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The Process Approach in the Financial Management of Insurance Firms

Lech Gąsiorkiewicz
Lech Gąsiorkiewicz
   | 20 feb 2020
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Publicado en línea: 20 feb 2020
Páginas: 7 - 18
DOI: https://doi.org/10.2478/fman-2020-0001
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© 2020 Lech Gąsiorkiewicz, published by Sciendo
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Figure 1

The process architecture of insurance activity (Source: Gąsiorkiewicz, 2019)
The process architecture of insurance activity (Source: Gąsiorkiewicz, 2019)

Figure 2

Model of the process of the financial management of insurance companies (Source: Authors’ own research)
Model of the process of the financial management of insurance companies (Source: Authors’ own research)

Figure 3

Model of the operational level of the financial management process (Source: Authors’ own research)
Model of the operational level of the financial management process (Source: Authors’ own research)

Figure 4

The relationship between the financial management process and other processes implemented in insurance companies (Source: Authors’ own research)
The relationship between the financial management process and other processes implemented in insurance companies (Source: Authors’ own research)

Measures for assessing the financial management process of insurance companies (Source: Gąsiorkiewicz, 2018)

Measure nameMeasure formula
Measure of covering the capital solvency requirement with own fundsOwn resourcesSolvency capital requirement*100%{{{\rm{Own}}\,{\rm{resources}}} \over {{\rm{Solvency}}\,{\rm{capital}}\,{\rm{requirement}}}}*100\%
Measure of covering the minimum capital requirement with own fundsOwn resourcesMinimum capital requirement*100%{{{\rm{Own}}\,{\rm{resources}}} \over {{\rm{Minimum}}\,{\rm{capital}}\,{\rm{requirement}}}}*100\%
Deductible payment capability measureTechnical provisions − net of reinsurance + other creditorsLiquid assets*100%{{{\rm{Technical}}\,{\rm{provisions}}\, - \,{\rm{net}}\,{\rm{of}}\,{\rm{reinsurance}}\, + \,{\rm{other}}\,{\rm{creditors}}} \over {{\rm{Liquid}}\,{\rm{assets}}}}*100\%
Measure of securing the payment of damagesTechnical provisions − net of reinsurance + capital and reservesWritten premiums − net of reinsurance*100%{{{\rm{Technical}}\,{\rm{provisions}}\, - \,{\rm{net}}\,{\rm{of}}\,{\rm{reinsurance}}\, + \,{\rm{capital}}\,{\rm{and}}\,{\rm{reserves}}} \over {{\rm{Written}}\,{\rm{premiums}}\,{\rm{ - }}\,{\rm{net}}\,{\rm{of}}\,{\rm{reinsurance}}}}*100\%
Technical activity profitability measureTechnical resultWritten premiums − net of reinsurance*100%{{{\rm{Technical}}\,{\rm{result}}} \over {{\rm{Written}}\,{\rm{premiums}}\,{\rm{ - }}\,{\rm{net}}\,{\rm{of}}\,{\rm{reinsurance}}}}*100\%
Return on sales measureNet financial resultGross written premiums*100%{{{\rm{Net}}\,{\rm{financial}}\,{\rm{result}}} \over {{\rm{Gross}}\,{\rm{written}}\,{\rm{premiums}}}}*100\%
Return on equity measureNet financial resultEquity*100%{{{\rm{Net}}\,{\rm{financial}}\,{\rm{result}}} \over {{\rm{Equity}}}}*100\%
Return on assets measureNet financial resultAssets*100%{{{\rm{Net}}\,{\rm{financial}}\,{\rm{result}}} \over {{\rm{Assets}}}}*100\%
Premium monetary efficiency measureGross written premiums − refunds of gross written premiumGross written premiums *100%{{{\rm{Gross}}\,{\rm{written}}\,{\rm{premiums}}\,{\rm{ - }}\,{\rm{refunds}}\,{\rm{of}}\,{\rm{gross}}\,{\rm{written}}\,{\rm{premium }}} \over {{\rm{Gross}}\,{\rm{written}}\,{\rm{premiums }}}}*100\%
Gross claims ratioGross claims paid + gross change in provision for claims oustandingGross earned premiums*100%{{{\rm{Gross}}\,{\rm{claims}}\,{\rm{paid}}\,{\rm{ + }}\,{\rm{gross}}\,{\rm{change}}\,{\rm{in}}\,{\rm{provision}}\,{\rm{for}}\,{\rm{claims}}\,{\rm{oustanding}}} \over {{\rm{Gross}}\,{\rm{earned}}\,{\rm{premiums}}}}*100\%
Damage deductible measureClaims paid − net of reinsurance + change of the state of technical provisions − net of reinsuranceEarned premiums − net of reinsurance*100%{{{\rm{Claims}}\,{\rm{paid}}\,{\rm{ - }}\,{\rm{net}}\,{\rm{of}}\,{\rm{reinsurance}}\,{\rm{ + }}\,{\rm{change}}\,{\rm{of}}\,{\rm{the}}\,{\rm{state}}\,{\rm{of}}\,{\rm{technical}}\,{\rm{provisions}}\,{\rm{ - }}\,{\rm{net}}\,{\rm{of}}\,{\rm{reinsurance}}} \over {{\rm{Earned}}\,{\rm{premiums}}\,{\rm{ - }}\,{\rm{net}}\,{\rm{of}}\,{\rm{reinsurance}}}}*100\%
Acquisition cost measureAcquisition costsGross written premiums*100%{{{\rm{Acquisition}}\,{\rm{costs}}} \over {{\rm{Gross}}\,{\rm{written}}\,{\rm{premiums}}}}*100\%
Administrative expenses measureAdministrative expensesGross written premiums*100%{{{\rm{Administrative}}\,{\rm{expenses}}} \over {{\rm{Gross}}\,{\rm{written}}\,{\rm{premiums}}}}*100\%
Insurance activity cost measureNet − operating expensesGross written premiums*100%{{{\rm{Net}}\, - \,{\rm{operating}}\,{\rm{expenses}}} \over {{\rm{Gross}}\,{\rm{written}}\,{\rm{premiums}}}}*100\%
Cost ratio for the financial management process in administrative costsCosts of the financial management processAdministrative expenses*100%{{{\rm{Costs}}\,{\rm{of}}\,{\rm{the}}\,{\rm{financial}}\,{\rm{management}}\,{\rm{process}}} \over {{\rm{Administrative}}\,{\rm{expenses}}}}*100\%
Ratio of the financial management cost dynamicCosts of the financial management process at the end of the periodCosts of the financial management process at the beginning of the period*100%{{{\rm{Costs}}\,{\rm{of}}\,{\rm{the}}\,{\rm{financial}}\,{\rm{management}}\,{\rm{process}}\,{\rm{at}}\,{\rm{the}}\,{\rm{end}}\,{\rm{of}}\,{\rm{the}}\,{\rm{period}}} \over {{\rm{Costs}}\,{\rm{of}}\,{\rm{the}}\,{\rm{financial}}\,{\rm{management}}\,{\rm{process}}\,{\rm{at}}\,{\rm{the}}\,{\rm{beginning}}\,{\rm{of}}\,{\rm{the}}\,{\rm{period}}}}*100\%

The stages of implementing process management (Source: Bitkowska, 2019)

AuthorStages of process management
(Talwar, 1993)

defining the organization’s strategy,

acquiring and developing such organizational competences and skills necessary for the effective implementation of strategy,

designing basic processes that support the development and use of organizational competences,

implementation of the process structure.

(Houy, Fettke and Loos, 2010)

development of process management strategies,

process definition and modelling,

implementation of processes in the organization,

realization of the implemented processes,

monitoring and controlling the implementation of processes,

process optimization and improvement.

(Rummler and Brache, 2010)

strategy formulation,

description and analysis of the current organization,

description and analysis of currently running processes,

preparing a map of processes and their measures,

designing the organizational structure,

preparing a description of each function in the structure,

preparation of job descriptions,

designing an employee effectiveness system for each position,

introducing management processes.

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Computer Sciences, Business Computing, Business and Economics, Business Management, Management Accounting, Financial Controlling, Cost Calculation, Investment
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