Corporate Risk Management - Essay Example

? Corporate risk management Topic: 6) Risk manager for a fleet of motor vehicles Contents Introduction 3 Discussion 3 Conclusion 6 Reference 8 Introduction Motor insurance is one important category of general insurance and it is also known as car insurance or auto insurance. This is the insurance which is purchase by individuals who owns cars, trucks, motorcycles etc. The primary use of this insurance is to provide financial protection against any damage from traffic collisions that occurs when in operation. It can result from physical damage caused by traffic collision. Each region or country has their own rules and regulations to be followed. There are many additional features like giving financial protection against theft of the vehicle or possible damage to the vehicle. It is illegal for any person to run their vehicle in the road without any motor insurance. Most of the jurisdiction are applied both to the drivers well as to the car, though degree of severity varies. There are many countries where there is a scheme like “pay-as-you-drive”. Here the driver has to pay the premiums through the gasoline tax that he uses. Using this both the problem get solved, one like charging the uninsured motorists and another is to charge them based on the number of miles. This increases the efficiency of the insurance through streamline collection. But associated with it is the risk of insurance companies charging higher premiums than others. But being a compulsory thing, the motor man sometimes faces the risk of paying higher insurance in cases if he doesn’t get any options. Discussion The manager here owns a fleet of motor vehicles. The problem here is that the motor insurer has given them a premium quotation which appears to be high to them. Hence the manger has to look for alternative course of action. The manager must look for other motor insurance provide. The manager must know what the options available to him in the market are, like he can go to any brokerage house where there is a number of insurance provider tied up with them. Manager must understand the features offered by the insurance provider (Frenkel, Dufey, Hommel and Rudolf, 2005, p. 543). There are several basic features which he needs to look at. Like the Liability Only Policy. This type of insurance policy covers the liabilities of insure towards third parties only. It is mandatory for the each and every vehicle which runs in any the public place as per the Motor Vehicles Act of any country. Next important step is the Package Policy. This states that for any loss or any damage to the vehicle insured it will be covered subject to the terms and conditions to the policy. The manager must understand that premiums are calculated on various factors like type, usage, model, place of registration, past claims of history etc. of the vehicle under consideration. Hence the approach should be known to him (Vinnem, 2007, p. 32). He must understand that while buying a fresh new insurance during the renewal he can go for other companies who provide the insurance. The manager must also know that if the premium is charged too high he can go to the insurance provider and ask for the exact details of the components where the money is being charged high. He must mention whether the vehicle runs on Gas or on Petrol because each of them will have a different cost attached to it (Khatta, 2008, p. 241). Hence the manager should understand the fact that there is a risk of moving from one insurer to another new insurer. For any new client the motor car insurance provider will check what is the vehicles damage, what is the cc of the car and accordingly quote the premium. But it might happen that government may increase tax rate which is applicable to the motor insurance. And as a result the premium may again rise (Merkin and Smith, 2004, p. 387). Hence the manger has to consult many insurance providers at the same time and assess the risk by discussing with them. There are many steps to assess the risk. First step is to identify hazard, here the managers must know why the motor insurer is trying to charge high premium. Premiums re based on age, driving history, gender, make model of the vehicle and the year of manufacture. In some states the insurer takes into consideration credit history also. If the car is financed, the lender is required to carry out some comprehensive insurance. This type of insurance protects the car from other things like hail, fire, theft, vandalism. Hence to avoid going for high insurance premium the manager must use Internet to obtain free quotes from several insurance companies (Cannar, 1994, p. 327). The manager also must look that he has maintained a good driving history; it is the best defence which a driver has at getting an affordable insurance coverage. Hence, if the manager has not violated any traffic laws and have paid the premiums previously on time then the premium will not be charged at high rates. Again the insurance rates are based on the type of car one drives (Todd, 2012, p. 57). If the managers drive a car which has low safety ratings, high incidence of vandalism, and a high rate the premium rates will go up. The second step of risk assessment is deciding who might be harmed and how. The manager must understand the role insurer plays in the scenario. In any accident of motor vehicles the insurance agents has to ascertain whose fault it was and who got damaged. If there is any third party insurance clause, then extra premium will be charged. Hence the manager must keep in mind if there is any third party insurance clause in it. The manager can purchase insurance policy based on Personal Injury Protection will pay all the reasonable and necessary medical expenses if one is hurt in an accident. It can also include feature like Residual Bodily Injury and Property Damage Liability. If the manager wants some additional coverage then the price will also rise. The third step is to evaluate the risk and decide on precaution insurance. For companies who own a fleet of motors there is a high chance that the company will face huge cost if the insurance premium of any car is increased. It will result in large outflow of cash. Hence the manager must take precaution like checking whether the insurance premium charged is according to the present rate or they are charging high rates. If must look at additional clause which might rise the premium rates. Many a time the motor car insurance company tries to give extra feature which may not be needed by the buyer. This inflates the rate of the premium. The manager must clearly set and discuss with the insurance agents the clauses which he wants to include. This will keep the insurance premium rates from going high. The fourth step is to record the finding and implement them. The manager after finding out the quotes from all the insurance companies through the internet must decide on the insurance product which will give him all the features at an affordable rate. It should include the basic features and also few additional features which is mandatory for the components. The manger must also do a background check on the insurance companies and find out its reliability, lie finding out the claim settlement process. At the same time he should be aware of the company’s policy of claim settlement. This idea is crucial because at the time of need, they will need money fast, and if the process takes a long time the money will be of no use. The last step is review of the assessment. This indicates that as motor insurance is valid for only one year and in each year, once its coverage gets over, the managers must look at new opportunities that exist in the motor car insurance market. It may happen that new company’s shave started their business in motor insurance. Though it is advisable not buy any insurance products from any new companies, but sometimes they do offer the lowest insurance premiums with extra features. Nowadays there is the opportunity to buy insurance online. It generally gives the lowest rates compared to other modes of insurance. The manger must also review the services which the present insurance agent gives and accordingly take decision whether to carry on with the same insurance or move on to the next best motor insurance. Conclusion Motor insurance is nowadays important from legal point of view because it is illegal to carry and drive without any insurance. Hence the major point of consideration for any person owning a fleet of motors is that they should get a discount for covering a large fleet of motors. Also they should get the best price deal, among other products available in the market. Hence the managers must first get complete information before trying to buy insurance. It should also consider the possibility of choosing a wrong motor insurance company by taking only price into consideration. It must also consider their claim settlement process and look into any complaints thereof. Reference Cannar, K. 1994. Motor Insurance: Theory and Practice. London: Witherby. Frenkel, M., Dufey, G., Hommel, U. and Rudolf, M. 2005. Risk Management: Challenge and Opportunity. New York: Springer. Khatta, R.S. 2008. Risk Management. New Delhi: Global India Publications. Merkin, R.M. and Smith, J.S. 2004. The Law of Motor Insurance. London: Sweet & Maxwell. Todd, W.F. 2012. Motor Insurance, the Treatment of Mechanical Road Transport Risks. Stockbridge: HardPress. Vinnem, J.E. 2007. Risk Management: With Applications from the Offshore Petroleum Industry. New York: Springer. Read More