Accounting Question

Assignment Question(s):(15 Marks)

Q1. Discuss methods of setting premium rates in insurance companies (Manual rating, merit rating, judgement rating)

(5 Marks)

Answer:

Q2. Identify any two insurance companies in Kingdom of Saudi Arabia and explain any two insurance products offered by them. Your answer should be based on following points:

(5 Marks)

• Name of the Company
• Type of Insurance
• Premiums
• Significant features of the insurance product

Answer:

Q3: Discuss in detail the various functions involved in “Transaction Cycle” with suitable examples.(5 Marks)

Answer:

References

College of Administrative and Financial Sciences
Assignment 1
Deadline: Saturday 7/10/2023 @ 23:59
Course Name: Insurance Accounting
Student’s Name:
Course Code: ACCT 424
Student’s ID Number:
Semester: 1
CRN:
Academic Year: 1445 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: /Out of 15
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.
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Assignment Question(s):
(15 Marks)
Q1. Discuss methods of setting premium rates in insurance companies (Manual rating, merit
rating, judgement rating)
(5 Marks)
Answer:
Manual rate: It is used for similar large and common risks, such as car accident coverage.
Determining premiums is easy and similar, due to large and similar groups. Through statistical
data, we can know one type of car accident from another type, in addition to spare parts and other
inputs. (Accountants, 2018)
Merit rating: It uses more than one method at first (such as manual rating) and then adjusts the
premiums, because the risks are uncommon and large, such as fires. It is divided into three
sections:
• Schedule rate: It starts with the manual rate and then adjusts to the standard rate (by knowing
the greater exposure and the lesser exposure).
• Experience rate: It depends on the insured’s previous coverage, then the premiums are
adjusted in the future and is used in workers’ compensation insurance.
• Retrospective experience rating: It differs from the experience rating by adjusting the
premiums during the period of insurance coverage on the basis of actual experience (not
previous experience). (Accountants, 2018)
Individual rate or (judgement): It depends on the skill and experience of the rate maker, and is
used for large and unusual risks. (Accountants, 2018)
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Q2. Identify any two insurance companies in Kingdom of Saudi Arabia and explain any two
insurance products offered by them. Your answer should be based on following points:
(5 Marks)
i.
ii.
iii.
iv.
Name of the Company
Type of Insurance
Premiums
Significant features of the insurance product
Answer:
Name
of
Company
the
Saudi Reinsurance Company
to transact cooperative reinsurance
and related activities inside and
Type of Insurance
outside the Kingdom of Saudi
Arabia.
Reinsurance in: Engineering, Fire,
Marine, Motor, General Accident
Premiums
,Protection, Health, Speciality,
Inherent Defects Insurance, Others.
Facultative and treaty solutions both
on a proportional and nonproportional basis.
Significant features Strong underwriting expertise in
of the insurance Engineering, Property, Marine,
product
Casualty, Motor, Retro, and Life &
Medical.
A range of reinsurance solutions to
the Takaful industry.
references
(Saudi Reinsurance Company, 2022)
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ALLIED COOPERATIVE
INSURANCE GROUP
to transact cooperative insurance
operations and related activities in
the Kingdom of Saudi Arabia.
Medical, Motor, General Accident,
Others
The Company shall settle the claims
with all fairness and integrity
without any compromises within a
maximum period of fifteen Hijri
days (for individuals) and forty-five
Hijri days (for companies) from the
date of receipt of the completed
claim from the claimant.
(ALLIED COOPERATIVE
INSURANCE GROUP, 2022)
Q3: Discuss in detail the various functions involved in “Transaction Cycle” with suitable
examples.
(5 Marks)
Answer:
The transaction flow pattern through the insurance claims cycle consists of:
Accept and process the claim
-Receiving notice of loss, directly or indirectly.
-Assign a file number to the claim in the claim system.
-Check the policy coverage (covers the loss or not).
✓ The insurance company uses a system or application called the claim system, through
which claim data is stored, processed by adding or modifying documents, and estimating
the claim. (Accountants, 2018)
Claim adjustments and estimation
-Field investigation.
-Claim evaluation and negotiation.
-Approval from the insurance company’s claims department. (Accountants, 2018)
Settlement of the claim
-After all documents are received and completed, they are reviewed and ensured that they
are covered under the contractual terms, accurate and consistent.
-The authorization is documented within the claim system to settle the claim.
-Payment via transfer or check, via the claim system, then the facility’s obligation to claim
expires, and the paid losses are recorded and posted to the general ledger. (Accountants,
2018)
In the Kingdom of Saudi Arabia, the insurance sector is subject to the supervision of the Central
Bank of Saudi Arabia (in the process of establishing a specialized insurance authority). (Arabia,
1999).
The Central Bank issued a number of instructions to regulate the procedures for compulsory insurance
claims with insurance companies. It obligated insurance companies to adopt the unified form for
compulsory motor insurance claims (third party) for individuals. The form includes unification of the
documents required in this regard and unified procedures that insurance companies adhere to in order
to settle the compulsory (third-party) vehicle insurance claim for individuals, most notably the
necessity of informing the applicant upon receipt of the application of any deficiencies in the required
documents, with the company’s commitment to inspect the vehicle. Within a period not exceeding
three days from the date of submitting the claim. (Arabia, Statement of the Central Bank of Saudi
Arabia regarding procedures for settling compulsory vehicle insurance claims for individuals, 2016)
The unified form consists of several sections that briefly consist of:
o Information of the claimant (third party).
o Information and description of the details of the accident.
o Acknowledgment and acceptance – specific to the third party claim.
o Receipt document (claim number – claim information – claim status).
o Customer Protection Principles (The company is committed to settling the amounts of claims
determined by the General Traffic Department or Najm Insurance Services Company or the entities
licensed to do so covered under the unified compulsory vehicle insurance policy in all fairness and
justice without any bargaining within a maximum period of (15) fifteen days from Date of receipt
of the completed claim documents.
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o Documents required to submit a claim (third party) – (Vehicle damage\public property\private
property\injury\death).
References
Accountants, A. I. (2018). Audit and Accounting Guide Property and Liability Insurance Entities. Durham.
ALLIED COOPERATIVE INSURANCE GROUP. (2022). Board of Directors report. Riyadh: ALLIED COOPERATIVE
INSURANCE GROUP.
Arabia, t. C. (1999). cooperative_insurance_companies_control_law. RIYADH: the Central Bank of Saudi
Arabia.
Arabia, t. C. (2016, 11 8). Statement of the Central Bank of Saudi Arabia regarding procedures for settling
compulsory vehicle insurance claims for individuals. Retrieved from the Central Bank of Saudi Arabia:
https://www.sama.gov.sa/ar-sa/news/pages/news01122016.aspx
Saudi Reinsurance Company. (2022). Board of Directors report. Riyadh: Saudi Reinsurance Company.
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