Fraud Prevention and Insurance Policies Quiz

Product Development Risk

• Product development risk involves making changes to an existing product to meet customer needs and increase marketability, impacting product coverage and liabilities.
• Companies must conduct an actuarial review and obtain approval to sell the new product.
• Ensuring compliance with regulatory requirements from Saudi Central Bank (SAMA) for approval of any new product is necessary.
• A report on changes in risks and insured behavior post-launch must be prepared.

Underwriting Risk

• Underwriting risk involves the assessment process of risks presented to insurance companies for approval.
• Clear articulation of policies and phrases is essential to avoid misinterpretation.
• Insurance applications must be completed by the insured.
• All policy costs and indirect charges must be included in premiums.
• Guidelines for underwriting and departmental responsibilities must be set.
• Reinsurance regulations must be followed before product selling.
• Regular reviews of policies, underwriting guidelines, and processes across departments are necessary for effective functioning.

Pricing Risk in Underwriting

• Pricing risk arises from the process of determining the appropriate premium rate.
• Companies must consider all potential risks using appropriate means to determine the price of the product.
• Evaluating profits and business losses to determine the effects associated with adjusting the premium rate is necessary.
• If new patterns emerge, the company should launch the price assessment process (i.e., re-pricing).
• Actuarial experts must be engaged in product pricing.

Claims Settlement Risk

• Claims settlement risk involves risks associated with the claims payment process for policyholders.
• The risk is that actual claims due to policyholders may exceed the carrying amount of the insurance liabilities.
• Insurance risk is affected by the exceptional competitive nature of the market and increased frequency and severity of claims, especially motor and medical claims.
• Companies must review decisions regarding claims settlement to align with the coverage of the insurance policy.
• Periodic evaluation of claims settlement procedures and principles is necessary.
• Identifying and applying the claims settlement process with reinsurers to facilitate settlement is essential.
• Identifying and applying proper mechanisms for the development of appropriate precautions is necessary.

Solvency Risk

• Authorities and organizations, including the Saudi Central Bank (SAMA) and the Capital Market Authority (CMA), prioritize the solvency of cooperative insurance companies.
• Senior managers must implement new measures and policies to combat fraud and improve existing ones based on annual reports and under the supervision of the Board of Directors.
• Companies need to define and document customer choice policies with necessary conditions for accepting insurance for new customers in each insurance category and product.
• Clear and comprehensive procedures should be established for evaluating claims, specifically outlining steps to verify facts, credibility, and indications of fraud activity for each insurance product.
• Companies should communicate their anti-fraud policies and the consequences of providing false or inaccurate information to policyholders.
• Including an information paragraph in the policy itself can encourage policyholders to read and agree to the measures taken.
• Companies must align their development goals, customer satisfaction objectives, and detection of fraudulent practices.
• Operational objectives and fraud reduction objectives should be jointly approved by the Board of Directors annually.