TICEAS-258 Design of Motor Vehicle Insurance Policy Management Application

TICEAS-258 Design of Motor Vehicle Insurance Policy Management Application Anak Agung Gde Agung Diploma of Accounting Computerization, Telkom University agung@tass.telkomuniversity.ac.id ABSTRACT Extensive growth of vehicle ownership higher, not followed by growth of the road cause increasing rate in vehicle density. With the density of 188 vehicles per kilometer in 2012, risk of accident increases. In 2012, there were 117,949 accidents happened, causing loss over 298.6 billion rupiahs. One way to transfer the risk of loss is through motor vehicle insurance. Insurance premium was calculated using Financial Services Authority (Otoritas Jasa Keuangan) 2014 regulation. Business process was designed using Flowchart and Data Flow Diagram. Database was designed using Relationship Diagram. The research also create user interface design for the application. This research produce design of an application which can calculate motor vehicle insurance premium, manage policy submitted, handle claim submission, and journal the transactions. Keyword: motor vehicle, insurance, policy, application, design 1. Introduction The growth of vehicle ownership in Indonesia has increased very rapidly during the last few years. This is caused by better income, affordable (low-cost) vehicles and public transport condition that are still not comfortable for most of the people. According to Indonesian Automotive Industry Association, there were 1.2 million car sold in 2013 and it is targeted at 1.25 million units for 2014 [1]. This growth is not proportional to growth of the road. From the statistical data, in 1992 there were an average of 33 vehicles per one kilometer of road, increased to 188 vehicles per kilometer of road in 2012 [2] [3]. Figure 1 Number of Motor Vehicle per Kilometer in Indonesia (left), Material Loss Caused by Motor Vehicle Accident in Indonesia (right) 88

This rate of density becomes one sources of accidents on the road. From the available data, there were 117,949 accidents in 2012 nationwide, which resulted loss as much as 298.6 billion rupiah (about US$ 24.83 million) [4]. One way to transfer the risk of loss is through insurance. Growth in the number of motor vehicles is an opportunity for motor vehicle insurance company in Indonesia. This research aims to design application that can perform the calculation of premium motor vehicles, manage policies and manage the handling of claims submitted by users of insurance services, using the latest insurance regulation by the government. 2. References 2.1 Risk Risk is defined as uncertainty about loss. Therefore, the risk begins with an uncertain condition. Risk is measured by the probability of an event, and the effects that these events when they occur. Probability of loss is defined as the possibility of occurrence of an event that may cause loss [5]. Because preceded by uncertainty, risk can inhibit an event, accelerating the achievement of an event, or cause no effect at all to that event [6]. 2.2 Insurance Insurance is one of the common methods used to transfer the risk of a person to be covered collectively. Insurance also means that there will be replacement for losses suffered. Thus, insurance is an economic device whereby a person in a community pay a relatively small fee (called a premium) to replace the larger losses that may occur (called risk) over the community [5]. In practice, insurance company acts as a facilitator in making agreements, collecting the premiums, calculating losses and paid losses suffered by a person. Agreement which contains rules and guidelines agreed upon by the insurance company and the person who uses the services of insurance is called policy [7] [5]. 2.3 Motor Vehicle Insurance Insurance business in Indonesia is covered by Government Regulation number 73 year 1992 which then undergoes three changes, the last in Government Regulation number 81 year 2008, to regulate insurance business [8] [9]. To manage insurance business in motor vehicle and property, then the Otoritas Jasa Kendaraan or Financial Services Authority issued a regulation regarding the determination of premium rates and provisions acquisition costs in 2014, which is effective from January 1, 2014 [10]. The cost of motor insurance premiums in Indonesia is divided into three regions, Sumatra and surrounding islands (Region 1), DKI Jakarta, West Java and Banten (Region 2) and other regions in addition to Region 1 and 2. This document also regulates the cost of insurance (premium rate) to be paid by customer. 89

2.4 Total Loss Only One of the schemes offered by insurance companies, in particular motor vehicle insurance is a protection scheme Total Loss Only (TLO), which occurs when [11] [12] [13] [14]: Vehicle were damaged, and cannot be repaired technically and legally, Vehicles were damaged so that the cost to repair the damage exceeds a certain percentage of the value of the vehicle at that time. The percentage of common damage percentage used by insurance companies in Indonesia is 75%. Vehicle were stolen and lost and cannot be found within a certain period of time, for example 60 days. 2.5 All Risk (Comprehensive) This schemes provide complete protection to the vehicle. It covers total damage (TLO) or partial damage such as misconduct, theft, collision or damage from impact. [11] [15] [12]. 2.6 Additional Coverage In addition to the schemes above, there are schemes which provide protection against losses due to natural disasters (floods, earthquakes and tsunamis), as well as unusual events (riots and unrest, terrorism). This scheme results can be selected to complement the main protection schemes that have been selected [10]. 2.7 Accounting Journal Journal is a record that stores transaction records are sorted by the time occurrences of transactions, written every day [16]. Table-shaped journal have components such as date, description, reference, as well as debit and credit columns. The process of recording transactions in a journal is called journalizing [17]. Recorded in the journal description that explains the purpose of transactions [18]. Transactions in the journal are grouped into accounts. 2.8 Flowchart One way to model business processes is by Flowchart [19]. This diagram illustrates the sequence of activities in a process to resolve the problem, illustrates the software design in general, and describes a part or the main process of the software to be built [20]. 2.9 Data Flow Diagram The connection of data between objects in a system can be described with Data Flow Diagram (DFD). There are some objects that are described in the DFD: External entities, which describe the source of the incoming data stream into the system. This entity also describes the destination of data flow out of the system. External entities 90

are illustrated by rectangles. Process, which describes steps or procedure to solve problems in a structured manner, and store the data that describes data storage. The process is illustrated with a circle, and data store represented by the two horizontal lines in parallel. Arrow, which shows flow of the data. Data Flow Diagram should have process less than seven. If so, it can be broken down into several derivative / level [21]. 2.10 Entity Relationship Model Entity Relationship Model is a model used to describe the data of a process, which is implemented in a data base and its components. The main components in the ER are the entities and relationships that occur between entities [22] [23]. Entities and their relationships are illustrated in a diagram. One of the notation used in diagram is the Crow's Foot notation [24] [25]. 3. User User of this application is divided into two types, the customer and the insurance company (operator). In outline, customer can register the vehicle (and request for policy), and filed a claim. Operators can perform policy approval and manage claims filed by the customer. Calculation of premiums and journalizing process will be done automatically by the system. If desired, the user categories can be changed, by moving the process and permissions as needed. 4. Flowchart There are two main processes in this design proposed. The first is the policy-issue procedure. The process begins when a customer enroll for the insurance program. The insurance company is receiving request by the customer. In this process, all the administrative requirements checked by the company. Vehicles survey by surveyors to determine the value of the vehicle. Creating the policy according to the selected protection scheme chosen by the customer. Payments by customer. Activation of the policy. 91

Figure 2 Procedure for Policy Issue (left), Claim Handling (right) The second process describes the steps performed by insurance companies when a customer file a claim. The insurance company receives the claim. Surveyors will conduct an examination of the damage. Approval (or refusal) of the claim by insurance companies. Customer pays the customer's own risk. Replacement of the cost of repairs (reimbursement) or the issue of Work Order to partner workshop to repair the damage. 5. Data Flow Diagram Data Flow Diagram for context diagrams can be seen in Figure 3. Diagram is described using DeMarco/Yourdan notation [26]. Data Flow Diagram Level 1 is a breakdown of the context diagram. There are four major processes in this application. Data Flow Diagram Level 2 for Policy Issue process shown in Figure 4. Policy Issue Process can be broken down into following sub-processes. Vehicle registration, the process of registering a vehicle by the customer. Premium Calculation, the system will calculate insurance premiums according to the protection package selected by the user. Policy Approval, which is done by the operator to determine whether the proposed policy can be approved or not. 92

Premium Payment, which is a process that occurs when a user pays a premium for the policy approved. Figure 3 Context Diagram (left), Data Flow Diagram Level 1 (right) Figure 4 Data Flow Diagram Level 2 Policy Issue (left), Claim Processing (right) Claim processing can be broken down into following sub-processes. Claim check, the insurance company check on the claims submitted by users. Claim Approval, conducted to determine whether the claims covered by the policy. Claim Payment, when the insurance company pays compensation of the damage or issue work order to workshop to repair the vehicle. 93

6. Entity Relational Diagram There are eight tables that will be used in this application. Figure 5 ER Diagram COA, contains Chart of Account. Jurnal, contains journal entry records. Transaction, consists records of transaction. Claim, contains claims data. Policy Detail, contains detailed premium data in every policy. Policy, contains policy data for a vehicle in specific coverage year. Rate, contains rate detail available to specific area in Indonesia. Vehicle_DB, contains specific information about a vehicles. 7. User Interface Design There are four main interface in the design of this application. Note that this interface is written in Bahasa Indonesia, but explanation below should describe the interface. Vehicle registration, accessed by customer when submitting the first data of the vehicle. Customer enter data about the vehicle such as registration number, engine number, chassis number, and photograph of the vehicle. Policy registration, accessed by operator when customer request policy issue. Customer then choose available protection, and the cost of the premium automatically calculated based on government regulation. 94

Figure 6 Vehicle Registration Menu (left), Policy Registration Menu (right) Figure 7 Claim (left), Claim Evaluation Menu (right) Claim, accessed by customer when filling a claim. Customer can enter the date of the event (accident) and a description about the event. vehicle, and make estimation about the loss. If accepted, system calculate the own cost must be paid by customer. Journal, accesses by operator to display transaction journal. Figure 8 Journal 95

8. Journalizing Application will make automatic journalizing to all financial transaction, such as premium payment or claim payment. Transactions are grouped into the accounts according to the purpose of the transaction. When users paid the insurance policy, the journal will be recorded as follows. Date Acc. Description Ref. Debit Credit 01-Nov 1xx Cash 5,000 4xx Revenue 5,000 repair or pay the repair at the workshop. The journal will be recorded as follow. Date Acc. Description Ref. Debit Credit 01-Nov 5xx Claim Expense 5,000 1xx Cash 5,000 9. Conclusion This research resulted in design of application that are ready to be implemented. Main process is represented by Flowchart. Connections of process and data flows are represented by Data Flow Diagram. Database design represented by relationship diagram. Interface design also available for main process. This application is designed to calculate insurance policy based on premium rate set by government regulation. It is also designed to manage are done. REFERENCES [1] 2014. [Online]. Available: http://www.imoney.co.id/articles/perkiraan-pertumbuhan-industri-asuransi-di-indonesia/. [Diakses 05 September 2014]. [2] - Pusat Statistik, 2014. [3] [4] 1987- Kerugian Materi yang Diderita Tahun 1992- [5] IMS Proschool, Risk Management and Insurance Planning, Tata McGraw-Hill, 2012. [6] P. Hopkin, Fundamentals of Risk Management: Understanding, Evaluating and 96

Implementing Effective Risk Management, Kogan Page Publishers, 2012. [7] M. S. Dorfman, e-study Guide for: Introduction to Risk Management and Insurance, Cram101 Textbook Reviews, 2012. [8] Presiden Republik Indonesia, Peraturan Pemerintah Nomor 73 Tahun 1992 Tentang Penyelenggara Usaha Perasuransian, Jakarta, 1992. [9] Presiden Republik Indonesia, Peraturan Pemerintah Nomor 81 Tahun 2008 Tentang Perubahan Ketiga Atas Peraturan Pemerintah Nomor 73 Tahun 1992 Tentang Penyelenggara Usaha Perasuransian, Jakarta, 2008. [10] Otoritas Jasa Keuangan, Surat Edaran Nomor SE-06/D.05/2013, Jakarta, 2013. [11] http://www.lippoinsurance.com/auto-protection/. [Accessed 04 September 2014]. [12] KBC Bank, General Condition Motor Car Policy, 2007. [13] http://www.aca.co.id/motoreng.aspx#kendaraan. [Accessed 04 September 2014]. [14] http://www.progressive.com/claims/total-loss/. [Accessed 04 September 2014]. [15] Caribbean Mercantile Bank N.V., BSURE Special Condition Car Insurance-All Risk. [16] E. A. Clarke, Accounting: An Introduction to Principles & Practice, Cengage Learning, 2012. [17] J. R. J. D. Carl Warren, Financial Accounting, 12th Edition, Cengage Learning, 2011, p. 57. [18] J. R. E. H. J. M. Pru Marriott, Introduction to Accounting, SAGE, 2002. [19] Krismiaji, Sistem Informasi Akuntansi, Yogyakarta: Sekolah Tinggi Ilmu Manajemen YKPN, 2010. [20] D. G. Moursund, Introduction to Computer and Communication, Mc. Graw-Hill, 1978. [21] A. Gregory dan E. Stobbs, Business Method Patents, Aspen Publisher, 2001. [22] Silberschatz, Korth dan Sudarshan, Database System Concepts Fourth Edition, 2001. [23] H. J. Rosenblatt, Systems Analysis and Design, Cengage Learning, 2013. [24] S. M. Carlos Coronel, Database Systems: Design, Implementation, & Management, Cengage Learning, 2014. [25] C. Liu, The Crows Feet Notation, Computing Department, Dublin Institute of Technology. [26] B. H. W. R. M. R. Alan Dennis, Systems Analysis and Design 4th Edition, John Wiley & Sons, 2010. 97