreed with the given quotation, then the MGA/ Carrier starts work on defining Proposal. In case agent is not agreed, then there will be negotiation and even after that, it does not work, and make the status of that submission as "Not Taken Up".
In case MGA/ carrier does not accept the risk, as it's exceeding their risk appetite, then status of the submission set as Void/ Cancelled.
3. Service: Prepare and Issue Policy
3.1. Proposal:
A booklet that highlights the important features, including the coverage, deductibles and policy limits of the insurance policy and premium cost that recommends.
3.2. Binder:
A Binder is a temporary contract between the insured and the insurance company that provides coverage for an insured before a policy is issued.
When the prospect finally accepts the proposal, the insurance coverage can begin, on a date that is agreeable to all parties. MGA/ Carrier receives and review binding request and issue binder/ invoice/ related documents to agent.
3.3. Policy:
A policy is an insurance contract between the insured and the insurance company that states the rights and duties for both parties.
4. Service: Changes in policy and Claims
4.1. Adjustments:
Change something in policy, no need to re-writing or issuing a new policy, an endorsement can adjust current policy. Agent/ Broker sends edit request to MGA/ Carrier before checking the changes, and then MGA/ Carrier does the processing of the endorsements and issue the same.
4.2. Claims Processing (if applicable)
The policyholder/ insured files a claim in case of an insured event (e.g. property damage, accident etc.) The insurer verifies the claim, assesses losses, and determines the payout. The claim is settled as per the policy terms and conditions.
5. Asses Risk: Renewal/ Non- Renewal
5.1. Renewal:
Renew Policy based on the prior policy, no gap, no coverage difference. Carrier sends renewal notification letter well advance before the expiration data typically 90 days/ 120 days and premium audit. Broker generates loss run data for renewal process.
In short, a well-managed life cycle helps insured secure their future while enabling insurers to operate efficiently and mitigate risks. Understanding this process is essential for making informed decisions about insurance coverage and financial planning.
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