With the strong finance capacity, professional and active staffs, high client service quality and multi insurance products, PJICO has achieved good business results.[r]
(1)Cohort 2016 – 2017
MASTER THESIS
RESEARCH ON FACTORS AFFECTING EFFICIENCY OF HULL INSURANCE IN PETROLIMEX JOINT STOCK
INSURANCE CORPORATION (PJICO)
Author : Ngo Thi Nhi Thuy
Advisor : Nguyen Thi Hai Duong, PhD
(2)TABLE OF CONTENTS
LIST OF TABLE iii
LIST OF FIGURES iv
INTRODUCTION
CHAPTER I: INTRODUCTION TO PETROLIMEX JOINT-STOCK INSURANCE CORPORATION AND HULL INSURANCE MARKET
1.1 Introduction to Petrolimex Joint-Stock Insurance Corporation (PJICO)
1.2 Introduction to Hull Insurance Market
1.2.1 Hull Insurance History
1.2.2 Ship Insurance in PJICO 11
CHAPTER II: HULL INSURANCE AND THEORITICAL FRAMEWORK 21
2.1 Concepts in Hull Insurance 21
2.2 Claim Settlement 24
2.2.1 Types of Losses in Hull Insurance 24
2.2.2 Loss Adjustment 25
2.2.3 Principles of Claim Settlement in Hull Insurance 25
2.2.4 Exclusion in Hull Insurance 25
2.3.5 Reduction in Indemnity 26
2.3 Theoritical Framework 27
2.3.1 Factors Affecting Hull Insurance Efficiency 27
2.3.2 Data 29
CHAPTER III: ANALYSZE AFFECTING OF FACTORS TO HULL INSURANCE OF PETROLIMEX JOINT-STOCK INSURANCE CORPORATION 31
3.1 Descriptive statistics 31
3.1.1 Affect of PJICO’s trademark 31
(3)3.1.3 What you think about Ship Insurance Product of PJICO? 33
3.1.4 Affecting of Service Quality on Hull Insurance of PJICO 39
3.1.5 Factors are need to focus 45
4.2 Assessment and Evaluation of Interviewed Experts 47
CHAPTER IV: RECOMMENDATIONS AND SOLUTIONS TO IMPROVE HULL INSURANCE EFFICIENCY OF PETROLIMEX JOINT-STOCK INSURANCE CORPORATION 49
4.1 Recommendations 49
4.2 Solution 50
4.2.1 Improving Service to Take Care of Clients 51
4.2.2 Well Carrying out the Claim Adjustment 51
4.2.3 Enhancing Competitiveness and Image of PJICO 54
CONCLUSION 56
REFERENCES 57
(4)LIST OF TABLE
Table 1.1 Brief financial reports 2013 – 2016
Table 3.1 Evaluation affecting of PJICO’s trademark 31
Table 3.2 Evaluation affecting of PJICO’s financial capacity 32
Table 3.3 Evaluation affecting of PJICO’s product diversification 34
Table 3.4 Evaluation affecting of PJICO’s product coverage 35
Table 3.5 Evaluation affecting of PJICO’s product endorsements 36
Table 3.6 Evaluation affecting of PJICO’s product premium 37
Table 3.7 Evaluation affecting of PJICO’s product terms and conditions 38
Table 3.8 Evaluation affecting of PJICO’s information provision 40
Table 3.9 Evaluation affecting of PJICO’s professionalism 40
Table 3.10 Evaluation affecting of PJICO’s professional knowledge 41
Table 3.11 Evaluation affecting of PJICO’s supporting and guiding clients 42
Table 3.12 Evaluation affecting of PJICO’s supporting in claim settlement 42
Table 3.13 Evaluation affecting of PJICO’s taking care of clients after issuing policies 43
Table 3.14 Evaluation affecting of PJICO’s insurance procedure 44
Table 3.15 Evaluation affecting of PJICO’s claim settlement procedure 44
Table 3.16 Evaluations of PJICO’s Specialists 46
(5)LIST OF FIGURES
Figure 1.1 Organizational Structure of PJICO 7
Figure 1.2 Premium Revenue Structure of PJICO in 2016 11
Figure 1.3: Revenue share of non-life insurance market in 2016 12
Figure 2.1 Factors effect Hull Insurance Efficiency 28
Figure 3.1 Evaluation of PJICO’s trademark 32
Figure 3.2: Evaluation of financial capacity of PJICO 33
Figure 3.3: Evaluation of the diversification of products in PJICO 34
Figure 3.4: Evaluation of coverage in PJICO 35
Figure 3.5: Evaluation of Endorsements in PJICO 36
Figure 3.6: Evaluation of premium in PJICO 38
Figure 4.7: Evaluation of terms and conditions of PJICO 39
Figure 3.8: Evaluation of service quality of PJICO 45
(6)(7)INTRODUCTION 1 Rationales
Accident and risk are factors always existing in people lives Those accidents and risks can occur due to objective conflict between people and nature or known as natural disasters Also, risks can arise from manufacture activities In term of marine industry, a vessel carrying cargo from this port to another may face a lot of risks such as stranding, collision, fire, wet cargo due to storms, accident and/or sickness of crew… These risks can cause other risks, leading to serious losses The companies that suffers the losses is affected It may have to bear small losses making the business and manufacture interrupt while big losses can make the companies going bankrupt totally
In order to face unforeseen losses, the best way is using Insurance It means that the Insured transfer their risks to insurance companies (Insurer)
Because of that, insurance has been appeared Insurance demand has been increasing when economy and living standards improve Thank to economic as well as cultural exchange among countries in the world, the insurance has been developed and expanded rapidly
―Insurance is a guaranty of the insurer to compensate to the insured in case of loss under scope of cover provided the Insured pay expenses for himself or the Third party‖
"Insurance is an activity whereby the insurer makes a statutory obligation to pay indemnity for the insured in the event of the insured event provided that the other party pays a premium to the insurer‖
In the insurance contract, the insured is responsible for paying premium and the insurer is responsible for settling claim in case of loss
(8)economy The service quality has contributed considerably to the growth and efficiency of insurance industry In comparison with other types of industries, insurance is still young industry but it has full potential to develop further During the implementation of insurance, there are still lots of challenges and difficulities that need more researches
In many consecutive years, hull insurance was not profitable due to economi crisis in general as well as the downsizing of Vietnam shipping industry in particular However, by the end of 2016, the hull insurance has been carried out by 29 non-life insurance companies During implementing this line of insurance, new companies always would like to attract clients with their policies such as reducing premium or increasing bonus to their clients
Insured objects of this line of insurance often have big value which is up to hundreds of billions Only some clients participate under compulsory aspect Normally, all clients are aware fully the benefit and necessity of insurance They would like to recieve support for their business after the loss In addition, they look forward to receiving necessary consulting opinions from insurers for their business The clients would like to renew the contract with insurers based on service quality besides premium rate and bonus/expenses
For all above reasons, during my internship in Hull and P&I Department of PJICO, I decide to choose the topic “Research on factors affecting Efficiency of
Hull Insurance in Petrolimex Joint Stock Insurance Corporation (PJICO)” for
my thesis
With the above topic, the research will focus on analyzing and showing measures, solutions to upgrade the efficiency of Hull insurance in development of PJICO
2 Research Objective
(9)3 Subject and Scope of Research
Subject of research: service quality and affecting of factors on the service quality in hull insurance of PJICO
Scope of research: the scope concentrates on the hull insurance of PJICO during period of 2013 to 2016
Author make interviews persons who are representatives of ocean transportation companies, owners of ships in some provinces of Vietnam who have been using Hull insurance products of PJICO
4 Research methodology
The research methodology applied in the thesis are qualitative analysis, survey (investigating, interviewing) and statistics analysis to make clear the objectives of the research
However, the research is carried out on small number of clients (not all) of PJICO Therefore, results of investigation/interview reports have not shown fully and objectively It will be difficult to examine the variable corelation It may not show fully all the issues raised in the research
6 Thesis Structure
Chapter I: Introduction to Petrolimex Joint-Stock Insurance Corporation
and Hull Insurance Market
Chapter II: Hull Insurance and Theoritital Framework
Chapter III: Analyze Affecting of Factors to Hull Insurance of Petrolimex Joint-Stock Insurance Corporation
(10)CHAPTER I
INTRODUCTION TO PETROLIMEX JOINT-STOCK INSURANCE CORPORATION AND HULL INSURANCE MARKET
1.1 Introduction to Petrolimex Joint-Stock Insurance Corporation (PJICO)
Petrolimex Joint-Stock Insurance Corporation (PJICO) is the first Joint Stock Insurance Company in Vietnam insurance market PJICO is the combination of strong prestigious State Corporations such as Petrolimex Group (Petrolimex), Vietnam Steel Corporation (Vinasteel), Vietnam National Reinsurance Corporation (Vinare), Vietnam Foreign Trade Bank (Vietcombank), Hanoi Hanel Electronic Company (Hanel)
PJICO is established under the License No 1873/GP-UB dated 8th June, 1995 issued by Chairman of Hanoi People Committee Until now, PJICO has been operating over 25 years from 1995 with charter capital of 53 billion dong
The development of PJICO can be summerized as follows:
Period from 1995 to 2002:
The beginning period is the period of stable, effective and persistant development of the company PJICO focused on some lines of retail insurance such as motor vehicle, health (personal accident) PJICO was one of leading insurers with good quality That was the important stage and is the premise for the next spectacular developed period
Period from 2002 to 2005:
(11)a lot in developing trademark and it was the most successful trademark in the market Expanding hull insurance market was one of reasons contribute to the success of this period
Period from 2005 to 2012:
PJICO redefined its policy as ―Stabilization, safety and efficiency‖ to create a momentum for sustainable development in the future This was a right direction and brough certain success and strenghtened the developemnt of PJICO in the upcoming years
Period from 2013 up to now:
PJICO has been consistent with its business direction of stabilization, safety and efficiency since 2013 The business results have proved the correctness of this direction
Over past years, PJICO has developed rapidly and created the image in the domestic and international market through povide insurance for nation - wide major infrastructure projects With its stable financial capacity, long lasting relationship with leading insurance corporations in the world as well as nationwide branches system, PJICO has met all requirements of clients concerning claim settlement PJICO’s image has been highly appreciated in supporting stable finance for clients in case of loss
In the difficult economic situation, PJICO has kept the stable position concerning the market share and turnover in Vietnamese general insurance market With the strong finance capacity, professional and active staffs, high client service quality and multi insurance products, PJICO has achieved good business results
(12)good business results with total revenue of 2,220.8 billion VND, increased 9% in comparison to that in year 2015 Profit before tax is over 125 billion VND
Table 1.1 Brief financial reports 2013 – 2016
Unit: VND
CONTENT 2013 2014 2015 2016
Premium
Revenue 1,752,265,889,122 1,745,391,442,021 1,896,564,438,596 2,066,758,581,415 Total revenue 1,889,331,305,630 1,874,779,107,412 2,032,191,885,627 2,220,865,321,133 Profit before tax 85,410,598,472 110,144,866,400 119,815,545,263 125,394,945,643
Profit after tax 65,883,962,691 88,199,214,051 96,891,431,208 101,971,022,860
(13)Tổng Giám Đốc Phó Tổng Giám Đốc Phó Tổng Giám Đốc Phó Tổng Giám Đốc
P BH Hàng hóa P BH Tàu
Thủy
P BH Phi Hàng Hải
P BH Xe giới
P BH Tài sản Kỹ thuật
P BH Con người
P BH Dự Án P Q.Lý
P.triển Đại lý
P Tổ chức P Tổng hợp P TCKT P CNTT P BH Đầu tư
và TTCK
P D.Vụ CSKH P Tái Bảo
Hiểm P T.Tra Pháp
Chế
Hội Đồng Quản Trị Ban Kiểm
sốt
Đại hội đồng cổ đơng Ban Tổng hợp HĐQT Ban Kiểm toán P.Kiểm toán nội
Các Công ty thành viên
Tổng đại lý đại lý
Các Văn phòng đại
diện
P Công tác Đảng
Figure 1.1 Organizational Structure of PJICO
(14)1.2 Introduction to Hull Insurance Market 1.2.1 Hull Insurance History
First of all, in 5th century BC, people sought way to minimize total loss of cargo shipment by dividing it into small ones That was the way to disperse the risks and loss and can be considered as the primary form of insurance After that, in order to face all serious losses, ―marine loan‖ was appeared It means that in the even of loss of cargo during transit, the borrower will be exempt from repayment of both the loan and interest Conversely, they had to pay very high interest if their cargo was safely arrived It could be understood that high interest was in fact insurance premium However, the number of loss was increasing, making creditors be in very dangerous situation Instead of that, insurance was appeared
(15)(16)in France named ―Company L'assurance Centree L'incendie‖ and ―Company Royade‖ (in 1788) The event worthy to pass through generations at that time and in the history of insurance was mathematic work of Pascal about "Geometry of Insurance " (Lageometric Du Hasard) in 1654 It was mathematical probability It was a statistical basic for serving insurance activities Up to now, it has been the basic technique of insurance
When the insurance was appeared in Vietnam? There have no documents to show exactly that It was conjectured in 1880 when foreign insurers from England, France, Switzerland, and USA… paid attention to Indochina They opened their insurance representative offices in Vietnam as trade companies
In 1926, the first branch of Franco – Asietique Company was opened In 1929, the first Vietnam Insurance Company was opened with Head Office located in Saigon However, it was specialized in car insurance From 1952, insurance activities were expanded with multi types and transactions with the operations of both domestic and foreign insurers
On 15/01/1965 Vietnam Insurance Company (As Bao Viet) started their official operation in the North of Vietnam In the early years, Bao Viet was specialized in marine insurance such as import-export cargo, ocean going vessels …
(17)Figure 1.2 Premium Revenue Structure of PJICO in 2016
Source: PJICO (2016)
From the establishment date (1995), PJICO has paid attention to develop marine insurance In 2007, Ship Department was officially set up After 20 years of development, Ship insurance has played important role in PJICO in term of revenue operating market in comparison to other leading insurance companies This type of insurance helps PJICO to build up the image and trademark to their clients This has kept the growth rate even the whole market has faced the difficulties of economic integration Ship insurance has created lot of works for hundreds of staffs and their agents The revenue of ship insurance in 2016 reached VND 436.5 billions (accounted for 17.62% of total premium revenue in PJICO in 2016)
1.2.2 Ship Insurance in PJICO
1.2.2.1 Products
(18)traditional insurance types – the first step for the market insurance integration and affirming the trade mark
After 20 years of development, Ship insurance has kept the important role in term of revenue as well as net of operation in comparison to other local leading insurance companies This insurance product has supported PJICO to build up the image and trademark for the clients with stable growth rate even in case of difficulties in economic integration Ship insurance has created lot of jods for hundreds of staffs and agents The revenue from ship insurance in 2016 was 436.5 billion VND (accounted for 17.62% of preium revenue of PJICO in 2016)
Total revenue of non-life insurance in 2016 was 36,652 billion VND With the premium of 2,066 billions VND (accounting for 7% of market share), PJICO and PVI, Baoviet, Baominh and PTI are top leading non-life insurance companies in Vietnamese market
Figure 1.3: Revenue share of non-life insurance market in 2016
(19)PJICO has been considered as one of the top professional ship insurers in Vietnam Client service center is always 24/24 to support and settle all accidents in all international and nationwide places It is easy to understand because PJICO has wide net of branches in all 54 provinces In addition, PJICO has cooperated with overseas partners (International P&I Correspondence of W.O.E, LSSO, SOP, KOREA P&I; Independent survey companies such as ATLANTIS, ISS P&I JAPAN, SPARK INTERNATIONAL COMPANY, GAC; International Laws consultants such as LLOYDS, C SOLUTION, INCE & CO
All ships including ocean vessels, domestic inland vessels, passenger ships, boats…can buy insurance at PJICO Besides, PJICO is responsible for other types of insurance such as Ship Builder’s Risks Insurance, Containers Insurance, Kidnap and Ransom Insurance
The insured objects include hull, machines, marine equipment (including finsing nets, fishing equipment) and ship owner’s liability (including liability for collision, cargo, crew and related third parties)
* Hull Insurance
Hull insurance is voluntary It usualy have high loss rate (all big insurance companies have been lost in continuous years) This must also be a warning of risks From 2013 backwards, the growth rate of revenue of hull insurance was low due to the fact that transportation industry was in crisis It can be seen that premium from new ships is difficult to increase because the budget for new vessels is zero Concerning existing vessels, some owners went bankruptcy, and value of vessels was reduced, premium was also reduced accordingly The competition among 29 insurers was intense, especially for newly estabilished and small insurers
(20)transportation bureau; Sea products, Insurance Supervisory Authority….) have made insurance companies and Owners be difficult in maintaining and developing fleet of vessels
Although the post selling service of PJICO has been improved, there have been still some disadvantages that are necessary to change, improve and upgrade to meet all requirements and interest of clients
As mentioned previously, due to economic difficulties, some owners have to cut their expenses for maintenance, salaries and wages of crew The decreasing trend of salaries of the crews had caused numbers of human – related losses (lack of experience, negligence, carelessness and faults in marine equipment…) Due to the climate change, acts of god (storm, thunderstorm) have been abnormally increased, and hence loss ratios have been increased (about 60-70%)
Hull insurance market is mainly located in Hai Phong, Quang Ninh, Nam Dinh, Thai Binh, Hanoi, Da Nang, Ho Chi Minh City, Vung Tau, Can Tho and Kien Giang
From 2014, along with positive change of Vietnamese economy, revenue from hull insurance has been developed rapidly
* Ship owner’s liability insurance
Up to now, this compulsory insurance has applied to ships carrying explosive cargo and passenger Ship owner’s liability insurance always relates to the third parties such as liability arised from collision, cargo, crew/passenger and other relating parties This is quite complicated and sometimes it relates to legal aspects such as arresting, accidents, death… The claim amounts sometimes are very big (up to billion USD in respect of oil pollution and unlimited to risks under international ship owner’s liability articles.)
(21)small owners (inland transportation and fishing vessels), they normally buy insurance with very low limit of liability
Due to financial difficulties, some ship’s owners buy liability insurance for only short-term when they delivery cargo or they only pay the first installment of premium in order to show it to their partners to sign delivery contracts
Protection and Indemnity (P&I) depend totally on International P&I Associations (W.O.E, LSSO, SOP, KOREA P&I) in term of premium level, deductibles and limits of some clauses One of disadvantages for marine transportation companies in general, for PJICO in particular is an increase of P&I premium (due to higher loss ratio of the whole Vietnamese fleet than P&I average loss ratio) This is also one of the reasons for the premium debts
* Ship Builder’s risks Insurance
This type of insurance appreared due to the developemnt of ship building industry This protects ship builders during the period of the building ships, testing, commissioning, handing over, liability to pollution, design fault, collision, general salvage and rescue
However, due to ecnomic crisis as well as the re-structure of ship building industry, the expenses for this type is limited Therefore, ship builders often buy insurance only for launching and testing period This is a potentialy risky period, however the premium is not enough to arrange with foreign and domestic reinsurers
*Containers insurance
(22)* Kidnap and Ransom
Kidnap and Ransom (K&R) is designed to protect shipowners against the risks of kidnap and ransom of piracy This situation has happened increasingly in the world
The main objects are protected through this type of insurance: + Cover for amount of ransom;
+ Cover for crew accidents during kidnap;
+ Cover for some expenses: consultants for negotiations, salary of crew during kidnap …
Some sea areas are at high risks: Mexico, Venezuela, Haiti, Nigeria, some countries in Latin Africa
Majority of ship owners are not aware of the risk Additionaly, due to the financial difficulties, the shipowners are usually not willing to buy this type of insurance In Vietnam, there are some cases of K&R: Hoang Son Sun vessel was kidnapped in 2011 with the ransom amount of million USD (however the owner has not participated K&R cover)
Up to now, PJICO has arranged some K&R insurance for several vessels of some big shipping companies
1.2.2.2 Distribution Channels
For insurance companies, the service distribution are carried out throughout the process from choosing and developing distribution channel system A large distribution channel, in which all staffs run the business professionally and effectively to bring the best services to the clients, will take the benefits to the enterprise Moreover, they will enhance the image of the enterprise in the market In particular, with PJICO - one of the leading corporations of quality and efficiency, a good distribution channel plays important role
(23)* Direct distribution channel
The direct distribution channel is non-level channel With this channel, the enterprise directly sells the products to clients without any intermediaries For PJICO, members of this channel are:
Underwriting department in head office
At the present, there are 02 underwriting departments in Head office : Project Insurance, Non-marine Department and management and underwriting departments : Property; Ship; Cargo; Motor Vehicle and Personal All departments in Head office are focused on their field under the functions according to name of department In addition to general policies of the Corporation, other types of insurance have been encouraged to carry out Hence, besides the ship insurance, this department also implements other types in the package
Member companies
Under this way, the selling and managing the contracts are carried out by the member companies Number of member companies have been increasingly in recent years This is also the favorable condition for developing the channel In 2013, PJICO has total 54 member companies nationwide
Regional Offices
These offices carry out the dependent business accounts under the levels They are under management of member companies They are main point of transaction for member companies Up to now, PJICO have 190 offices in 54 provinces, cities nationwide In Hanoi, there are 14 offices With the neat structure, this is very effective channel because they easily contact the market and bring services to their clients
* Indirect distribution channels
(24)indirect distribution channel in marine insurance of PJICO is brokers
Insurance brokers are middle parties who always consult their clients (insurance participants) and arrange the insurance for customers Brokers understand well about terms and conditions, especially the market information They are connecting point between demand and supply of insurance At the same time, they also can improve the image of products as well as insurers
Normally, premium of hull insurance via brokers are from inurance contract having loans in financial and credit organizations or from brokers working in marine field Therefore, the revenue via this channel is not considerable
1.2.2.3 Human Resources
Human is the most important factor creating high quality for insurance business Hence, upgrading the quality to meet the requirements of clients must go with the upgrading of human resources With this target, PJICO has determined that focus on staffs with high qualifications and good sense of market is essential factor
There are sources for recruitment of staffs for PJICO, including: other insurance companies, companies of Petrolimex, employing new staffs and staffs developing from agents
Staffs from other insurance companies: They have knowledge about insurance, market experience and existing clients Due to some personal reasons, they would like to move This main human source can help PJICO in increasing revenue in all types of insurance
Staffs from companies of Petrolimex: The majority of them not have much knowledge about insurance, however they have good relationship and communication ability These are chances to connect with the clients Understanding this, PJICO focuses on training and providing them underwriting knowledge, cooperating with old staffs to work effectively
(25)staffs with average age of 31 Young staffs are enthusiasm, active and flexible in thinking, settling the situation and having good health This is an advantage for insurance industry, especially for ship insurance, which asks for high qualification, underwriting knowledge and service quality
Staffs from agents: Agents of PJICO does not always have high qualifications as well as insurance knowledge However, via their works and training courses organized by PJICO, some of them have shown their ability and they are employed as official staffs This creates motivation for them to more actively work and be close to PJICO They are also the next staffs for the whole system of PJICO member companies
1.2.2.4 Promotions for the Development of Hull Insurance
*Applying technology and science
Now, the Head office of PJICO is well equipped with technology to serve the works: using the mails system, software, convenient store of documents… The high Internet speed, software for declaration records, statistics of accounts arising liabilities for motor vehicle via message of telephone, modern backup … make the whole system of PJICO control and manage underwriting data, statistics for each type of insurance It also help PJICO to share and arrange effectively insurance
However, technology applied to management in PJICO has some disadvantages Using internal telephone system through the general port for minimizing the costs is not so effective The general infrastructure of information techonology in member companies are not synchronous These not meet the requirements in management and contacts
*Program for enhancing service quality
(26) Often contact owners to update/advise policies/new documents of State authorities in respect of ship insurance;
Explain in details in respect of confuse and suitable requests from Owners;
Service for claim settlement 24/24 for receiving and consulting clients when problem occurs; quickly sending staffs to site or appointing independent inspection companies (under the list approved by the Board of Directors every year) to solve problems
Often check and upgrade time, progress/procedure for claim settlement/compensation to create the highest benefits for owners when the owners carry out correctly all instructions of PJICO;
In order to support owners to rapidly overcome the big problems happened to their vessel, PJICO will consider and pay in advance part for costs under insurance liability;
Open periodically training courses of underwriting to upgrade qualifications as well as behavior of PJICO’s staffs;
Check and sign contracts with cooperative partners in ship insurance industry such as survey companies, laws firms and evaluation firms…
Meet periodically owners in some major areas such as Hai Phong, Thai Binh, Nam Dinh, Ho Chi Minh city… in order to advertise and answer outstanding questions
1.2.2.5 Others
(27)CHAPTER II
HULL INSURANCE AND THEORITICAL FRAMEWORK
2.1 Concepts in Hull Insurance
*The Insurer
The insurer accepts to insure under the proposal of client The Insurer has the right to collect premium and has the responsibilty to pay losses in coverage For example, Petrolimex Joint Stock Insurance Corporation (PJICO) is a insurer
* The Insured
The insured is a person or an organization who has property, liability or life under the coverage The insured is responsible for paying premium and asking for compensation for damages under the scope of coverage
The participant of insurance contract is a person who has direct relationship with the insurer in the signing the insurance contracts
The person appointed to receive the compensation is the insured * The Reinsurer
The reinsurer is a person who insures the insurer * The Reinsured
The reinsured is a person who shares the risks from persons having objects to other insurance organizations
*Insurable value
Insurable value is actual value of insured object agreed by both parties under the insurance contract This definition is appeared in property insurance
(28)to crews and costs/expenses for the voyage which is agreed in the contract The value of cargo is total value stated in the invoice at loading port or market value at the place of loading time plus insurance premium, freight and estimated interest
* Sum insured
Sum insured is the value of insured object under the proposal of the participant of insurance and the insurer accepts this amount It can be equal to or smaller insurable value
*Premium rate
It is a percentage stated in the insurance contract This is paid by the insured to the insurer annualy
*Premium
It is an amount stated in the insurance contract This is the amount which the insured must pay to the insurer The annual premium is sum insured multiplies with premium rate
* Deductible
The deductible can be expresse in amount of money or the proportion of sum insured If the loss amount is smaller than the deductible, the insurer is not responsible for compensation to the insured
The use of deductible has many advantages as follows: Minimizing small payments
Reducing premium for the insured
Transfering a part of liability of insurer to insured There are two types of deductible:
(29) Deductible is applied to the case when the loss value is bigger than deductible, the insurer will pay with the part excess the deductible
* Loss value
Loss value is the value of damaged/lost property or costs to repair the damaged items The definition of loss value is used in Property insurance; in personal insurance the definition ―insurance accident‖ is used
* Compensation value
It is the value which the insurer pay to the insured This value is loss amount plus adjustment cost, management costs to protect the insured items to minimize the loss The compensation value is never bigger than sum insured
*Insurance object
The insurance object is the subject for which the safety of the subject has led to the insurance contract between the insurer and the insured The insured object is the item which faces risks
The insured objects are divided into three groups as bellows : Property such as ships, cargo
Health status and life of person Liability Shipowner’s liability * Insured risks
The insured risks are all incidents causing damages to the insured objects Marine risks are ones relating to the safety of the ship
Based on the origin, marine risks are divided into two types as follows : Act of gods : rough sea, whirlwind, thunder, bad weather
(30)Marine insurance contract: this is applied to compensate the loss concerning the marine In other words, this is a contract under that the insurer has right to collect the premium and compensate for losses of the insured objects stated in the scope of coverage during the sea voyage
Marine insurance policy: this is a proof document signed for the specific insured object This is also the document on which the Insured asks for the claim
* Insurance terms and conditions
The terms and conditions state which risks under the coverage The insurer will pay for all losses caused to the insured objects under the scope of coverage Each insurance term and condition will mention the interest of compensation for the insured For convenience, the standard terms and conditions are issued Up to now, all standard marine terms and conditions are writen by UK insurance This is used popularly all over the world
* Abandoning the property ownership
In marine insurance, there are some cases in which the insured has the right to abandon their insured assets and move the ownership to the insurer At that time, the insurer will pay total loss
2.2 Claim Settlement
2.2.1 Types of Losses in Hull Insurance
Loss is damage, broken status happened to the insured objects under the risks In the marine insurance, there are two following loss types:
Based on loss severity: Two types
Partial loss: damage to a part of insured objects
Total loss: damage to the total value of insured objects Total loss inludes two types:
Actual total loss: the insured obejcts are under total lost or damaged
(31)recover the value of the insured objects is higher than the insured value and not economical
- Based on liability classification General average
Partial average
2.2.2 Loss Adjustment
When the accidents happen to the insured objects, the insured must inform the insurer and ask for the loss adjustment
The adjuster is appointed by the Insurer The adjuster may be the person of Insurer if loss happened in the domestic area, he may be a person under the authorization (correspondence of Insurer) for loss happned in overseas
In special cases, the Insurer can not appoint their adjuster to the site, the insured is allowed to invite the adjustesr in the area of accident provided these adjusters are accepted by the State authorities
2.2.3 Principles of Claim Settlement in Hull Insurance
Claim settlement amount of insurer is limited within sum insured
Special cases are ones when the total cost of minimizing and protecting costs, adjustment cost, fees for General Average under the coverage are higher than the sum insured In this case, the insurer will pay all
Claim amount will be paid by money, not in kind The type of currency applied for claim settlement is currency used to collect premium
When the insurer compensate, the insurer has the right to deduct sum of money collected by the insureds when the insureds settle the remaining property or get recover from the third party
After paying the claim amount, the insurer has the right to collect money from the third party for the liability to compensate for the loss within the amount paid
(32)a Losses of insured objects which are not covered
b The insurer is not responsible for loss caused from intentional acts or too careless actions of insured However, the Insurer is responsible for loss caused from negligence or errors of the captain, crews or navigator during the process of management and control of ships
c when insuring for ships and freight, the insurer is not responsible for the following losses :
The ship is not have full safety condition at the time of departure, except for the case when the ship has inside defects eventhough the insured has paid due attention
Cargo on board is flammable and explosive or has other dangerous stuffs which is not suitable with regulations for carrying These types of cargo are not advised to the Insurer
e If there is no other agreement in the insurance contract, the insurer is not responsible for loss due to war or army activities, strike, riot, requisition, confiscation, arresting, destroying or under the order of army force or under the decision of State authorities
2.3.5 Reduction in Indemnity
* The reduction of claim amount is applied to refuse the indemnity with the amount appointed under the percentage in total claim amount The reduction of claim amount includes two types:
- Franchise: when the loss happens, the loss extend reaches the regulated percentage, the Insurer has to pay all
- Deductible: The Insurer will deduct the fixed percentage for the loss over the regulated extend
* The target:
(33)- There is a part of rate from sum loss amount for the Insured It means the Insured bears a part of liability in loss
At the time being, due to the high competition in the market, insurance companies rarely apply the reduction of loss in order to hold clients This will be applied to special cargo and high loss frequency
2.3 Theoritical Framework
2.3.1 Factors Affecting Hull Insurance Efficiency
There are factors effecting hull insurance efficiency, including both objective and subjective factors Objective factors are the economic growth rate, inflation, the development of marine transportation, the development of import and export activities, international and local regulations Subjective factors are trademark, financial capacity, risk assessment competence, products, distribution channels, service quality
The research concentrates to subjective factors, those may be improving by insurer
- Rating and trademark of company: insurance business is a financial service, so that, it’s development is much depend on the reputation of the insurance company or insurer’s trademark and rating The trademark and rating is good, it is advantage for the development of the business, on the contrary, the rating is low, it is disadvantage for the development of the business
- Financial capacity of insurer: this factor affects to the insurance capacity and retention of an insurer The financial capacity is high, the insurance capacity and retention may increase
- Risk assessment and management competence: this factor affecting to the quality of insured risks and affects to the lost ratio of insurer
- Product: this factor includes sub-factors such as the diversification of product, coverage, endorsements, premium, terms and conditions
(34)qualification, support and assistance, procedure for claim settlement, care of clients after issuing policies Those are closely connected with the human resource and business process of insurer (underwriting, claim settlement, and indemnity)
Objective factors
- Economic growth rate - Import and export quantity - International regulations - Local regulation
- Marine Transportation development
Figure 2.1 Factors effect Hull Insurance Efficiency
In case of PJICO, hull insurance is one of traditional insurance type and accounts for big percentage of total revenue not only in PJICO but also in the whole insurance market However, underwriting results are not so good, loss ratio is high Hence, the research mainly concentrates to analyze subjective factors to point out affecting of those to hull insurance efficiency in PJICO
The research questions are set up to review specialists’ evaluations relating to the affecting of factors to the hull insurance efficiency of PJICO
Subjective factors
- Trademark and rating - Financial Capacity - Risk assessment - Risk assessment and
management competence
- Product
- Distribution channel
- Service quality
Hull Insurance efficiency
(35)Firstly, the research studies an evaluations of subject factors to hull insurance business’s result (including: products, distribution channel, service quality, risk assessment (underwriting process, adjustment and claim settlement)
Evaluations came from both insurance specialists and client
In addition, the research also tried to find out evaluations from specialists relating to effecting of objective factors such as the development of hull insurance market, the development of economy, advantages and disadvantages of legal environment to hull insurance, a competition among insurance companies
The research also deeply emphasizes on service quality of PJICO relating to information providing, manner and professionalism, underwriting qualification, procedure, supporting for claim settlement, client take care
2.3.2 Data
2.3.2.1 Collecting data
Data is used in the research mainly is primary data, which is collected from interview insurance specialists (experts working in PJICO and some branches of PJICO, who have at least 10 years major in marine insurance) and client (who are transportation companies and have been using hull insurance of PJICO)
Locations: Quang Ninh, Hai Phong, Ha Noi, Thai Binh, Nam Dinh, Ho Chi Minh provinces
- Interview process: + Preparing interview:
Choosing the person for interview and the way of interview
Determining the target, contents (for clearer matters) for interview Preparing questions to interview
Choosing place, time… to interview
Preparing supporting tools (papers, pens…) + Conducting Interview:
(36)secure about the contents of interview for research only
Interviewing: focusing on main questions to exploit information, summarizing information, repeating the content to confirm the correct aspect of information
Summarizing necessary information Refinement of information
Finishing the interview + Collecting data:
Due to large research scope, all questionnaires are sent to member companies of PJICO in provinces to collect data After collecting questionnaires, data is reviewed and analyzed through popular statistics software such as Microsoft Excel
Time for setting up questionnaire: 03 days Time for collecting: within 20 days
+ After Interview:
Re-checking information, finding conflicts or unclear contents; re-committing confidential aspect of information to make interviewee feel secure about providing information
2.3.2.2 Questionnaire Structure
Structure: Questionnaire includes 02 parts:
Part A: Information about research subjects (Name of company, address, name of interviewee, position, insurance period in PJICO, sum insured participated in PJICO)
Part B: Content of questionnaire include 06 questions (05 closed question, 01 opened question)
(37)CHAPTER III
ANALYSZE AFFECTING OF FACTORS TO HULL INSURANCE OF PETROLIMEX JOINT-STOCK INSURANCE CORPORATION
3.1 Descriptive statistics
3.1.1 Affect of PJICO’s trademark
Trademark is an image of the insurer As mention before, insurance is financial service, so that, the buyers usually choose insurer(s) based on their rating and trademark In Vietnam, most of insurers are not rated by international rating organizations, so it is difficult for buyers to choose insurer They may base on the trademark of insurer
Table 3.1 Evaluation affecting of PJICO’s trademark
Evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 5.66
Normal 15 28.30
Good 30 56.60
Very good 9.44
Total 53 100
(38)Figure 3.1 Evaluation of PJICO’s trademark
Source: collected from the survey
Most of client evaluated PJICO’s trademark have good or very good affecting to the hull insurance business (56.60% good and 9.44% very good) Experts from PJICO also assessed that the trademark have good affect to PJICO’s hull insurance business
3.1.2 Affect of PJICO’s financial capacity
Financial capacity affects to the insurance capacity and the retention of the insurer Financial capacity is high and stable, the insurance capacity and retention is improved and have positive affected to the business result
Table 3.2 Evaluation affecting of PJICO’s financial capacity
evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 0
Normal 16 30.19
Good 31 58.49
Very good 11.32
(39)Figure 3.2: Evaluation of financial capacity of PJICO
Source: collected from the survey
More than a half of client evaluated PJICO’s financial capacity is good (58.49%) However, there are 16 client avaluate this factor is nomal (30.19%) In comparison with other insurers in Vietnam Insurance market, PJICO’s financial capacity is hight, but it is low in comparision with other international insurers, those engaged in marine insurance
4.1.3 What you think about Ship Insurance Product of PJICO?
* Evaluating the diversification of products
(40)Table 3.3 Evaluation affecting of PJICO’s product diversification
evaluation Results
(interviewers)
Percentage (%)
Not very suitable 0
Not suitable 0
Suitable 46 86.79
Very suitable 13.21
Too suitable 0
Total 53 100.00
Source: collected from the survey
Figure 3.3: Evaluation of the diversification of products in PJICO
(41)The survey’s result showed that 86.79% client evaluated PJICO’s product diversification is suitable, 13.21% evaluated PJICO’s product diversification is very suitable
* Evaluation of coverage
Insurance coverage provides the scope of protection to insured In general, when the market gone up, the coverage is tied, when the market is gone down, the coverage is more opened Most of client hope that the coverage is opened
Table 3.4 Evaluation affecting of PJICO’s product coverage
evaluation Results
(interviewers)
Percentage (%)
Very not suitable 0
Not suitable 3.77
Suitable 43 81.14
Very suitable 15.09
Too suitable 0
Total 53 100.00
Source: collected from the survey
(42)Source: collected from the survey
According survey’s result, 96,23% of client said that scope of PJICO’s hull insurance coverage is suitable and very suitable From the side of client, this evaluation is good, help to attract more clients, however, from the side of insurers, this may not be good The coverage is large may is a reason leading to increase in loss ratio
* Evaluation about endorsements
Endorsements expand the coveage of insurance
Table 3.5 Evaluation affecting of PJICO’s product endorsements
evaluation Results
(interviewers)
Percentage (%)
Very not suitable 0
Not suitable 1.89
Suitable 42 79.24
Very suitable 10 18.87
Too suitable 0
Total 53 100.00
Source: collected from the survey
(43)Source: collected from the survey
The survey’s result showed that 98,11% client evaluated that endorsements are suitable and very suitable
* Evaluation of premium
Premium is rated by actuary and based on risk profile as experience from the industry as well as insurers Problem in emerging market is that some insurers may reduce premium, even lower that technique premium In Vietnam, most of insurers are lost in hull insurance business (loss ratio is high, premium is not increased)
Table 3.6 Evaluation affecting of PJICO’s product premium
evaluation Results
(interviewers)
Percentage (%)
Very not suitable 0
Not suitable 11.32
Suitable 36 67.93
Very suitable 11 20.75
Too suitable 0
Total 53 100.00
(44)Figure 3.6: Evaluation of premium in PJICO
Source: collected from the survey
Evaluation from client is good with nearly 90% evaluated it is suitable and very suitable However, at the situation of high loss ratio and loss from business of insurers, PJICO should be review present premium
* Evaluation of terms and conditions
Terms and conditions are very important in insurance business, those are factors to reduce dispute between insurer and client
Table 3.7 Evaluation affecting of PJICO’s product terms and conditions
evaluation Results
(interviewers)
Percentage (%)
Very not suitable 0
Not suitable 0
Suitable 45 84.91
Very suitable 13.20
Too suitable 1.89
Total 53 100.00
(45)Figure 4.7: Evaluation of terms and conditions of PJICO
Source: collected from the survey
With 100% evaluations that PJICO’s product terms and conditions are suitable, very suitable and too suitable, it can be showed that the product’ terms and conditions of PJICO is got high rating from client, which support for hull insurance business of the company
3.1.4 Affecting of Service Quality on Hull Insurance of PJICO
* Evaluation of providing information
(46)Table 3.8 Evaluation affecting of PJICO’s information provision
evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 0
Normal 9.43
Good 45 84.91
Very good 5.66
Total 53 100.00
Source: collected from the survey
In case of PJICO, most of interviewers evaluate that the company good this task, 90.57 % said that providing information is good and very good
* Evaluation of professionalism:
Professionalism of insurers is so important to their business This will be affecting to the business results, company’s trademark and rating
Table 3.9 Evaluation affecting of PJICO’s professionalism
evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 0
Normal 3.77
Good 44 83
Very good 13.2
Total 53 100.00
Source: collected from the survey
(47)company, has positive affect to the hull insurance business * Evaluation of professional knowledge:
Professional knowledge mentions about the knowledge of PJICO’s staff relating to hull insurance, such as: product, risk assessment, claims settlement, regulations, etc
Table 3.10 Evaluation affecting of PJICO’s professional knowledge
evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 0
Normal 11.3
Good 45 84.9
Very good 3.77
Total 53 100.00
Source: collected from the survey
Most of staff in hull insurance department in head office or companies in PJICO have at least ten years in marine insurance, so that, the evaluation of 88.68% said that professional knowledge at good and very good is suitable in this situation
* Evaluation of supporting and guiding clients:
(48)Table 3.11 Evaluation affecting of PJICO’s supporting and guiding clients
evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 0
Normal 1.89
Good 47 88.7
Very good 9.43
Total 53 100.00
Source: collected from the survey
The survey’s result from client showed that 98.11% evaluated that PJICO’s supporting and guiding clients are good and very good There is 1.89% evaluated that is is normal
* Evaluation of supporting in claim settlement:
Hull insurance is much complicated, it relating to insurers in abroad or international laws So that, the support in claim settlement for client is much necessary
Table 3.12 Evaluation affecting of PJICO’s supporting in claim settlement
Evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 0
Normal 7.55
Good 41 77.36
Very good 15.09
(49)Source: collected from the survey
Most of interviewed client evaluated that this support of PJICO is good and very good (92.45% said that supporting in claim settlement is good and very good)
* Evaluation of taking care of clients after issuing policies
Taking care of clients after issuing policies is important factor, it affects to risk reduction activities as well as the loyalty of client with the company
Table 3.13 Evaluation affecting of PJICO’s taking care of clients after issuing policies
evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 0
Normal 13.2
Good 43 81.1
Very good 5.66
Total 53 100.00
Source: collected from the survey
(50)* Evaluation of insurance procedure
Table 3.14 Evaluation affecting of PJICO’s insurance procedure
Evaluation Results
(interviewer)
Percentage (%)
Very bad 0
Bad 0
Normal 3.77
Good 49 92.5
Very good 3.77
Total 53 100.00
Source: collected from the survey
This factor is got high evaluation from PJICO’s client 96.23% of interviewer client evaluated PJICO procedure in hull insurance at good and very good
* Evaluation of claim settlement procedure
This factor relates to the document and document processing in claim settlement
Table 3.15 Evaluation affecting of PJICO’s claim settlement procedure
evaluation Results
(interviewers)
Percentage (%)
Very bad 0
Bad 0
Normal 17
Good 41 77.4
Very good 5.66
(51)PJICO’s claim settlement procedure is got high evaluated with 83.02% said that claim settlement procedure is good and very good This also showed that PJICO’s service quality is good and the company is affording to serve its client
Figure 3.8: Evaluation of service quality of PJICO
Source: collected from the survey
The figure 3.8 showed overview evaluated relating to PJICO’s service quality.IN general, PJICO’s service quality got good evaluation from client
3.1.5 Factors are need to focus
(52)Table 3.16 Evaluations of PJICO’s Specialists
Factors Results Percentage (%)
Financial capacity 5.79
Distribution channel 6.61
Service quality 12 9.92
Diversification of products 31 25.62
Leadership and Management ability 2.48
Facilities 2.48
Staffs 6.61
Procedure of Claim settlement 17 14.05
Period of claim settlement 32 26.45
Total 121 100
Source: collected from the survey
(53)According to survey’s result:
26.45% said PJICO should pay attention to period of claim settlement This answer accounts for highest percentage Comments of experts: This is the factor affecting a lot the business results
25.62% said PJICO should pay attention to the diversification of products It is the second most important factor Comments of experts: This is the content affecting a lot the business results
14.05% said PJICO should pay attention to claim settlement procedure Comments of experts: This is the content affecting a lot the business results
33,8 % for other options
The majority of clients well evaluate trademark, image, financial capacity, service quality and ship insurance of PJICO However, clients not get satisfactory in some aspects such as period and procedure of claim settlement as well as the diversification of products
In order to increase competition capacity and image of PJICO closer to clients, PJICO should upgrade period and procedure of claim settlement as well as multiform of products
4.2 Assessment and Evaluation of Interviewed Experts
Concerning ship insurance in Vietnamese market in recent years
Ship insurance was appeared in Vietnam in 1990s At that time, Bao Viet was only Ship and Cargo Insurer Thanks to the economic development, up to now there are 30 non-life insurance companies providing ship insurance such as Bao Viet, PVI, PJICO, Bao Minh, PTI and other small insurance companies
(54)Economic crisis has affected shipping industry considerably Volume of cargo reduces, freight reduces continuously, and fuel costs increase while anchorage costs, salary for crew… not reduce Economic difficulties leads to insufficient fund for ship-owners to invest in maintenance/repairing/upgrading ships classification under the regulations Loan procedure of bank has been tightened… Ship insurance has faced difficulties such as delay in premium payment, increasingly debts from ship owners while liability for risks has been expanded
Concerning legal environment (both domestic and international) advantages and disadvantages related to ship insurance
+ Advantages: Ship insurance has followed regulations of International Marine Laws Practice among countries is not so much different; hence, claim and conflict settlement procedure is simple and fast
+ Disadvantages: Legal procedure in each country is different and quite complicated This will affect considerably to the ship owners and insurance companies
Concerning the competition among insurance companies
This has also affected PJICO’s ship insurance: Overtime, renewal annual premium of ships reduces because of the ship depreciation while risks are higher Premium from new vessels is not considerable while terms and conditions are expanded to increase the interest of owners and the third parties Due to high loss records, premium is not enough to make balance for other underwriting costs; PJICO’s ship insurance has suffered lost for many years
General comments from experts via interview: service quality post selling is one of critical factor affecting business results
In conclusion, there are some factors affecting the efficiency of ship insurance as follows:
+ High loss records
(55)+ Service quality post selling
CHAPTER IV
RECOMMENDATIONS AND SOLUTIONS TO IMPROVE HULL INSURANCE EFFICIENCY OF PETROLIMEX
JOINT-STOCK INSURANCE CORPORATION
4.1 Recommendations
By analyzing activities in PJICO, it is found that PJICO is one of the most effective insurance companies PJICO is one of companies with stable and strong business However, the efficiency of ship insurance is not so high The fact is that, it has been lost for many years although the loss records and business loss have been reduced year by year
Table 4.1 Result of Hull Insurance Business of PJICO (2013-2016)
Year 2013 Year 2014 Year 2015 Year 2016
Revenue (Billion VND) 222.3 247 276 329
Loss ratio (%) 80 55 47.84 34
Management underwriting loss 60 35 28 13
Source: PJICO (2014 to 2017)
Ship insurance is one of traditional insurance types It accounts for a big percentage of revenue in PJICO as well as of the whole Vietnam insurance market However, the business result of ship insurance is not so good due to high loss ratio Therefore, researches showing factors affecting the underwriting results in PJICO as well as in the whole market is very important From outstanding matters in PJICO and trend of development in the upcoming time, it is necessary to find solutions to improve the efficiency
- Reduce loss ratio
(56)total company revenue
The following proposals may help to reduce the loss ratio:
- After receiving the proposal from the clients: it is necessary to evaluate type of ship, depreciation period to apply the suitable premium rate
- Concerning clients having high loss ratio over long period, it is necessary to negotiate to increase premium rate and share difficulties with PJICO
- It is necessary to control adjustment activities to avoid defraud insurers - Long-term solutions are based on statistics to evaluate types of ships, depreciation period, trading limit, cargo on board, frequency of loss, claim amounts, premium, loss ratio… From these, the efficiency of each type of vessels, each fleet and warning vessels and fleets with high loss records will be shown to build up the plans for ship insurance
- Upgrade quality of claim settlement
- It is necessary to improve settlement procedure once receiving claims from clients
- It is necessary to show in public the period, procedure and step of claim settlement
- The loss adjustment must be timely and fast This should not affect the manufacture and business of clients
- Adjustment must be exactly, determine the damage level as well as cause of loss
- It is necessary to warranty the honesty and objectivity
- In the case when there are undetermined losses or it needs more time to determine the inconsistant causes, there should be mechanisms to pay attention to customers such as extending the time of premium payments for the next period
4.2 Solution
(57)part, some proposals will be mentioned
4.2.1 Improving Service to Take Care of Clients
It is found that writing policies is the first and the most important step in insurance industry It will decide the vital existing of insurance lines insuring by the insurance company In order to upgrade the service quality, PJICO should carry out the following measures:
- Well-equipped staffs with insurance knowledge, experience as well as knowledge about laws applied to marine section These staffs should be able to explain in details about liabilities, interests as well as duties to their clients Furthermore, they need to meet all requirements and can answer all questions and confuse of clients to avoid arising complains and claims In addition, they should consult ship-owners to minimize loss
- Often updating the changes in rules, terms and conditions as well guidelines of PJICO New policies and legal documents are sent to clients for their reference;
- Focusing on staffs to take care of clients in order to collect information and consult solutions to minimize and prevent loss, guiding claim procedure for loss under coverage;
- Providing liability insurance and advance compensation to customers if the cause of the loss is covered;
- Periodically checking and evaluating the ability of partners (adjustment companies; evaluation companies, Laws firms ) to settle all outstanding matters during the progress of adjustment, show the conclusion and causes as well as damage with high accuracy
4.2.2 Well Carrying out the Claim Adjustment
Under the strategy “We would commit to what we can and strive to
achieve what we have committed”, PJICO has determined that attraction for
(58)clients’ belief and image of enterprise
* Simplifying procedures and processes
- It is neccessary to regularly review and sytematize all processes and procedures to find the most suitable and the best way for each steps: shortening the period of claim settlement, creating all convenient conditions for clients to receive compensation under terms and conditions stated in the insurance contract;
- Organizing claim authorization level, upgrading claim settlement process Encouraging the flexible cooperation between Head office and member companies
- Publishing hotline to receive and answer all questions of clients
* Shortening time, upgrading progress and procedure of claim settlement
Recent success of PJICO is set up and develeoped from many factors in which the most important priority is satisfactory and fast claim settlement With the awareness of it, this is the leading duty in business activities In addtion to compensate the finance, PJICO always pay attention to share and motivate customers when accidents and risks happen
- Head office and member companies pay more intention to checkand controlthe adjustment and claim settlement The claim adjusters are asked to follow all regulations and progress to guarantee the time and procedure Period of claim settlement is shown in ISO and stated clearly in the insurance contracts In order to carry out the strict guidelines, the Head office also issue penalty applied to individuals and units in the system once finding out the faults in survey, claim settlement
(59)In fact in PJICO: After received full documents to prove the loss, the time
of compensation settlement is 15 days Consist:
Staff classify document: days Staff check document: days Leadership approve: days
PJICO should shorten the time of settlement under 15 days by
information technology solution like as use electronic signature Reduce time at
the stage as:
Staff classify document: days Staff check document: days Leadership approve: days
* Satisfactory compensation
The feedback of clients after claim settlement is the way to measure the satisfactory of clients With this meaning, PJICO should apply a lot of measures to gurantee the satisfactory of clients.:
- Generating the groups of staffs for adjustment and claim settlement with high qualifications, experience and especially morality Well equiping more and more modern tools for staffs helps them to work correctly, faithfully, rapidly and to avoid making profits, to compensate exactly
- Cooperating tightly with concerning authorities to investigate, determine the cause of loss, damage of all relating parties and show the plan of settlement
- During the claim settlement, PJICO staffs should discuss, explain in details about the claim amount which is settled to clients This will create the satisfactory and calm status for clients
- Increasing training for staffs who carry out the adjustment and claim settlement not only concerning the underwriting but also other ralating fields to settle claim suitably and avoid defrauding insurers
(60)4.2.3 Enhancing Competitiveness and Image of PJICO
* Facilities
Up to now, facilities among companies of PJICO are not equal PJICO should invest in building, repairing and hiring working offices to upgrade the infrastructure which are suitable with the image and position of PJICO This is to create the belief for clients, especially potential clients Additonally, working equipments and facilities of compnaies in other areas are necessary to be taken care
PJICO pays attention to develop profesional software management system and organize training courses for staffs in order to use Premia software in the whole system
* Management capacity
Enhancing the management skills not only for of staffs but also for leaders must be taken care This makes the management more effectively Person with high qualifications will be arranged in right positions in order to work more effectively and contribute more to the sucess of corporation This, consequenly, raises the image as well as service quality of PJICO
* Image of PJICO
The image of PJICO has been highly appreciated for many years Therefore, it is necessary to maintain this image In addition to this, PJICO should study and show strategy of cooperation to raise this image to other countries to intergrate internationally
* Financial capacity
Financial capacity to compensate big loss in timely manner will raise the image and trademark of PJICO, carrying out all commitments with clients
PJICO should increase of charter capital to meet all tender requirements for bidding of shipping companies
(61)skills
* Training and upgrading the quality of human resources:
- Often organizing meetings to exchange profesional experience, underwriting information, sharing obtacles in operation not only among PJICO member companies but also other companies in PJICO system
- PJICO should encourage staffs’self- learning by supporting part of the cost since each employee is fully aware about what they need to learn more
- Training to improve the quality of human resources is important in insurance business Leader of PJICO shouls pay attention to this, especially training for agents who contribute considerably in revenue of retails
* Creating motivation for staffs
The staffs will develop their ability and energy effectively once they are encouraged and evaluated their ability on time Besides, training and updating more underwriting knowledge and experience must be cared Interest, bonus and suitable salary for their position and ability are important things to help the staffs to work more and more effectively
* Professional Ethics
For insurance companies, morality is built on Enterprise culture Each staff of PJICO should live and work in this culture which helps client to believe and cooperate with PJICO
This is quite complicated matter and can not carry out in short time Hence, PJICO should carry out in advance the following measures:
- Issuing all regulations in respect of communication and behaviour among staffs and clients
(62)CONCLUSION
For many years, insurance is one of industries which has very impressive development of revenue and profit as well as stable growth rate in Vietnam However, there still have many challenges for non life insurance companies That is why all non life insurance companies must complete and improve theỉ service quality, make clients feel satisfactory, minimize bad factors affecting the efficiency of insurance industry
By analyzing, it is shown that there are many factors affecting the efficiency of ship insurance The target of this thesis is studying factors affecting the efficiency of ship insurance, but the fact is measuring these factors to collect ideas and feedback from clients concerning the ship insurance in PJICO
Finanally, some solutions and proposals are shown to support and develop more and more ship insurance However, this thesis is carried out on small group of clients using insurance in PJICO, therefore the results will be more correct if it is implemented in bigger groups with more samples
(63)REFERENCES
References in Vietnamese
1 D Bland (1998), Bao hiem: Nguyen tac va Thuc hanh, Nha xuat ban bo Tai chinh, Hanoi (Insurance principles and practice, Financial Publishing House) 2 Hoang Trong Chu, Nguyen Mong Ngoc (2005), Analizing data under SPSS,
Statistics publishing House, Hanoi
3 Insurance laws of Vietnam 2000, 2010, 2013
4 Nguyen Van Dinh (2012), Insurance Economics, Press of National Economics University, Hanoi
5 PJICO (2014, 2015, 2016, 2016), Annual Report 6 PJICO (2014, 2015, 2016, 2016), Financial Report
7 Cục quản lý giám sát bảo hiểm (2014, 2015, 2016, 2017), Niên giám thống kê (Vietnamese Insurance Supervisory Authority (2014, 2015, 2016, 2017), Statistical Book)
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(65)APPENDIX
QUESTIONAIRE
Subjects: Experts are people who are working in PJICO, major in hull insurance at least 10 years
Method: Direct interview
INTERVIEW QUESTIONS
Hull insurance is one of traditional insurance type and accounts for big percentage of total revenue not only in PJICO but also in the whole insurance market However, underwriting results are not so good, loss ratio is high Hence, the research is to show factors affecting the efficiency of insurance, particularly hull insurance in PJICO
In order to serve this research, we would show some following questions and look forward to receiving your assistance:
1 Please show your ideas about development of hull insurance in Vietnam in recent years? How you evaluate the effects of economy to the development of hull insurance? Please show advantages and disadvantages of legal environment to hull insurance
(domestic and international)?
4 What you think of the competition among insurance companies and hull insurance in PJICO?
5 Please show your ideas about the following factors affecting the results of PJICO business (scores from to in which is the lowest and is the highest)
No Factors
Totally not affected
Not affected
Affected Much affected
Very much affected Products
2 Distribution channel
3 Service quality after selling
4 Adjustment and claim settlement Underwriting progress
6 Others
6 How and which factors should PJICO upgrade results of ship insurance?
(66)QUESTIONAIRE
Subjects: Representatives of Ocean Transportation Companies who have been using hull insurance of PJICO
Method: Direct interview
QUESTIONAIRE
Hull insurance is one of traditional insurance type and accounts for big percentage in portfolio not only of PJICO but also the whole insurance market However, underwriting results are not so good, loss ratio is high Hence, the research to show factors affecting the efficiency of insurance, particularly hull insurance in PJICO is very important
In order to serve this research, we would show some following questions and look forward to receiving your assistance:
A Information about the interviewee: - Full name:
- Company:
- Duration under insurance in PJICO: year…… 2-5 years … above years…… - Value of property (ship) under insurance in PJICO:
B Main content:
1 How you evaluate the trade mark and image of PJICO?
Very bad Bad Normal Good Very good How you evaluate the financial capacity of PJICO?
Very bad Bad Normal Good Very good 3 How you evaluate the ship insurance of PJICO (put X):
Factors Very not
suitable
Not suitable
Suitable Very suitable
Too suitable The diversification of products
Coverage Endorsement Premium
(67)Content Very bad
Bad Normal Good Very good Providing information about service
Manner and professionalism Underwriting qualification Supporting insurance procedure Supporting claim settlement
Taking care of clients after issuing policies Insurance procedure
Claim settlement procedure
5 Do you think which the following items PJICO should take care to raise the capacity of PJICO:
- Financial capacity
- Distribution channel
- Service quality
- Quality/diversification of products
- Management ability
- Facilities
- Staffs
- Claim settlement procedure
- Time of claim settlement