Risk Management

& Insurance
Presented To : Mr.Ahsan Khalique
Presented By : M.Hashaam
Roll no.
: AM552381

Topic:
Private Insurance in the
Financial Services
Industry

Overview of Private Insurance in

the Financial Services Industry
O The financial services industry consists of:
O Commercial banks
O Savings and loan institutions
O Credit unions
O Life and health insurers
O Property and casualty insurers
O Mutual Funds
O Securities brokers and dealers
O Private and state pension funds
O Government-related financial institions

Overview of Private Insurance in

the Financial Services Industry
O Changes

in the financial services

industry include:
O Consolidations

The number of firms has declined due to

mergers and acquisitions
O Convergence

Existing financial institutions now sell a

wide variety of financial products that
earlier were outside their core business
area

Types of Private
Insurers
O Insurers can be classified by

their organizational form:

O Stock insurers
O Mutual insurers

O Reciprocal exchanges
O Blue Cross and Blue Shield Plans
O Health maintenance organizations

(HMOs)
O Other types of private insurers

Types of Private
Insurers
O A Stock Insurer is a corporation

owned by stockholders
O Objective:

earn

profit

for

stockholders
O Increase value of stock
O Pay dividends

O Stockholders

elect

board

of

directors
O Stockholders bear all losses
O Insurer cannot issue an assessable
policy

Types of Private
Insurers
O A Mutual Insurer is a corporation owned by

the policyowners

O Policyowners elect board of directors, who have

effective management control

O May pay dividends to policyowners, or give a rate
reduction in advance
O There are three main types of mutual insurers:
O

An advance premium mutual is owned by the

policyowners; there are no stockholders, and the
insurer does not issue assessable policies
An assessment mutual has the right to assess
policyowners an additional amount if the insurers
financial operations are unfavorable
A fraternal insurer is a mutual insurer that provides life
and health insurance to members of a social or
religious organization

Types of Private
Insurers
O The

corporate structure of
insurers is changing due to:

mutual

O An increase in company mergers

O Demutualization,
in which a

mutual
company is converted into a stock insurer
by:

Pure conversion
O Merger
O Bulk reinsurance
O

O The creation of mutual holding companies

O A holding company is a company that directly or
indirectly controls an authorized insurer

Types of Private
Insurers
OA

Reciprocal
exchange
unincorporated mutual

is

an

O The reciprocal is managed by an attorney-

in-fact
O In a pure reciprocal exchange, insurance is
exchanged among the members; each
member of the reciprocal insures the other
members
O

A separate account is kept for each member

O A modified reciprocal exchange is similar to

an advance premium mutual

No individual accounts

Types of Private
Insurers
O Blue Cross and Blue Shield Plans are

generally organized as
community oriented plans

nonprofit,

O Blue Cross plans provide coverage for

O
O
O
O

hospital services
Blue Shield plans provide coverage for
physicians and surgeons fees
Most plans have merged into one entity
Many sponsor HMOs and PPOs
Some plans have converted to a for-profit
status to raise capital and become more
competitive

Types of Private
Insurers
O A Health Maintenance Organization

(HMO)
provides
comprehensive
health care services to its members
O Broad health care services are provided

for a fixed prepaid fee

O Cost control is emphasized
O Choice of health care providers may be
restricted
O Less costly forms of treatment are often
provided

Types of Private
Insurers
O A Captive insurer is an insurer owned

by a parent firm for the purposes of

insuring the parent firms loss
exposures
O Savings Bank Life Insurance refers to
life insurance that is sold by mutual
savings banks, over the phone or
through Web sites

Conclusion
There is no trend of insurance
in
Financial
Industry
of
Pakistan. Other Countries of
World use these type of
insurances very commonly.

Recommendation
There should be awareness
about
insurance
specially
Private
Insurance
in
the
Financial Services Industry.
Islamic mode of Insurance can
also play role in this industry.