With the advent of insurance business, the risk associated with various kinds of activities can easily be diversified by the customers, but there are certain areas that are still largely untouched by the insurance schemes and products offered by the companies
The need is to develop a wide array of financial products and alternative schemes that can be utilized for the purpose of insuring difficult-to-insure risks, associated with various business activities. Financial Insurance is also known by the name of "Finite Risk Insurance" that caters to a variety of risks like underwriting risks, investment risk, credit risk and timing risk. The insurance product offered by the financial insurance company may be in the form of multi-year contracts to bear a limited exposure of risk of the customers.
Financial Insurance companies often deal with performance management issues as they cater to a highly vulnerable area of businesses. KPIs in this regard helps in spot lighting those aspects of the company that are critical in managing the performance effectively and efficiently. The performance of a Financial Insurance Company can be judged by using a number of KPIs arranged under four major perspectives namely, Financial Perspective, Underwriting Risk Perspective, Investment and Credit Risk Perspective and, Client Handling and Performance Perspective. Financial Perspective caters to KPIs like premium revenue growth, % increase in operating profits, market coverage, etc. Underwriting Perspective on the other hand includes KPIs in the form of expense ratio, reserve adequacy level, retention ratio, etc. Investment and Credit Risk Perspective comprises of KPIs such as % increase in investment returns, investment leverage, insurance duration, etc. Lastly, Client Handling and Performance Perspective is the mea sur
e of the company efforts to maintaining customer relationship, it takes into consideration KPIs such as frequency of customer complaints, % of service level agreements monitored, number of insurance programs offered, etc.
As the Financial Insurance Company is concerned with highly complex niche of operations, it has to simultaneously deal with a number of challenges. To start with, one of the major challenges faced by the company is of accurate estimation of risk linked with different financial insurance activities. Any variance in this area may result in huge losses for the insurance company. Customer demands may vary according to their needs, so a financial insurance company requires developing customized products to suit their requirements. The lack in expertise in this area may be another important challenge in front of the company. A large number of fraudulent claims may be alarming for the company, so it requires initiating right policies and methods to keep a check on these kinds of activities. Sales force management is another area which requires the attention of the insurance company.
KPIs works as a measurement tool to mark the performance of a financial insurance company. As mentioned earlier, KPIs highlights the key areas of a business which needs to be monitored and managed properly. It provides benchmarks with which the performance can be matched and resultant variance may be corrected by taking correct measures in time.
To sum up, a financial insurance company constantly needs to develop and provide customized insurance products to their customers so they can manage their risk portfolios effectively and KPIs come across as the most suitable means to keep them in good shape.