Understand the parties and their definition in the contract of insurance. Learners will learn about the key stakeholders in the insurance business along with a classification of internal and external stakeholders.
There are two parties in the contract of Insurance:
The first party in the contract of insurance is the INSURED: Insured is a person who is looking to hedge his future risk of unforeseen losses or events. There are different types and costs of insurance policies available nowadays. The choice of the policy type depends on the insured as to what type of risk he wants a cover for.
The insured, is the person in whose favor, the contract is operative and who is indemnified against, or is to receive a certain sum upon the happening of a specified contingency or event. He is the person whose loss is the occasion for the payment of the insurance proceeds by the insurer.
Second party is the INSURER : Insurer or the insurance company agrees to pay for the future financial losses of the insured against a regular payment of premium. The insurance company assumes or accepts the risk of loss and undertakes for a consideration to indemnify the insured or to pay him a certain sum on the happening of
The second party in the contract of Insurance a specified contingency or event.
The business of insurance may be carried on by individuals just as much as by corporations and associations. The state itself may go into insurance business.
To whom the proceeds/Claims are paid?
Is it always the case that the proceeds or the claim is paid to the Insured? Not always; the person paid may be the beneficiary designated in the policy. A common example of this situation is a life insurance policy where the proceeds are not given to the insured but to a third party designated by the insured.
Key Stakeholders in Insurance Business:
Any person or entity interested in a particular business is called a stakeholder. They are affected by the business activity, and they may be part of the core decision-making team. Many people contribute to the running of an insurance company. Aside from shareholders, the key stakeholders in the insurance value chain are:
- Consumers who buy insurance products are the main constituents of the list of stakeholders for Insurance Industry. They may be the insured or beneficiaries or persons with insurable interest.
- Investors that support insurance companies by purchasing insurance company stock as they believe in the industry model and invest their money in the insurance company stock.
- Insurance carriers that provide insurance coverage through policies and accept the risks covered by the policies. These are generally large insurance companies, including direct insurers and reinsurers.
- Partners who couple with insurance companies to share profits and losses. Partners include reinsurers, institutional investors, and trade partners. Partners also include the insurance agencies and brokerages that distribute insurance products.
- Outside networks that include those that perform professional services for insurers. They include appraisers, insurance bureaus, reinsurers, claims adjusters, and firms providing consulting, claims processing, and data collection services.
- Regulators and auditors that help secure the financial health of the insurance industry. Regulators implement and enforce regulations, while auditors ensure adherence to finance and accounting standards.
- Vendors that supply the goods insurers require performing business activities. Examples include software distributors and administrative goods suppliers.
Internal stakeholders are owners, managers, and workers. External stakeholders are the customers and the suppliers. The community in which the organization does business also is a stakeholder. All the stakeholders are not equal, and different stakeholders will have varying considerations. These stakeholders can have direct or indirect stake in the organization and in policy-making. Given below is a non-exhaustive list of internal stakeholders in insurance industry:
- Insurer Executives
- Product Managers
- Distribution Staff
- Claims Assessors
- Claims Managers
- Funds, Master Trusts & Corporates
- Banks & Financial Intermediaries
- Group Fund Members
- Bank Customers
- Alliance Partners
- Third Party Administrators (TPA’s)
- Service Providers
External stakeholders are people who are not directly working within the business but are affected in some way from the decisions of the business. The range of external stakeholders for the insurance sector is extremely broad, and includes:
- Trade associations
- Professional bodies
- Analysts and Rating agencies
- International regulators and International bodies
- The political community
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