What are the main issues for internal audit and controls in an insurance companies?

Insurance companies’ functions are complicated and the internal audit needs to understand how an insurance company operates before starting  audit. Key Insurance company functions can be summarized as follows:

-  Actuarial Department

-Underwriting

-  Claims

- Policy Servicing

- Investment Department

Main  audit  & control issues relating  to insurance companies are :

- Claims fraud

- Effectiveness of risk management function

-Reasonableness of Actuarial pricing & valuations

- Mixing shareholder and policyholder funds

- Management of suspense accounts

- Revenue recognition

- Qualified & honest employees

- Regulatory changes and compliance

(1)Premium is the revenue for an insurance company.Rating and collection of premium should be adequate.

(2)Then comes the claims.Claims are major outgo.Claim payment should be as per policy conditions for which premia are charged.Customer satisfaction should be balanced,better to be fair.

(3)Then comes expenses. There are limts of expense incurrences by budget and by statute or regulatory measures.Expense which are controllable should be controlled

(4)Then comes. coinsurance. Proper decision should be taken to share risks with other insurers.At times, by option, customers excercise option to divide business among two or three insurers.So customer confidence shold be achieved so that full business comes with us.

(5)Then reinsurance.This is insurance of insurance.This is a type of coverage of risks already underwritten with such specialist reinsurers-local or abroad.

(6)Investments.Insurance funds are invested in such manner that the idle funds fetch. revenues.This is in such manner that liquidity is there for claim settlements,statutory limits of investments are made in such statutorily specified investments such that they give better results.

Even when there was underwriting loss, investment income made companies profitable.

1. review of accounting transactions and otherwise, in order to provide a service.

2. Steering control is aimed at the measurement and evaluation of the effectiveness of other controls.

3. classical internal audit has been dealing primarily internal control system, ie, the set of measures, policies and procedures established by companies to protect assets, minimize the potential for fraud, increase operational efficiency and improve quality of the financial information. He has focused in administrative, accounting and financial.

4. a) Check the reliability or degree of reasonableness of accounting and non-accounting information generated at different levels of the organization.b) monitor the functioning of the internal control system (which means your survey and assessment), both the internal accounting control system as the OS.

Insurance company controls.analysis made ​​by top management.testing calculation operations.security device.segregation performance.confidentiality.assignment of authority and responsibility areas.coordination between areas.documentation.defined levels of authorization