INSURANCE BASICS
WHAT IS INSURANCE?
Is a contract between two parties - the Insurance Company that provides insurance
(Insurer) and the Individual who purchases Insurance (Insured). The terms of this
‘contract’ (insurance policy) state that the insured will pay a set amount (premium) to
the insurance company at regular intervals, and in return, the insurance company will
pay a certain amount to the insured in case of certain events or situations; such as loss,
damage, or anything sudden and unexpected that could result in financial outflow. An
insurance company takes the Premium the Insured gives them based on certain rules,
keeps it safe, and gives it back to the insured person if something bad happens.
NOTE!
A person's insurance policy helps protect them financially in case of certain events, like
a car accident. It gives the insured a financial safety net in case something bad happens
suddenly.
The insurance policy will cover different things depending on the type of policy chosen.
Insurance policies are grouped based on the situations in which they can be used. This
means that an auto insurance policy can only cover things that happen to cars. Auto
insurance won't cover a medical emergency or a restaurant fire. This makes each
insurance policy unique and specific in how it works.
THE COMPONENTS OF AN INSURANCE POLICY
1. The Premium:
The insured individual/policyholder pays the insurance company a certain
amount for a period at regular intervals. This amount is the Premium. It is
determined by several things, such as how likely or risky it is that a particular
event will happen, where the insurance applies, and a person's credit score or
past financial history.
Depending on the applicant's credit score and financial history, some policies
may require payment upfront. During the policy's life, the Premium rate may
change. This can happen for several reasons, such as changes in the policy or
external factors such as inflation, government spending, etc.
When the policy is used, the person usually has to pay a higher premium for a
policy that pays out more. No matter how often the insured person files a claim
or uses the policy, they must pay the Premium for the whole policy length
2. The Deductible:
Is the amount the insured has to pay before their insurance policy covers them
for a loss. When a loss occurs to your home or you have a car accident, the
deductible is subtracted, or ‘deducted,’ from what your insurance company will
pay for your loss.
Ex.
- If a policy has a $500 deductible, and the Insurance company determines that
the insured has a loss worth $10,000, the insured would be paid $9,500 by
the Insurance company (reimbursement of the Claim).
To summarize, deductibles are how risk is shared between you (the insured) and
the Insurance Company (Insurer).
3. Policy Coverage Limit:
Is the maximum amount of money an insurance company will pay for a loss to
an insured. This maximum payout depends on the asset's value, like a car or
house, the possible risks associated with the asset, and the events or situations
that a person wants to be covered by their insurance policy.
The insurance policy limits will vary by the type of Insurance policy and its
coverages. Once the insurance company pays up to a policy's limit, the insured
may be held responsible for paying the additional amount of the loss.
When the limit is higher, the premium is also higher, and vice versa. This limit
can be used for the whole insurance policy or just for one claim.
Ex.
- A car insurance policy might have a maximum payout of $1,500 for a single
claim or $10,000 for all the claims in a policy term.
4. Policy Coverages:
Are the specific protections provided by the policy for the events and
occurrences that the policy covers.
Ex.
- A homeowner’s insurance policy may provide coverage for theft, fire
damage, and structural repairs but may not cover damages caused by
flooding.
A comprehensive list of coverages is provided with each purchased policy that
details the extent to which the insurance company is willing to cover the insured
individual or property under various circumstances and events.
INVOLVED PARTIES
1. Insured or Policyholder: A Prospect is the potential buyer of an Insurance
policy. Once a prospect has completed the purchase of an insurance policy, they
become the insured or policyholder.
2. Insurance Company/Carrier: An insurance Carrier is a company that sells the
insurance policy, collects the payments from the policyholder, and reimburses
claims against the policy. It is the organization that provides the financial
services related to an insurance policy.
3. The Insurance Agency and Agent: An insurance agency is a connecting
organization between the insurance carrier and a prospect or the insured.
Insurance agencies may provide support and services to policyholders of
multiple insurance carriers or limit themselves exclusively to a single carrier.
Insurance companies are the providers of the product (insurance policies),
whereas the Insurance Agencies are the distributors and providers of customer
support.
4. The CSR: A Customer Service Representative (CSR) undertakes supportive
clerical and administrative tasks at an insurance agency. They help agents sell
policies to prospects. They also provide support services to the policyholder by
collecting payments, making policy changes, submitting claims, and receiving
critical information necessary for insurance brokers/agents to complete their
roles. A CSR plays a crucial role at any insurance agency, helping cut down
processing times and simplify downstream tasks.
ADDITIONAL TERMINOLOGY
- Quote: Is an Insurance company’s estimate of the premium they would
charge for a new policy based on required coverages and policy limits. It is
presented as a document to the prospect. A prospect may receive multiple
quotes from various carriers offering different coverage limits and benefits.
- Claim: Is a formal request from the policy owner or insured individual to the
insurance provider seeking compensation in the event of loss, damage, or
injury based on the terms of the policy they had purchased.
Ex.
● If a home is damaged and the homeowner has insurance, they will
file a ‘claim’ with the Insurance company to initiate the process of
paying for the repairs.
- Additional Interest: Is any third-party entity, such as an individual or
organization, with an insurable interest in the property or asset covered by an
insurance policy.
Ex.
If you finance your vehicle, you may be required to add the lender as an
additional interest to your Auto Insurance policy.
- Admitted Carrier: Are insurance companies that have been given approval
by the state's insurance department for following their rules and regulations.
When an insured purchases a policy from an admitted carrier, they get the
following benefits:
● The person who has the policy doesn't have to pay as many fees and
taxes.
● If the insurance company goes out of business, the state will pay
some or all of the insured's claims.
● If an insured person doesn't agree with how a claim was handled,
they can go to the state insurance department to try to change the
decision.
- Non-Admitted Carrier: Are insurance companies that either didn't get
"admitted" status from the state's insurance department or aren't in the state
where the insured lives. Since non-admitted carriers don't have to follow the
rules and regulations set by the state's insurance department, they are more
likely to cover a complicated, high-risk insured.
The downside is that the insured person doesn't get the same benefits that
admitted carriers do, and the premium is usually due all at once.
HOW IS AN INSURANCE POLICY PURCHASED?
A prospect will usually begin their journey by selecting an asset or property for which
they require insurance.
The prospect then reaches out to an insurance agency to learn about the policies
available to them from different insurance companies. At this point, an insurance agent
holds a detailed conversation with the prospect to learn their insurance needs better.
This will help the agent determine the most suitable policy for them. The agent then
provides the prospect with one or multiple quotes that include a comparison of the
coverages, premiums, and limits provided by various insurance policies from different
carriers available to them.
The prospect may then choose to purchase one of the insurance policies short-listed in
the quote. The agent forwards this request to the respective insurance carrier, which
then processes and confirms the purchase of the insurance policy by ‘binding’ the
policy.
HOW IS AN INSURANCE POLICY CLAIMED?
To initiate a claim, the insured can choose to seek help from the insurance agency in
reporting the claim, or they can contact the carrier directly. Depending on whom they
contact, the agency or the carrier will collect information pertinent to the matter from
the insured.
Based on the provided information, the insurance carrier may reimburse the insured
according to the policy's limits once the deductible has been met.
INTRODUCTION TO THE ROLE OF A CSR
Serving across various domains, a CSR streamlines the operations performed at an
Insurance Agency by skillfully managing several tasks and responsibilities.
As an insurance customer service representative, you can expect to handle insurance
inquiries, resolve service issues, document customer requests, and finalize policy
adjustments. In addition to helping insurance agents and sales representatives resolve
customer complaints, you may also be charged with handling inbound and outbound
calls and transfer calls for services and transactions.
In this way, you will function as a connecting individual between the various
departments within an Agency and the partners and carriers the Agency works with.
INTRODUCTION TO COMMON PLATFORMS
1. Agency Management System: An Agency Management System is multi-
functional software that automates various processes an insurance agency
performs on several levels. Some of the specialized tasks you can perform
through an AMS include:
- Keeping an up-to-date dossier on current clients and contracts.
- Insurance contract option generation allows you to provide prospective
consumers estimates on how much an insurance policy will cost or what
plans they are eligible for.
- Maintaining an accurate data log of client notes, contacts, and other agency-
related information for business management.
- Organize Accounts
Agency Management Systems take much of the laborious, repetitive work out of
the day-to-day clerical tasks of running an insurance agency. AMS software
allows insurance firms to focus on expansion rather than maintaining old
processes, from generating sales leads to indexing existing customer datasets.
2. Comparative Rater: A comparative rater is a software program that enables a
CSR to easily and quickly compare insurance policies offered by several eligible
carriers for a particular type of policy at the click of a button.
A comparative rater provides details on the premiums, deductibles, and
coverages offered by various carriers against a particular type of insurance
policy and enables a CSR to quickly request quotes for the listed policies.
3. Carrier Website: An insurance carrier's website is the primary portal through
which all client-related tasks specific to the carrier can be performed. Most
insurance carriers offer an online portal through their website, which contains
details on each of the policies provided by the carrier, along with links and
forms that enable a CSR to request quotes, bind policies, and make changes to
an existing customer's insurance policy.
