“Duties and responsibilities of professional organizations having link with insurance”
There are various professional organizations namely, Credit Rating Agency, Audit Firm and Loss Surveyors etc. who matter when it comes to insurance business.
Each of the above companies play an important and significant part in insurance.
It is in this context that these companies should deliver professional and competent services and maintain the highest standard of quality and business ethics.
They should work with integrity without compromising professionalism.
We shall now discuss below about the duties and responsibilities of each of these companies.
1. Credit Rating Agency
There are several internationally reputed Credit Rating Agencies namely, Standard & Poors (S&P), AM Best, Moody and Fitch.
Important functions of these credit rating agencies include sovereign credit rating and credit rating of an individual business enterprise forming a part of the corporate world.
Credit rating lends credibility to a business organization in the eyes of the public and concerned authorities.
It certainly goes a long way in building the reputation of a business organization which plays an important role in today’s competitive market.
Companies with credit rating have a distinct advantage over the ones without credit rating.
Credit rating is done mainly on the basis of the financial strength of the company. In other words it assesses the financial health and stability of the company.
A company with “AAA” credit rating represents a very strong company financially. Similarly a company with a lower credit rating such as “BBB”, or BB+, BB- etc. represents a less strong company in terms of financial strength.
In the insurance industry, an insurance company with a higher credit rating enjoys a higher degree of respect in the market compared with a company having a lower credit rating.
Credit rating agencies should be fair in their assessment and take into account all aspects of a business before approving its credit rating.
2. Audit Firm
Audit Firm including Chartered Accountant Firm is responsible for annual audit of a business. Their responsibilities include preparing Profit and Loss account, Balance Sheet etc.
It is a statutory requirement for insurance companies to submit a set of financial reports to Insurance Development and Regulatory Authority (IDRA) and other relevant authorities namely Bangladesh Securities and Exchange Commission in case of listed companies etc.
It is a requirement that these financial reports must be prepared by an external audit firm.
However, authorities may appoint auditors selected by them to conduct special audits where the situation warrants.
However, insurance companies may conduct internal audits on a quarterly or half yearly basis.
It is the responsibility of the external audit firm to examine books of account, present a correct and impartial account of the business, find out flaws and deficiency/loopholes in the system and recommend improvements where necessary.
Audit firms should prepare reports in accordance with the established international accounting practices and as per the requirements of the authorities.
Cases of auditors “cooking books” as per the wishes of the insurer is not unheard of or unknown in many territories including Bangladesh.
Auditors should be fair, transparent in their work and desist from all any temptation in discharging their duties and responsibilities.
3. Survey/Loss Adjusting Firm
Survey or loss adjusting firm plays a crucial role in dealing with insurance claims.
The responsibility of survey firm or loss adjusting firm includes finding out the exact cause of the loss, extent of the loss, negotiation of settlement of claim, salvage and recovery aspect etc.
It is essential that the surveyors or loss adjusters are well conversant with the terms and conditions of the insurance policy and international best practices.
They should be professionally qualified having sound work knowledge and experience.
It is a highly technical job requiring special skill and expertise or technical knowhow.
On top of everything a surveyor or a loss adjuster should be fair, independent, impartial or unbiased in discharging their duties without being influenced by any quarter.
Mr. Haque was brought up and educated in Dhaka. He obtained his master’s degree with honours in Biochemistry from University of Dhaka (DU). He spent nearly four decades in Dubai (UAE) working for several multinational insurance companies in various capacities. He obtained his Fellowship (FCII) from The Chartered Insurance Institute (CII), London, Associateship (AIRM) from The Institute of Risk Management (IRM), London, Associateship (ACIArb) from The Chartered Institute of Arbitrators (CIArb), London. He has authored several books on insurance which have been acclaimed both at home and abroad. He contributes regularly on insurance matters in various online insurance news portals and is a founder General Secretary of Bangladesh Insurance Professionals Society (BIPS).