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The Process Approach in the Financial Management of Insurance Firms

Foundations of Management
Volume 12 (2020): Issue 1 (January 2020)
By:
Open Access
|Feb 2020

Figures & Tables

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.

DOI: https://doi.org/10.2478/fman-2020-0001 | Journal eISSN: 2300-5661 | Journal ISSN: 2080-7279
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Language: English
Page range: 7 - 18
Published on: Feb 20, 2020
Published by: Warsaw University of Technology
In partnership with: Paradigm Publishing Services
Publication frequency: 1 issue per year
Keywords:
process management,
process identification,
financial management process,
financial management process model,
process relationships,
process evaluation measures
Related subjects:
Computer sciences,
Business computing,
Business and economics,
Business management,
Management accounting, financial controlling, cost calculation, investment

© 2020 Lech Gąsiorkiewicz, published by Warsaw University of Technology
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

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