Preparation of Accounts of Insurance Companies | Accounting

For the purposes of maintenance of accounts, two types of books are required to be maintained by such organisations.

Statutory Books:

(a) Register of Policies:

It contains the particulars in respect of each policy issued by the insurer such as the name and address of the policy holder, date when the policy was affected and record of the assignment of the policy, etc.

(b) Register of Claims:

This register contains the particulars of each claim such as the date of claim, name and address of claimant, the date on which the claim was discharged or settled, date and reasons of rejection, in case the claim is rejected.

(c) Register of Licensed Insurance Agents:

It contains the particulars of various insurance agents, their names, occupations, addresses, numbers of licence, dates of issue of licence, and date of renewal, particulars of business done and commission due to every agent.

Subsidiary Books:

Subsidiary books are maintained taking into account the magnitude of the business and convenience of the concern. Some important of these are- register of proposals, proposal advance cash book, first year’s premium cash book, renewal premium cash book, agency and branch cash book, petty cash book, claim cash book, general cash, bank cash book, commission register, lapsed and cancelled policies cash book, journal, agency ledgers, policy loan register, general loan register, investment ledger and many others.

Some of these are being discussed here as under:

i. Premium Register:

In this ledger, the amount received as premium from each insured category is recorded. Separate registers are maintained for each type of policies.

ii. Cash Receipt Register:

Cash premium received from the insured is recorded in this book/register. Other receipts like, fines, penalties, interest on investments, rent on outlet properties, etc. are also recorded in this book.

iii. Cash Disbursement Book:

All expenditures or expenses paid by the insurance company are recorded in this book such as settlement and payment of claims, payment of commission, refund of premium and other expenditures for the management of the company.

iv. Claim Register:

All the claims which are lodged with the company, and particulars of such claims are to be recorded in this register. Separate registers must be maintained for each type of policies.

v. Claim Disbursement Book:

All the claims which are lodged with the insurance company are verified by conducting surveys of the claims lodged. The amount as determined by the licensed surveyor or loss assessor is paid by way of compensation. As such, all the particulars of claim disbursements are recorded in this book.

vi. General Cash Book:

It contains the summary of all books such as register of proposals, premium cash book, branch or agency cash book, petty cash book, claims cash book, first year’s premium’s cash book etc. As such, it contains all particulars of information received in the head office and may be called Summary Book.

vii. General Ledger:

This accounting book contains different accounts maintained by the insurance company. This book helps in the preparation of Trial Balance from which final accounts are prepared so as to calculate profits or loss and to know the financial position of the company.