INTERNAL CONTROL IN THE MANAGEMENT SYSTEM OF AN INSURANCE ORGANIZATION: CHALLENGES OF ALIGNMENT AT THE STRATEGIC, TACTICAL, AND OPERATIONAL LEVELS
Abstract
The article presents an in-depth examination of the internal control system within insurance companies, emphasizing its multidimensional nature and the significant challenges associated with aligning control mechanisms across strategic, tactical, and operational levels of management. Internal control is conceptualized as an integrated framework that ensures the effectiveness of business processes, the accuracy and transparency of financial information, the protection of assets, compliance with regulatory requirements, and the mitigation of insurance-specific risks. At the strategic level, internal control facilitates the formulation and monitoring of long-term objectives, risk appetite, corporate governance standards, investment policies, and alignment with regulatory frameworks such as Solvency II, IAIS principles, and national supervisory guidelines. At the tactical level, internal control focuses on medium-term decisions related to pricing, underwriting, reserving, portfolio management, and investment limits. This includes the validation of actuarial models, assessment of product profitability, monitoring of technical reserves, and ensuring consistency. Tactical internal control plays a key role in preventing excessive risk-taking, maintaining tariff adequacy, and ensuring that underwriting practices remain aligned with the company’s overall risk profile. The operational level encompasses daily control over policy issuance, claims handling, customer data management, compliance with KYC/AML procedures, accuracy of internal databases, and adherence to established workflows by front-line employees and intermediaries. Operational control ensures the quality of documentation, timely detection of errors or fraud, and overall process reliability. These discrepancies often lead to inefficiencies, increased losses, delayed reaction to emerging risks, and weakened strategic performance. The analysis demonstrates that the effectiveness of internal control largely depends on coordination among audit, compliance, risk management, financial control, and operational departments.
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