Insurance Master Data
Premium Cycle—P&C
COSO
Component
Control
Activities
Cycle
Premiums
Control
Activities
Premiums
Control
Activities
Premiums
Transaction
Process
Control Objective
Billing
Premium receivable information
from the policy administration
system are recorded in the billing
system(s) completely, accurately
and in a timely basis.
C, A
Control
Objective
Category
(C/FR/O)
Risk
Point of Focus
Point of
Focus
Control
Type
(CAVR)
FR
Transactions recorded in the
policy administration system do
not update the billing system(s)
completely, accurately or in a
timely basis.
Reconciliations are performed between all sources of
premium receivable transactions, including automated
balancing routines for interfaces between respective
policy administration system(s) and policy
administration system(s).
C, A
Billing
Billings accurately reflect all
amounts due from intermediaries
and insureds according to policy
records.
A, V, R
FR
Billing
Billings are correctly issued in the
appropriate financial period.
C
FR
C, A, V
FR
A, V
FR
Control
Activities
Premiums
Billing
Billings performed by third party
administrators are processed
completely, accurately and in a
timely fashion.
Control
Activities
Premiums
Billing
Premium invoices are supported
by the billing file.
3/6/2016
Control
Objective
Control
Type
(CAVR)
Billing system calculates of premium receivable reflects
all authorized premium adjustments (e.g. return
Billings are inaccurately
premiums, cancellations, and endorsements), policy
calculated, do not accurately
charges and fees. The billing system performs edits
reflect authorized premiums
and validations on premium receivable data such as
adjustments or manual errors
A, V, R
verification of billing address and policy details to the
arise in the billing preparation
policy administration policy file prior issuance of the
process resulting in inaccurate
invoice. All adjustments and manual calculations of
invoice preparation.
premium receivables are reviewed by independent
personnel.
Bills are not processed timely or
Automated billing runs exclude prepaid premiums
duplicate bills are issued to
C
already received and are reconciled to mailing logs.
intermediaries or insureds.
Billing by intermediaries may not
Management reviews billing reports (e.g. written
be processed correctly or may
premium summary listings) to ensure timeliness and
result in delays in receiving and
C, A, V
quality of premium receivable data received received
recording data from
from intermediaries.
intermediaries.
Principal sources of information needed to prepare
Billing files are not effectively
premium billing are communicated to all parties
documented to support premium
A, V
involved in premium billing preparation and
receivable balances invoiced.
documented within the billing file.
Page 1 of 9
Insurance Master Data
Premium Cycle—P&C
COSO
Component
Control
Activities
Cycle
Premiums
Transaction
Process
Billing
Control Objective
Control
Objective
Control
Type
(CAVR)
Billing policies and procedures are
documented and communicated to C, A, V, R
all billing personnel.
Control
Objective
Category
(C/FR/O)
FR
Risk
Point of
Focus
Control
Type
(CAVR)
Point of Focus
Billing policies and procedures
Billing policies and procedures are effectively
have not been effectively
C, A, V,
communicated and readily accessible by personnel
communicated to a premium
R
and management responsible for premium billing.
billing personnel.
Fraudulent billing activity results in
Segregation of duties is enforced between those
invoices not being issued for valid
authorized to modify billing master file data and
R
amounts due from intermediaries
personnel issuing bills.
and insureds.
Intermediaries’ access to the billing system is restricted
Intermediaries process
and access levels reviewed periodically by an
R
unauthorized billing transactions
appropriate official.
Delays in receiving policy data Incomplete data submissions from intermediaries are
from intermediaries results in
isolated and rejected prior to input into the billing
C
billing delays.
system.
Reconciliation is performed over amounts invoiced
Amounts due from policyholders
between the billing, policy administration system and
C, A
are not billed.
financial ledger.
Errors in the billing run result in Automated balancing routines within batch processing
A
incomplete of inaccurate invoicing. ensures that invoices are issued for all policies in-force.
Billing
Effective segregation of duty is
maintained over the billing
function.
R
FR
Premiums
Billing
Programmed controls restrict third
party access to Company records.
R
FR
Control
Activities
Premiums
Billing
All relevant data required to issues
bills is available on a timely basis
C
FR
Control
Activities
Premiums
Billing
Invoices are issued for all amounts
due form policyholders.
C, A
FR
Control
Activities
Premiums
Billing
Invoices are issued for all amounts
due form policyholders.
A
FR
Control
Activities
Premiums
Billing
Effective segregation of duty is
maintained over the billing
function.
R
FR
Fraudulent data entry understates
Segregation of duties is enforced between invoicing
billing activity for the purpose of
and premium collection.
misappropriating cash receipts.
R
Control
Activities
Payments are completely and
Payment
accurately applied to policies in
Premiums Application and
force and recorded in the proper
Collection
period.
FR
Cash received from intermediaries
All cash receipts are logged and recorded in the cash
or insureds is not completely and
sub ledger on a timely basis and supported by
accurately applied to premium
remittance advices
receivable.
C, A
Control
Activities
Premiums
Control
Activities
3/6/2016
C, A
Page 2 of 9
Insurance Master Data
Premium Cycle—P&C
COSO
Component
Control
Activities
Cycle
Transaction
Process
Control Objective
Payment
Receivables listing represents a
Premiums Application and complete and accurate record of
Collection
outstanding premiums.
Control
Objective
Control
Type
(CAVR)
C, A
Control
Objective
Category
(C/FR/O)
Risk
Point of Focus
Point of
Focus
Control
Type
(CAVR)
FR
The billing system is not updated
to reflect cash receipts, resulting in
the overstatement of receivables.
The cash sub ledger is reconciled to the General
Ledger and billing system.
C, A
Control
Activities
Payment
Cash receipts are allocated
Premiums Application and
against polices on a timely basis
Collection
C, A, V
FR
Control
Activities
Payment
Credit control activities identify
Premiums Application and
and monitor delinquent accounts
Collection
V
FR
Control
Activities
Payment
Premiums Application and
Collection
C, A
FR
V, R
FR
R
FR
Control
Activities
Control
Activities
3/6/2016
Premiums paid equal amounts
billed and recorded by
intermediaries.
Payment
Management reviews nonPremiums Application and
standard cash application
Collection
transactions
Payment
Cash receipts are appropriately
Premiums Application and
safeguarded upon receipt.
Collection
Payments received cannot be
matched against premiums due Cash is matched and applied to specific invoices with
resulting in the misallocation
unallocated cash suspense accounts being cleared on
C, A, V
between cash assets and
a timely basis and the reconciliation reviewed by
receivables for financial
appropriate management.
statements disclosures.
Delinquent accounts are identified through monthly
aging analysis (by intermediary and insured) and the
Premiums due are not collectible.
V
need for monitored for bad debt allowance or
termination monitored by credit controllers.
Amounts due from intermediaries,
reflecting premiums paid and
Receipts from intermediaries are reconciled to
applied against receivables, is not
C, A
accompanying bordereaux statements.
completely and accurately passed
on to the Company.
Misappropriation of cash receipts
All adjustments to amounts due and collected are
due to fraudulent or errant
V, R
approved by independent personnel.
adjustments to receivables.
Misappropriation of cash assets.
Cash receipts are securely stored, restrively endorsed
and access restricted to authorized personnel only.
R
Page 3 of 9
Insurance Master Data
Premium Cycle—P&C
COSO
Component
Cycle
Transaction
Process
Control Objective
Control
Objective
Control
Type
(CAVR)
Control
Objective
Category
(C/FR/O)
Control
Activities
Premium
Recognition/
Written premium transactions are
Premiums Premium Audits
recorded in the proper period.
Experience
Rating
C, A
FR
Control
Activities
Premium
Premiums are recognized as
Recognition/
revenue over the period of the
Premiums Premium Audits contract in proportion to the
Experience
amount of insurance protection
Rating
provided.
A
FR
A, V
FR
Control
Activities
Control
Activities
3/6/2016
Premium
Recognition/ The unearned premium reserve is
Premiums Premium Audits
adjusted for reinsurance or
Experience
premium adjustments.
Rating
Premium
Recognition/ Premium audits are performed to
Premiums Premium Audits assess the accuracy and validity
Experience
of earned premium.
Rating
A, V
FR
Risk
Point of
Focus
Control
Type
(CAVR)
Point of Focus
Formal period end cut-off procedures are established
and communicated to underwriting/financial personnel,
and adherence monitored by an appropriate official.
Prepaid premiums relating to the current period are
Incorrect gross and net written recognised as earned, and additional prepaid amounts
premiums recorded for the period. recorded as unearned premiums. The policy/premium
administration systems calculate written premium using
the inception and expiration dates of the insurance risk
assumed rather than the date the transaction was
recorded.
Underwriters establish an earning profile for each line
of business to appropriately reflect the nature of the
Earned/unearned premium does
risk insured, and compliance with applicable
not approximate the portion of
local/overseas regulations. The policy administration
written premiums relating to the
system performs automated calculations of earned
period of expired/unexpired risk.
premium by line of business. Any manual intervention
is reviewed by independent personnel.
Unearned premium calculations are performed using
Incorrect amounts of unearned
current written premium data recorded in the policy
premium recorded in the financial administration system and premium sub ledgers, which
ledger.
incorporate retrospective and late premium
adjustments
Earned premiums are not
Renewal premiums are accurately calculated using
accurately recorded due to
authorized premium rates and adjusted upon
validation through a premium audit completion of premium audits as applicable for the
function.
respective line of business.
C, A
A
A, V
A, V
Page 4 of 9
Insurance Master Data
Premium Cycle—P&C
COSO
Component
Monitoring
Monitoring
Monitoring
Control
Activities
Control
Activities
Control
Activities
3/6/2016
Cycle
Transaction
Process
Premium
Recognition/
Premiums Premium Audits
Experience
Rating
Premium
Recognition/
Premiums Premium Audits
Experience
Rating
Control Objective
Control
Objective
Control
Type
(CAVR)
Control
Objective
Category
(C/FR/O)
Risk
Point of Focus
Premium audits are performed
accurately and on a timely basis.
A, V
FR
Earned premiums are not
accurately recorded due to lack of
effective premium audit function.
Management monitors the quality and timeliness of
completion of premium audits, including the timely
processing of voluntary audits.
Management monitors and tests
C, A, V, R
the internal control environment.
FR
Premium
Management monitors and tests
Recognition/
the internal control environment
Premiums Premium Audits
C, A, V, R
operated by third party service
Experience
providers.
Rating
FR
Premiums
The Company’s records reflect the
Allowance for
amount of premiums due expected
Uncollectible
to be recoverable under insurance
Premiums
contract.
Premiums
Allowance for
Uncollectible
Premiums
Consistent treatment of doubtful
debts by third party service
providers.
Premiums
Allowance for Effective credit control procedures
Uncollectible mitigate the risk of uncollectible
Premiums
premiums
V
FR
V
FR
V
FR
Point of
Focus
Control
Type
(CAVR)
Internal control weaknesses result
Internal Audit (where applicable) involvement in the
in the fraudulent, invalid,
selection, planning and execution of premium audits. C, A, V,
inaccurate and incomplete
Findings are formally documented and issued to senior
R
recording of premium activity in
management.
the Company’s record.
Internal control weaknesses at
third party service providers result
Formalized review of the control environments
in the fraudulent, invalid,
C, A, V,
operated by MGAs and TPAs. All material service
inaccurate and incomplete
R
providers are selected at least on a rotational basis.
recording of premium activity in
the Company’s record.
Unidentified delinquent accounts
Overdue premiums are compared to policy terms and
exist without any allowance for
cancellation notices issued where required.
doubtful debts being established.
Third party service providers do
not monitor premium collection Intermediaries are advised of delinquent accounts on a
activity and fail to identify
timely basis and initiate collection procedures in
delinquent accounts on a timely accordance with the Company’s credit control policy.
basis
The Company continues to write
direct and intermediary business Credit controllers establish credit limits and payment
with persons considered to be terms to appropriately reflect the risk of non-payment.
high credit risk.
V
V
V
Page 5 of 9
Insurance Master Data
Premium Cycle—P&C
COSO
Component
Cycle
Control
Activities
Premiums
Allowance for Premiums receivable are adjusted
Uncollectible to reflect allowances for delinquent
Premiums
accounts.
Control
Activities
Premiums
Fraud
Investigations
Control
Activities
Premiums
Control
Activities
Premiums
Control
Activities
Premiums
Transaction
Recording
Control
Activities
Premiums
Control
Activities
Premiums
Control
Activities
3/6/2016
Premiums
Transaction
Process
Control Objective
The company has sufficient
resources and expertise to
investigate fraud.
All new and renewal premiums are
Transaction
recorded in the policy
Recording
administration system and
actuarial records.
All new and renewal premiums are
Transaction accurately recorded in the policy
Recording
administration system and
actuarial records.
Control
Objective
Control
Type
(CAVR)
Control
Objective
Category
(C/FR/O)
V
FR
Risk
Point of
Focus
Control
Type
(CAVR)
Point of Focus
Allowances for uncollectible amounts are determined
Inadequate allowance is provided
by credit controllers and based upon the debtors’ credit
against doubtful debts
status and payment history.
Fraud investigations fail to resolve Fraud investigations are performed in accordance with
internal control weaknesses or pre-determined guidelines by experienced underwriting
recover losses.
and (where applicable) Internal Audit personnel.
All new policies are not considered
Written premium data is reconciled to the policy
for reinsurance, resulting in the administration system to identify all in-force direct and
retention of inappropriate levels of assumed polices prior to the calculation of reinsurance
risk.
cessions.
Rejected policy data is isolated, analysed and
Inaccurate recording of policy data corrected on a timely basis through programmed
due to incorrect/ invalid data entry
controls, batch headers and suspense accounts.
Management reviews resulting exception reports.
An appropriate level of review is in place to ensure that
Processing backlogs exist and are
policy data is entered on a timely basis and any
not cleared on a timely basis.
backlogs addressed.
Incorrect amounts of gross and Calculation of premium adjustments (including return
net written premium recorded in premiums and retrospective premium adjustments are
the financial statements.
approved by an appropriate official.
V
V
FR
C, A
FR
V
FR
All transactions are recorded on a
timely basis
C, A
FR
Transaction
Recording
Only valid transactions are
recorded in the underlying
records.
V
FR
Transaction
Recording
Only valid transactions are
recorded in the underlying
records.
A
FR
Incorrect amounts of gross and
Suspense accounts are reconciled and reviewed by an
net written premium recorded in
appropriate official for unusual or aged items.
the financial statements.
A
Transaction
Recording
Effective segregation of duties
exists between those recording
premiums transactions and
personnel handling cash receipts.
FR
Fraudulent data entry understates Segregation of duties exists between those recording
premium activity for the purpose of premiums transactions and personnel handling cash
misappropriating cash receipts.
receipts.
R
R
V
C, A
V
C, A
V
Page 6 of 9
Insurance Master Data
Premium Cycle—P&C
COSO
Component
Control
Objective
Control
Type
(CAVR)
Control
Objective
Category
(C/FR/O)
Transaction
Process
Control Objective
Premiums
Transaction
Recording
Management monitors
completeness and accuracy of
data input into the Company's
administrative system
Control
Activities
Premiums
Transaction
Recording
Premium transactions are
accurately reflected and classified C, A, V
in the financial ledgers
FR
Control
Activities
Premiums
Transaction
Recording
Premiums are correctly stated in
the reporting currency.
A
FR
Control
Activities
Premiums
Transaction
Recording
Tax information derived from
premium activities is accurately
and promptly reported.
C, A
FR
Control
Activities
3/6/2016
Cycle
C, A
FR
Risk
Point of Focus
Point of
Focus
Control
Type
(CAVR)
Management reviews policy information to critically
Management is unable to identify
analyze premium activity, including current and
significant data entry problems in
historical premiums trends, new and renewal business, C, A
the recording of premium billing
premiums by lines of business, intermediary and
and cash application transactions.
insured.
Inaccurate data input results in the
misclassification of policy data and The financial sub ledgers are reconciled to the general
financial records and the
ledger. Reconciliations are reviewed and approved by C, A, V
miscalculation of ADIAL due to
financial management.
inaccurate premium data.
Misstatement of premium and
Translation of foreign currency written premiums is
related income due to inaccurate
calculated using prevailing exchange rates at the date
A
or incomplete foreign currency
of policy inception.
translation.
Documented procedures for developing, summarizing,
and reporting required tax information. Review of
Erroneous data may be used in
major transactions or major classes of transactions by
tax computations and result in
individuals who are knowledgeable about tax
C, A
overpayments or underpayments
requirements. Programmed sub ledger coding
of taxes.
facilitates the automated classification, summarization,
and retrieval of required tax information.
Page 7 of 9
Insurance Master Data
Premium Cycle—P&C
COSO
Component
Control
Activities
Control
Activities
Control
Activities
Control
Activities
Control
Activities
3/6/2016
Cycle
Transaction
Process
Control Objective
Control
Objective
Control
Type
(CAVR)
Control
Objective
Category
(C/FR/O)
Risk
Point of
Focus
Control
Type
(CAVR)
Point of Focus
Premiums
Transaction
Recording
Relevant disclosure data is
gathered completely, accurately
and on a timely basis.
C, A, V
FR
Recorded transactions capture and aggregate required
account disclosures including:
- gross and net written premiums
Required GAAP/ MD&A/ 10-K
- earned premium (including changes in unearned
disclosures are incomplete or
premium)
C, A, V
inaccurate for presentation in the
- allowance for bad debts
financial statements
- insurance balances receivable
- appropriate segmental and geographical analysis
- associated cash flows
- material legal proceedings
Premiums
Adjustments
and Ledger
Maintenance
Prevention or detection of
incorrect entries to policyholder
accounts, agents' balances and
reinsurance data.
R
FR
Unauthorized adjustments are
made to the financial sub ledgers.
Premiums
Appropriate segregation of duties
between the entry and approval of
Adjustments
journal entries (related to
and Ledger
underwriting transactions not
Maintenance
recorded in the Company's
administrative systems).
R
FR
Unauthorized adjustments are Appropriate segregation of duties exists between the
made to the financial sub ledgers.
entry and approval of journal entries
R
Premiums
Adjustments
and Ledger
Maintenance
A, V
FR
Incorrect/ inconsistent treatment of A chart of accounts is maintained and updated on a
manual adjustments between sub timely basis, establishing procedures and account
ledgers.
mappings for processing journal entries to sub ledgers.
A, V
Premiums
Adjustments
Sub ledger journal entries
and Ledger represent valid adjustments to the
Maintenance
Company’s financial records.
V
FR
Polices and procedures exist for
processing journal entries.
Incorrect of fraudulent journal
entries are recorded.
Access to ledger journal entries is restricted to
appropriate finance personal through programmed
authority levels.
All journal vouchers are approved by management and
attached to supporting documentation.
R
V
Page 8 of 9
Insurance Master Data
Premium Cycle—P&C
COSO
Component
Cycle
Transaction
Process
Control Objective
Premiums
Adjustments
and Ledger
Maintenance
Sub ledger journal entries are
recorded on a timely basis.
Control
Activities
Premiums
Adjustments
and Ledger
Maintenance
Control
Activities
Premiums
Adjustments
and Ledger
Maintenance
Control
Activities
3/6/2016
Prevention or detection of
incorrect entries to policyholder
accounts, agents' balances and
reinsurance data.
Sub ledgers are reconciled to
policy administration, billing and
reinsurance systems.
Control
Objective
Control
Type
(CAVR)
Control
Objective
Category
(C/FR/O)
V
FR
C, A
FR
C, A
FR
Risk
Point of
Focus
Control
Type
(CAVR)
Point of Focus
Ledger maintenance activities are
Manual adjustments are reviewed by an appropriate
not recorded in the correct
official to ensure accuracy of cut-off.
financial period.
The financial sub ledgers do not
The financial sub ledgers are reconciled to the
accurately reflect current policy
underlying policy administration, actuarial and
data, reinsurance terms and reinsurance systems. Reconciliations are reviewed and
billings.
approved by financial management.
Unreconciled suspense accounts Suspense accounts are reconciled and reviewed by an
exist and are not cleared on a
appropriate official to identify and clear unusual or
timely basis.
aged balances.
V
C, A
C, A
Page 9 of 9