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Running Head: Strategic Issue Management in Insurance Companies
Strategic Issue Management in Insurance Companies
Assignment: DB 2.1
Summary of Project - External Strategic Context
Topic: Strategic Issue Management in Insurance Companies
Problem: The impact of Internal and External factors in profitability of Insurance Company.
Student Name: Kumar Mangath
Submitted to:…………..
Aspen School of Management
    
Introduction
The business environments have become highly complex and multidisciplinary. The external environment of the Insurance Companies has become unstable due to faster technological advancements, global competition, globalization and regional integration, and changes in the preferences of the customers. New technologies and the innovations have entered the Insurance Sector in form of block chain technology, robo-advice, sharing economy, data protection and aggregation. The Financial Services nowadays are dealing with a number of products. The technical innovations have reduced the transaction cost, and enabled the efficient service delivery possible. The latest expansion of the internet, mobile devices and home computing has reduced the ba
iers for market entry, thus intensifying the international competition. However, the technology has
ought positive development, efficiency and convenience in the life of people.
Strategic Issue Management organizes the strategic issues of the Insurance Companies at three levels: Corporate level, Functional Level and Process Oriented Level. The Management process is based on the characteristics like Location and Focus of Analysis, Decision making and Organizational Involvement.
Fig. Strategic Issue Management in Insurance Companies. Source: Swalehe, Ojera, Aila & Asaka (2015)
Primary dynamics in the organization's external environment creating both threat and/or opportunity
Various internal and external factors influence the profitability of the Insurance sector such as Investment Income, Underwriting Profit and the ROA i.e. overall profitability. The panel data regression has been used to investigate the influence of Insurance Companies in US.for the time duration of 2008-2017. The losses experienced by the Insurance Companies imply for the requirement of actuary and separate departments for granting validation to the policies. Growth in Premium increases the profitability of the insurance companies. Other external factors include leverage, expenditure on the management and the performance outcomes. The over-regulations, 24 hour demand for the accessibility of the services, increasing competition, and the altering business standards imply to the need of more effective management of the sector.
The study by Swalehe, Ojera, Aila & Asaka (2015) enquired the respondents about the changes in their external environment that the employees have been experiencing since last 5 years. More than 27% respondents said that the changes have been stable however 72% said that the working environment has been consistently changing and the Company has been imbibing regular changes in the annual strategies and the operating plans. The study ascertained that 96% of the companies had flexible plans to adjust to the immediate changes in the environment while 4% said the plans are not flexible enough.
The study found that most important external factor influencing the business sof Insurance Sector is Recu
ent changes in the Interest Rates (76%), followed by insecurity (67%), increased competition (64%), Government legislation (53%) and the infrastructure (38%). The most important Strategic Issues influencing the Insurance Business are: Performance Trends (100%), Internal Business and Capability Issues (96.6%) and the external Environmental trends (96.3%) (Swalehe et al 2015).
Insurance Companies respond to technical and economical innovations and transforms their policies and regulations to integrate these changes into the processes. For instance the start ups like Uber could be possible due to sharing economy. The insurance of vehicle is a responsibility of Taxi driver, the insurance companies may use technology to respond to new risks. The historical data trend of the Insurance companies is observed to accomplish the risk assessment of policy holders and the big data analysis. Fluctuating ‘rate of interest’ influences the cost of claims and assets value of the Insurance Companies.GDP also contributes to the economic developments of the Insurance sector to raise the living standards of the people.
Such volatile nature of the processes and procedures in the Insurance Sector pose a threat to...