Incorporating Internal Financial Controls over Financial Reporting Empirically- Series 1 –Insurance Process (Listed Companies Call)

As I already stated in my introductory part of this topic, any process will be parted into static and strategic meaning thereby one which is in as it is form and the other requires professional skepticism. Above that, static facts w.r.t. terminologies are also tuned here. Let us sail beyond statutory sections sight u/s 134, 143,177 of Companies Act, 2013 by carving into crux of Insurance Management Process.

Also Read: Incorporating Internal Financial Controls over Financial Reporting Empirically Series 2 –P2P (Listed Companies Call)

Draft design depicted as:-

  • Radical round
  • Strata-static sphere
  • CA’s Substance
  • Wrap up
  • Vocab wall

♦ Radical Round

Radical Round

It begins with a plan to cover what, how much, with or without additional riders, from whom and all allied aspects. Then takes step ahead to calculations and coverage cross linked with various departments.*Conditions apply is not the last cut but first phase to peruse any policies. After free look period of reading * marks and exclusions that provides exotic edge to earmark; comes the claims, if any be clarified till settlement stage. Review of under/ over coverage, premium refunds, etc. rides reassessment road which again lands at planning mode!

♦ Strata- Static Sphere

1. SOP

SOP, once sent to us for evaluation, sets the stage for starting this process. Following facts from it:-

  • Coverage and classification of risk
  • Criteria to mitigate risk of the Company
  • Assumptions and methods used for re-instating /valuing assets. Are we missing any figures here? Yes, illustrative calculations, trends, factors, etc. figured with past policies drive the concept to start anything with opening balance except 1st time policies.
  • Approval matrix

2. Valuation and coverage criteria

Valuation is either internally or by 3rd party based on extent of coverage. Broadly risk is categorized as business related and employee related. Readiness to read policies reduces the risk of refrained recognition in our reports.

3. Payment and renewal

GST glide to payment gateway with alert to auto renew or review renew requires cautions call. Renewal be streamlined to one date rather than different dates for different polices leading by default chance to default!

4. Recording in books of accounts

Purpose Receipts Payments
Prepaid point Recoveries of claims Premium
Adjustment aspect Refund of undeclared amount/ Return of premium clause Cash deposit with Insurer for addition/deletion in cover

5. Claims and settlement

Clumsy cluster to crack! Yes, it is. Imagine a pre-covid scenario when we used to go at work place.

“Our journey from home via own or company vehicle visiting at corporate office. Those work stations and morning huddles, business meets vs. factory feeds. Third party site visits and transporting back at home.”

Vehicle, group policies, fixes assets, IT, transit, loss of profit, burglary, director’s officer’s liability and so on  are some snaps sought for Insurance.

Almost all departments are covered. Cluster crunch for various aspects under insurance and mechanism set/ communicated to stakeholders seems like boiling the ocean. First point of contact for types of claim till submitting documents for settlement of claims catches care by clouds of departments. Are we addressing alternative of minimum threshold to raise the claim? That mechanism to debit vendor or employee for specified amount. Withdrawal of claim due to any reasons to be evaluated effectively as it may stretch its share to hit Profit & Loss account of company.

CA’s Substance


Ageing in Insurance? Yes, can be drawn for TAT since rising of claims till settlement stage. Point which plays pivotal role here is not only painting ageing in excels but also rating reasons resulting to idle time for settlement of claim.

E.g. BRS – Few standard reasons for closing as per bank vs. books; Incidental way for insurance can also be identified. One which is on account of internal controls like “ Documents pending for submission from user” while other on account of external factors like” Awaiting for surveyors report”,etc. can be drawn.

Only after assessment of above, procedure produces proper outcome.


From sowing seed of valuation for varied areas assured, way forward to reflection in stock statement till refunds of premium/ deposits and outlook towards opportunity cost of deposit for deletion/ addition in coverage Vs. refund at the end of policy term or quarterly payment scheme instead of onetime payment as per level of coverage; demands negotiation niche for company via broker or direct mode.

B) Beyond figures

Mix-match method

As it is listed company’s call, we see a lot of repetitive add-ons on each policies alternative to stand alone policy for that add-on.

E.g. Terrorism generally is the additional cover in each policy while standalone terrorism also available.

This point may be already undertaken and if not, it finds its place in non- key/ operational aspect.

Akin advice to our clients for floaters plans or individual plans persist here.

Group policies

One must be aware of pre- existing illness without insurance or failing to renew insurance drags down to 3 to 4 years as waiting period in contradictory to enrolment in group/ corporate policies, which eliminates this risk at all! Switch of insurer instead of renewal requires precision poll.

Parallel advice to our client who recently joined the job.

Review reports by Insurers

Some insurers in form of top up service releases review reports which give insight to areas for betterment/ suggestions serving a suited insight.

♦ Wrap up

The basic reason to take cover is to mitigate risk, but what if mitigation process itself is under risk? That is why IFC for Insurance management. An umbrella of insurance is of no use unless we know how to open it; rather than becoming Popatlal of Tarak Mehta ka oolta Chashma who always keep umbrella out of love & affection. It’s good unless we open it, but the awareness arch in lieu of premium paid ought to be at our fingertips.

♦ Vocab Wall

Though it is web of words, will have only gist of basic blocks —

Word Meaning
Burglary Insurance against loss or damage resulting from or following the unlawful breaking and entering of designated premises or places of safekeeping
Corporate buffer Corporate buffer is a common pool of coverage maintained at an organization level. This can be availed in case of any medical emergency falling under listed critical illness, after exhaustion of individual employee’s Family Floater coverage. This is extended to Employee, Spouse & Children.
Copay Co-pay is out-of-pocket expenses to be borne by employee for each claim
Indemnity Insurance Indemnity is a contractual obligation of one party to compensate the loss incurred to the other party due to the acts of the indemnitor or any other party
Insurable Interest Insurable interest refers to the interest of a person, financial, or otherwise, in obtaining insurance for a person or property.
 Proximate cause Is an event sufficiently related to an injury that the courts deem the event to be the cause of that injury.
Subrogation Subrogation in insurance is a term used to describe a legal right the insurance company holds to legally pursue a third-party responsible for the damages caused to the insured.
Designation of Property clause For the purpose of determining, where necessary, the item under which any property is insured, the insurers agree to accept the designation under which the property has been entered in the insured’s books.
Agreed Bank Clause All policies in which a Bank has a partial interest shall be made out in the name of the Bank and Owner or Mortgagor along with other agreed declarations.
Return of Premium Clause If the Insured declares at the latest nine months after the expiry of any policy year that the Gross Profit earned during the accounting period of twelve months most nearly concurrent with any period of insurance, was less than the sum insured thereon a pro rata return of premium not exceeding one third of the premium paid on such sum insured for such period of insurance shall be made in respect of difference.

Thank You

Author Bio

Qualification: CA in Job / Business
Company: Protiviti India Member Pvt Ltd
Location: Mumbai, Maharashtra, India
Member Since: 30 Jul 2019 | Total Posts: 13
I am working in industry since 4 years. I keep on doing some certifications mostly in the field of investments or stock markets, but keeping it intact with oneself is of no use, unless we share knowledge, so I started writing … Your feedback will bring immense value to me, hence keep sharing. Y View Full Profile

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March 2024