What Are The Functions Covered Under Policy Administration For Insurance

What Are The Functions Covered Under Policy Administration For Insurance

If we only take the United States insurance industry into picture then it is worth $419 billion annually. This magnanimous industry currently employs over 3 million people out of which nearly 50 percent are responsible for carrying out policy administration services. What exactly is this term? And, what are the functions that a policy administrator must perform?

What Does The Term Mean?

Before we look at the actual meaning with regards to Insurance, it would be worthwhile observing the etymology first. Public policy administration was the first kind of administrative process developed in the world where a government would set down policies or regulations and ensure that its citizens abided by it. The same policies in turn would also allow a government to function within a set framework, preventing it from violating rights of its citizens. This is the concept that insurance administration borrows.

Such an administration usually ensures that insurance contracts are documented, plaintiffs are addressed, claims are investigated and checks are performed, all within the legal framework of an insurance company. Basically, everything you see an insurance employee do falls under the vicinage of insurance administration.

The Functions Or Role Of Administration With Regards To Insurance Policies

1.      Rating – In order to price or rate policies a very complicated algorithm is used. This is to ensure that the claim is matched with the risk. Departments charged with performing this aspect of administration must extrapolate and tabulate data about crime rates, fire incidents, and other factors before assigning credit ratings to specific policies. This is what ultimately decides profits for an insurance agency.

2.      Insurance – What is an insurance company if it does not insure something? This basic function too falls under the jurisdiction of administration. By the help of appropriate technology, policies are created and printed such that the wording accurately reflects the terms and conditions of the company. This department is also responsible for filing of documents and archiving them for future reference.

3.      Billing – Consider this administrative duty to be at par with bookkeeping. Unless an insurance company keeps record of its financial transactions, it cannot file profits and tax returns, pay its employees and address claims. Moreover, there are government regulations that must be adhered to when it comes to keeping reserves, maintaining accounts. These things fall under the billing department’s responsibilities.

As one can see, policy administration is a large enough subject on its own. Maybe this is the reason why many agencies have turned towards computer software to manage some or all of their administrative requirements.