Category: Insurance

Abstract

The insurance industry in the Gulf Cooperation Council undergoes considerable changes. The UAE is one of the most successful regions where insurance brokers and agents achieve success and recognition. The representatives of GCC have survived the global economic crisis. Still, the organizations could not allow themselves to stay in the same position; therefore, they have to undergo certain transformations and consider the innovations to stay competitive and achieve the required portion of success. In this paper, the evaluation of the UAE insurance market will be offered and compared with the markets of other regions of GCC, such as Saudi Arabia and Qatar. In addition, the explanation of such terms as an insurance broker and an insurance agent will be given to clarify if these two occupations may coexist regarding their responsibilities and rights in terms of relations they can develop with clients.

Insurance Broker in the UAE

The Gulf Cooperation Council is a regional unit that consists of all Arab states, including the UAE, Saudi Arabia, Oman, Qatar, etc. During the last several years, this region has undergone a number of considerable changes, and the insurance industry is not an exception (GCC insurance industry, 2013). The UAE is one of the dominant states in GCC, and its insurance conditions remain to be the most successful. In 2014, the insurance market growth was about 15%, and the insurance premiums were more than $22 billion (Rizvi, 2015). The differences between years show that regional insurance companies are ready to work and develop their activities to result in considerable financial benefits and assets.

In comparison to the UAE, there are also such regions as Saudi Arabia (about $8 billion) and Qatar (about $2 billion) that demonstrate good results in the insurance market. The peculiar feature of insurance brokers in the GCC is their decision to capitalize on the practice to reduce the strengths of credits (Rizvi, 2015). To gain control over the assets that come from insurance companies, in the UAE, new broker regulations were offered in 2012 according to which brokers could identify their possibilities and conduct life assurance, insurance that is related to fund business, general assurance, etc. (O’Shea, 2014).

These regulations help to understand the difference that exists between an insurance broker and agent. Though both occupations deal with sales of insurance policies, these people should take different responsibilities. A broker is a person who cannot carry on business the way an agent can. Agents can represent one company only, and brokers may represent several companies at the same time and provide clients with a number of products. Agents usually work for a company, and brokers take care of customers. In the UAE, a broker cannot become an agent or develop business relations with another broker.

The task of the broker is to consider the interests of a client only. Brokers are able to undertake reinsurance broking. However, the same broker cannot perform the functions of an insurance broker and a reinsurance broker in regards to the same transaction and customer (O’Shea, 2014). Agents are free to choose the conditions under which they want to work and inform their clients about their intentions. In comparison to brokers, agents have such rights. Still, there is one requirement that has to be met by both occupations: either a broker or an agent has to get the required license that corresponds with the jurisdiction of the region where a person starts working.

References

GCC insurance industry. (2013). Web.

O’Shea, J. (2014). New UAE broker regulations become law. Clyde & Co. Web.

Rizvi, M. (2015). UAE insurance industry to sustain dominance in GCC. Khaleej Times. Web.

Executive Summary

Although the couple seems to be doing comparatively well as far as their financial resources are concerned, Anna and John could use a different approach toward investing their money. Furthermore, the couple should redesign the approach toward resource allocation. Particularly, the issue of cost management needs to be brought up as one of the primary concerns of the family. It is essential that Anna and John should get their priorities straight and plan their budget accordingly (Friedberg 121). Additionally, the very concept of setting goals and achieving them with the help of their budget needs to be redesigned. While it would be wrong to demand that every single purchase should be planned carefully, it will be necessary to make sure that the couple is aware of the risks and their financial limitations (Ahmed et al. 10).

Homeowner’s Insurance

Given the fact that the rent for the house is comparatively low, as well as the fact that there are valuable personal possessions, it will be reasonable to spend a significant number of the financial resources on the homeowner’s insurance. Furthermore, one should mention that the APR for the house is comparatively low (i.e., 3.5%, which means that the family will have to pay an average of

($250,000-$12,500)•0,035≈$8,312

every year). Thus, there is a possibility to extend the family’s budget so that the house could be insured appropriately. One must bear in mind that the threat of a theft implies that the family will lose a total of at least

$18,450+$26,000+$3,500 = $47,950

, i.e., the jewelry, the gun collection, and the cash hidden in the house, the, which means that insurance must include the items in question (Gitman et al. 364).

Auto Insurance

Auto insurance will also have to be comparatively high since one of the cars is quite expensive. Therefore, maintaining it in good condition and addressing possible accidents will require a significant amount of money. It should be borne in mind that the couple should be able to pay $250 deductibles in case the auto insurance coverage is required. Furthermore, the fact that the APR on the car loan is currently at 6% means that the family has to submit the payment of

($21,500+$1,600) = $23,100

will have to be submitted so that the family could use the vehicles. Therefore, it is reasonable to suggest that Anne and John should adopt a more flexible strategy in their resources management.

Life Insurance

Another essential aspect of the financial planning process, life insurance will have to be considered. Given the fact that the net worth of the family is $57,895.00, it will be necessary to cut some of the expenses taken by Anna and John on a regular basis; for example, the utilities- and the entertainment-related aspect of the costs taken by the family will have to be reconsidered. For instance, the total number of expenses for entertainment may be reduced to $400, whereas the consumption of water and electricity may be reduced so that the total of the utilities should equal $800 instead of $1,200. Although the identified goal will require that Anna and John should reconsider their approach toward resources management entirely, it will also imply that they should also alter their lifestyles as well. In other words, a more elaborate approach toward the use of their assets, including not only money but also personal possessions, must be viewed as a necessity.

Disability Insurance

When considering the amount of disability insurance, Anna and John must bear in mind that setting their bar too high may cost them their job. Indeed, by setting the disability insurance costs high, they will basically declare that they have health issues that may be incompatible with certain types of work. Therefore, employers may be reluctant to consider them as possible job applicants (Stiglitz and Kaldor 26).

Other Insurance

Double insurance can be viewed as a possibility for the couple. Indeed, seeing that their budgets are intertwined, they might consider the idea of insuring the same item under different policies (Clark 248).

Risk Management Strategy

When considering the available tools for managing risks, one should suggest the instrument known as Risk Reduction. Aimed at bringing the risk levels down to a considerable extent, the identified approach is likely to help the family address some of the issues associated with the possible loss of or damage to their possessions. For example, the jewelry, the money that is stored at home, and other items that could use better security definitely require insurance.

Non-Insurance Recommendations

As stated above, it is crucial that the couple should view a change in their concept of resource management as a necessity. For instance, they might redesign their current use of resources by focusing on investments rather than simply saving money (Frazer et al. 340). Furthermore, the idea of storing financial resources the way in which they do it now does not seem legitimate. Instead of hiding money under the mattresses, the couple should consider buying a safe. It is also suggested that John and Mary should consider using a different approach to cost allocation. Although it might seem adequate at present, they may need to be more cautious so that they could have extra resources in case of a crisis or an emergency.

Works Cited

Ahmed, Rizwan Raheem, et al. Influence of Children on Family Purchase Decisions. GRIN Verlag, 2015.

Clark, John. International Dictionary of Insurance and Finance. Routledge, 2014.

Frazer, John, et al. Implementing Enterprise Risk Management: Case Studies and Best Practices. John Wiley & Sons, 2014.

Friedberg, Barbara. Personal Finance: An Encyclopedia of Modern Money Management. ABC-CLIO, 2015.

Gitman, Lawrence, et al. Personal Financial Planning. Cengage Learning, 2013.

Stiglitz, Joseph E. and Mary Kaldor. The Quest for Security: Protection without Protectionism and the Challenge of Global Governance. CUP, 2013.

In the modern world of business, companies have to engage in stiff competition to survive in the market. Consequently, it is paramount for a new business to perform an analysis of the existing situation and identify what type of differential advantage its products will have. Thus, the current paper proposes a SWOT analysis for a new insurance company, discusses its leverages and core competencies, as well as describes the sources of its differential advantage and how it will meet the criteria for good differential advantages.

SWOT Analysis

It is possible to provide a SWOT analysis for the new company proposing the new high-deductible health insurance plan, organizing this analysis into a 2×2 table as suggested by Berkowitz (2017). This analysis is provided below, in Table 1.

Table 1. A SWOT Analysis for the New Company.

(Berkowitz, 2017, p. 58).

Leverages and Core Competencies

On the whole, it might be possible to consider the provision of high-deductible, low-premium health insurance to be the core competency of the new company. As for the leverages, the new organization may propose advantageous health insurance plans for couples and families. It is known that currently, one of the competitors offer their customers insurance options with deductibles at the level of $5,000 for singles and $10,000 for couples. The new company may create a similar offer with slightly lower premiums for single persons, while simultaneously proposing insurance plans with similar (slightly lower) premiums, but with deductibles that would be considerably lower than $10,000 for couples. Also, health insurance plans may be proposed for families larger than 2 people.

Source of Differential Advantage

It is pivotal that the new enterprise establishes a differential advantage upon their entry into the market (Qureshi, 2017). Regarding the source of differential advantage for the new insurance company, such a source as the targeted segment may be applied to the current case (Berkowitz, 2017, p. 61). As has been noted above, there are currently no advantageous options for health insurance plans for groups of individuals (couples or families). The currently existing offer for couples (with $10,000 deductibles for 2 people together) is less advantageous than the offer for individuals (with $5,000 deductibles), for each member of a couple should gain personal insurance because it would be easier to exceed the threshold of $5,000 than that of $10,000. Also, it seems that no specific offers exist for families of 3 and more people. Consequently, the new insurance plans need to be targeted at couples and families.

The Criteria for a Good Differential Advantage

As for the criteria for a good differential advantage, Berkowitz (2017) mentions four of these: importance, being perceived by the buyer, uniqueness, and sustainability (p. 59). Regarding the first criterion, it should be observed that the proposed differential advantage will be important to the buyer. This is because customers will obtain significant advantages about deductibles when purchasing insurance for couples or families: they will be able to buy insurance for several individuals, thus economizing on premiums, and they will also get lower deductibles.

The second criterion, being perceived by the buyer, should be met without any trouble, for any information or advertisement of the new health insurance policies can easily explain that these policies are advantageous for groups of people, and it will be easy for clients to understand that this is so because realizing this requires no specific knowledge. The third criterion, the uniqueness of the service, is also accounted for because it is apparent that the insurance companies that currently exist in the target market do not propose any specific type of service for couples or families of 3 and more persons. When it comes to the last, fourth criterion, the proposed differential advantage may be sustainable in the market if the competitors do not specifically attempt to retaliate and propose better offers. However, it appears unlikely that they do so, for the new organization is planned to occupy a niche in the market that is currently utilized by no one.

Conclusion

All in all, it should be stressed that according to the provided analysis, the new company might have an opportunity to propose high-deductible, low-premium health insurance policies that would be of benefit for couples and families larger than 3 people. This will provide the new organization with a differential advantage in the targeted segment. It should also be pointed out that the said differential advantage appears to meet all the four main criteria for a good differential advantage as listed by Berkowitz (2017, p. 59).

References

Berkowitz, E. N. (2017). Essentials of health care marketing (4th ed.). Burlington, MA: Jones & Bartlett Learning.

Qureshi, I. H. (2017). Marketing assets: A framework for differential advantage. Asian Journal of Management, 8(2), 220-228.

Introduction

Prospective’s Profile and Performance History

Prospective Insurance Company was founded in 2000 by a group of five investors. It has its headquarters in Compton, USA. Since its founding, the company has enjoyed significant success. Currently, the firm has more than $20 billion worth of life insurance policies. In addition, the group serves approximately 3.5 million clients. It provides such services as insurance and investment advisory. According to a 2015 report by the JCR-VIS Credit Rating Co. Ltd., Prospective Insurance Company was ranked among the top 10 insurance firms in the US. The criteria for grading was based on market capitalization and the policies sold.

Mission and Vision

For a company to succeed, its operations must be based on sound values, mission, and vision (Dorfman 75). Prospective Insurance Company’s core values are courage, excellence, relationships, and personal responsibility. Its vision and mission is to be the best insurance organization in the world and to positively impact on the community through the provision of effective financial security planning.

Problems Facing Prospective Insurance

In spite of the success, Prospective Insurance has faced a number of challenges over the decades. The main concerns include technological evolution, large volume of data, customer focus, and regulation. Customer focus refers to the need to create a better and comprehensive relationship with clients (Brocke and Rosemann 65). On its part, regulation entails operating within different jurisdictions and complying with the various guidelines, such as capital and investment rules.

To manage the challenges, Prospective Insurance Company makes use of ERP. Shaikh observes that ERP entails an integrated view of the primary business processes using the databases maintained by a catalog management system (88). Prospective Insurance Company uses ERP software to gather, store, control, and deduce information from its operational activities.

Literature Review

Overview

ERP has helped Prospective Insurance manage its challenges. As a result, the firm has avoided the negative consequences of disjointed business practices. The insurance industry is an economic sector. Consequently, insurance corporations are required to be effective in their operations to save on costs. In addition, they need to develop appropriate and reliable information transmitting channels. The reason is that they have to reach out to a large number of clients. Clark observes that insurance companies also deal with many files from different bodies, such as private and government entities (98). Over the years, Prospective Insurance uses ERP to manage its daily operations and provide its customers with high quality services.

Topics to be Covered

The topics to be addressed in this case study are the use of ERP in solving the challenges facing the company, the initiatives, and the steps taken to overcome the problems. The advantages of the initiatives adopted by Prospective Insurance include the development of channels to interact with clients, provision of high quality services, and sustainable economic continuity. Some of the risks associated with the initiatives are impersonation of applications used to provide services and resilience support. Other are slow adoption of the initiative in the business world and competition from rival companies.

Use of ERP by Prospective Insurance Company

Insurance companies carry out complex tasks that require the use of flexible systems. Current market trends reveal that there is a growing need among companies and individuals to acquire insurance policies. As a result, insurance firms are striving to provide customers with high quality services in a quick and efficient manner. The invention of ERP has helped the firms to achieve this objective. According to Shaikh, ERP software is used in contract accounting and preparation of different insurance documents (87). In addition, the technology speeds up the computation and formulation of payment procedures.

In Prospective Insurance, ERP is the primary tool used to develop quick output of customer services. The software has various features. The attributes include client database, purchase data, contract accounting, billing, cash, and finance management. Other features include contract follow-up, accounting transaction, human resource, receivables, and credit management (Sood 77).

Challenges facing the company

Attracting new IT talent

Prospective Insurance uses conventional work systems. Failure to use new modes and operational approaches prevents new and youthful employees from seeking positions in the company. When technology advances, corporations are required to adopt them. The reason for this is to simplify work and improve efficiency. Grant, Hackney, and Edgar note that technology and talent-related concerns are some of the major problems affecting insurance companies (102).

Retaining skilled employees

Retaining skilled employees is a challenge to most organizations. The main reason is lack of motivation, incentives, and competition. Highly skilled employees are productive and drive a company towards the realization of its goals (Dorfman 62). Upon attaining the set targets, it is important to acknowledge workers’ efforts through remuneration. Rewards can include bonuses and pay increments. Prospective Insurance lacks proper mechanisms of rewarding top performing employees. As a result, many of them move to rival companies with better offers and commissions.

Sales channels

Prospective Insurance faces the challenge of developing sales channels and mechanisms for its new products. The main issue associated with the problem is stiff competition and lack of proper marketing channels (Sood 66).

Selling to new demographics

Most insurance companies have local and international branches (Clark 74). However, majority encounter entry challenges and problems in establishing a strong customer base. Since its founding, Prospective Insurance has attained extensive success. To serve clients from different parts of the country, the firm has branches in over 10 states. However, some of the outlets have failed to attain success in the new areas.

Investment income

When investing, companies need to focus on effectiveness and efficiency. Brocke and Rosemann note that the failure to consider the aspects results in failure (104). Prospective Insurance Company has faced investment problems over the years, leading to a decline in annual revenues.

Growth

Growth is the greatest challenge affecting Prospective Insurance. After its inception in 2000, the firm stayed in the market for two years and collapsed. However, it was later revived through collaborative efforts between different stakeholders (Clark 88). In spite of opening branches in different states, the company’s growth rate is still low.

Economic uncertainties

Economic uncertainty is one of the main challenges affecting the insurance industry (Dorfman 98). At Prospective Insurance Company, the ambiguity was caused by a drop in the yield of bonds. The value decline put upward pressure on the insurance rates and affected the ability to attract low-risk taking customers. The uncertainty has prompted the company to raise its policy premium rates.

Pool optimization

Pool optimization is another problem facing Prospective Insurance (Sood 88). Due to extreme rivalry, firms compete for low-risk clients. They offer them reduced rates. The approach leads to pools imbalance in the industry.

Time to market pressures

Prospective Insurance Company is faced with the challenge of launching new products within short periods. The emergence of new insurance firms and increased competition requires firms to be at the forefront in offering new products (Brocke and Rosemann 114). In addition, corporations should develop strong marketing channels to ensure clients familiarize themselves with the products.

Solutions to manage the challenges

Cloud-based analytics

ERP has helped the insurance company manage different problems with ease. One of the ERP tools used by Prospective is cloud-based analytics. The technology is employed to create a foundation for a new data-driven underwriting model and pool optimization. According to Grant, Hackney, and Edgar, cloud sporting can hold large volume of data (69). The information is integrated into the actual model to compute probable risks.

Customer segmentation

In the insurance industry, it is important to understand and formulate the best means of partitioning client base (Sood 44). Prospective used ERP clusters to evaluate clients’ needs and financial potency.

Evaluation of product lines

When an insurance firm has a number of products, it is important to evaluate each line (Sood 102). Prospective makes use of ERP to determine the items doing well in the market and those performing poorly.

Reinsurance funding

Most insurers protect themselves through private reinsurance. The measure caters for catastrophes, which may hinder operations and the ability to effectively provide services to clients. It is one of the ERP approaches used by Prospective. The idea to adopt the approach was influenced by policyholders’ demand for more security after incidences of recent disasters.

Capital markets investment

Over the years, Prospective have tried to reduce property losses (Clark 115). The company put in place structures and measures aimed at minimizing losses caused by disastrous incidences. Prospective Insurance Company adopted an ERP driven capital markets scheme to safeguard its clients’ assets and reduce losses.

Understanding decisions of key stakeholders

Grant, Hackney, and Edgar note that for companies to develop appropriate strategies to deal with catastrophic risks, they can use ERP to understand the ‘potencies of the threats’ (62). In addition, firms need to evaluate the actions and the outcomes of the peril. Prospective Insurance has come up with a number of solutions by organizing forums with key stakeholders on different aspects concerning the company. The approach has helped the firm reduce the magnitude and impact of uncertainties.

Simplified decision rules

Prospective Insurance Company has used ERP to come up with simplified rules to overcome the effects of particular catastrophes in the business sector. Some of the guidelines include relocating people living in disaster prone areas and educating them on their roles in the insurance field. In addition, insurers have put in place measures to consider and calculate uncertainties by offering certain products (Clark 120).

Nested decision structure

Nested decision structure is used by insurance companies to develop strategies to manage risks with the different policy and stockholders’ associations. It can be incorporated into an ERP framework. One of the tools used in this structure is eGuide. According to Grant, Hackney, and Edgar, eGuide shows the way an organization needs to develop plans, goals, and strategies that are in line with its vision and mission (79).

One of the benefits associated with nested decision structures include increased operating system. It also helps employees to understand what is expected of them by the company. When workers understand their roles, they perform better. In addition, they become more productive, leading to the realization of organizational goals. The development makes it possible to achieve the set targets within the specified timeframe.

Nested decision structure also facilitates quick execution of business strategies. Brocke and Rosemann note that rigid goals and target visibility enable faster implementation of a company’s policies (79). To attain different goals, the management allocates labor resources and duties to various departments in the firm. The approach ensures that employees are not duplicating the work of their colleagues. In addition, the process allows managers to be responsible to facilitate the speedy realization of goals. Working or solving insurance problems in groups helps to better understand the added responsibilities associated with specific goals. The process is essential in the elimination of redundancy across job titles. In addition, the approach assists in determining the most important goals that need to be achieved.

Managing employee turnover

It is important to manage employees’ turnover rates. The reason for this is that workers play the greatest role in the company’s growth. Sood observes that the work setting is the primary cause of absenteeism (58). In addition, the feature is associated with reduced commitment among employees. Such factors as turnover rates can be managed using ERP.

Setting practical goals

Prospective Insurance Company uses ERP to set practical goals and solve some of the challenges facing the company. Brocke and Rosemann claim that goals established for the organization should be able to contribute directly to the achievement of the firms’ success (113). In addition, managers should maintain openness and transparency with employees when setting goals.

Customer focus

Customer focus entails creating better and comprehensive relationships with clients. In light of the increasing levels of competition, Prospective has used ERP to develop the best approaches to interact with customers and provide services (Dorfman 107). The adoption of the strategy has helped Prospective Insurance Company to develop ways that make it easy for customers to conduct business with the organization.

Initiatives adopted by Prospective Insurance Company

Insurance companies all around the globe are responsible for developing different initiatives aimed at benefiting both the firm and the community (Clark 105). Since its inception, Prospective Insurance Company has established a number of projects with the help of ERP. The plans include micro-insurance, sustainable insurance, and IN-APP initiative.

Micro-insurance initiative

Micro-insurance is a project that aims at providing clients with cost effective ventures through the use of collaborative novelty. According to Shaikh, there is a huge micro-insurance gap in the industry that needs to be filled (81). Failure to fill the space will hamper growth and hinder penetration of insurance products and services to the poor persons in the community.

The implementation of the micro-insurance initiative has various advantages. One of the plan’s benefits is that it has helped the company solve different societal problems, such as economic continuity and longevity. In addition, the initiative has benefitted first generation insurance clients.

The micro-insurance initiative faces a number of risks. One of the primary perils associated with the project is uncertainties in the development, design, and launch of micro-insurance ventures (Sood 95). Another risk is lack of capital to support the initiative’s products within the context of ERP.

Sustainable insurance initiative

Sustainable insurance creates awareness and improves levels of preparedness in communities. It also provides risk management guidelines to clients. In addition, the strategy is used to increase the capacity of insurance products to accommodate risks (Sood 76). The advantages of sustainable insurance include enhanced disaster response and recovery for communities and support for prudential policy and frameworks linked to sustainability.

Sustainable insurance initiatives adopted by Prospective face a number of risks. The main perils include problems associated with sharing of confidential information with key stakeholders and resilience support (Sood 77).

IN-APP initiative

ERP technology helps insurance firms to provide their services with ease (Shaikh 102). IN-APP initiative at Prospective aims to support the marketing of insurance policies. In addition, the project facilitates quick processing of clients’ problems.

The advantages of INN-APP include reinforcing financial strength and developing stable and lasting relationships with customers through the provision of high quality services. The risks associated with the initiative include defects in kernel and system codes provided by the insurance company and access to data by unauthorized parties. Another major risk associated with the application is UI impersonation (Sood 23).

Best Approach used to Implement the Initiatives

The best approach used for implementing the ERP initiative entailed making an in-depth evaluation of enterprise profile, competitors programs, and trends in the insurance industry. In addition, Prospective Insurance Company worked closely with other key players in the insurance business and other sectors. Working with different groups provide more information and better ways of tackling issues (Sood 63). Another approach involved refining the implementation plan of the initiative and educating members of staff and stakeholders on the new project. Enlightening shareholders and workers reduced resistance to the ERP project. Refining the execution plan helped the company to determine procedures that needed more evaluation and changes.

Case Study

Drivers for Formulating the ERP Initiative

Companies are influenced by numerous factors to develop projects. The main drivers associated with Prospective Insurance Company’s plan to develop the ERP plan was the need to provide high quality services to clients. In addition, the firm was motivated by the desire to help the community overcome different uncertainties that impact negatively on sustainability (Sood 65).

The plan was executed by following a number of steps. The first phase involved contacting stakeholders and other key parties. During the meetings with the relevant parties, the vision, mission, and goals of the project were discussed. Conferring allowed for sharing and brainstorming of ideas. In addition, the platform enabled the formulation of approaches to realize the goals of the ERP initiative (Clark 77). The second process of executing the plan entailed creating a process master, prioritizing processes, and assembling a process improvement team. The final steps were re-measure and execution.

Governance Framework

Once projects are implemented, it is important to do follow-ups. The reason for this is to ensure that the venture continues to run as expected (Dorfman 67). The governance framework adopted by Prospective Insurance entailed monitoring, evaluating, and analyzing any information acquired during the implementation of the ERP project. The governance framework was based on accountability, transparency, and integrity. Other principles were openness, efficiency, and stewardship.

KPIs Assigned as the Success Factor

The key performance indicator used as a success factor for the initiative was the SMART criteria. The approach was linked to targets and values that helped to determine whether or not the goals of the ERP have been achieved (Clark 74). Under the criterion, the specific purpose of the project was assessed. Each aspect of the plan had a different timeframe. However, the average duration for implementing each of them was around six to eight months.

Initiative Charter and Communication Plan

Implemented projects can fail if appropriate mechanisms and controls are not put in place (Brocke and Rosemann 104). The channels were used to ensure that information regarding the ERP initiative was relayed to all key stakeholders. The communication strategy used by Prospective Insurance entailed determining what will be communicated, who to communicate with, and whom the information will be transmitted to. Other features of the strategy were establishing parties responsible for making connections, selecting where the communication needs will be delivered, and determining the right channels of passing messages about the ERP.

Conclusion

Insurance companies face numerous challenges. The concerns include regulation, investment, growth, and technology. ERP has proved to be an effective tool in helping companies manage and solve issues affecting productivity. The success of ERP in Prospective Insurance Company was measured using KIPs. A number of lessons were learnt. For example, it became apparent that for a business to succeed, its operations must be based on a sound vision, mission, and values. In addition, it is important to involve stakeholders in decision making processes.

Works Cited

Brocke, Vom, and Michael Rosemann. Handbook on Business Process Management, Berlin: Springer, 2010. Print.

Clark, Geoffrey. The Appeal of Insurance, Toronto: University of Toronto, 2010. Print.

Dorfman, Mark. Introduction to Risk Management and Insurance, Upper Saddle River: Pearson/Prentice Hall, 2008. Print.

Grant, Kevin, Ray Hackney, and David Edgar. Strategic Information Systems Management, Andover: Cengage Learning, 2010. Print.

Shaikh, Zubair. ERP: The Future of Business Automation, New Delhi: Atlantic & Distributors, 2009. Print.

Sood, Harish. Insurance Management, New Delhi: Anmol Publications, 2014. Print.

Blafax Insurance Group is a company that operates in Los Angeles and twenty other cities in the US and across the globe. The company’s headquarters is in Los Angeles while the biggest international outlets are found in Finland. Therefore, the customers of the company range from the US citizens to those across the globe, particularly in Europe and Asia. Blafax Insurance Company is dedicated to offering a broad range of insurance services to its customers. The firm has been in existence from 2003 when it began as Blafax Insurance in Los Angeles before rebranding to Blafax Insurance Group in 2010 after it had expanded its operations to cover newer markets. This paper focuses on outlining the SWOT analysis of the company in the context of its services.

SWOT Analysis of Blafax Insurance Group

What the SWOT Chart Reveals

The chart above reveals that the company has more strengths and opportunities than the disadvantageous threats and weaknesses. The main strength of the company is its large financial base. However, the company also enjoys working in a conducive political environment and a strong institutional culture. The biggest weakness to the company is slow adaptation to new markets does not have the best employee motivational aspects. The company has a chance of expanding its customer base. The main threat that the business faces is stiff competition from other firms in the industry.

Evaluation

SWOT analysis is a tool that indicates the advantages and weaknesses of any business. I have compared the strengths against the weaknesses of the company and realized that there are more advantages than disadvantages. Therefore, the business venture is viable enough to guarantee excellent performance, which means I will continue with it.

References

Angeles, Sara. (2014). 4 Free SWOT Templates for Small Businesses. [Online]. Web.

Fox, W., & Van, W. G. (2007). A guide to project management. Cape Town: Juta.

Abstract

Pearl and Mutual Benefit Insurance Company (PMIC) has been experiencing a high turnover of graduate trainees. For the last five years, the company has invested in 15 to 20 graduate trainees each year. The turnover is approximately 60% of the recruits. The current report investigated the reasons for such a high rate of turnover. It was found that the recruitment model, which used the General Mental Ability, was faulty. The senior managers were manipulating the process. The current report is a search for an alternative model. The Personality and Emotional Intelligence model was recommended for the PMBICI recruitment process. The model will help the company select the graduate trainees suitable for the firm and who can be retained.

Report

Introduction and Background Information

Over the past five years, Pearl and Mutual Benefit Insurance Company (PMIC) has recruited between 15 and 20 graduate trainees per year. However, retention analyses indicate that 60% of the recruits have left the organization for careers in different industries that are not related to the financial service sector. The trend is worrying considering the investment made by PMIC to develop each of these graduate trainees.

The organization’s selection method adopts the General Mental Ability as the initial screening instrument. After the screening, the candidates are interviewed by senior line managers trained on the competency framework interview process. The process is designed to rate and elicit six behavioral competencies. The skills include those related to selling, drive to achieve and interpersonal relationship. The process is rated as effective.

However, it allows the senior managers to impose their conclusions on the final decisions regarding the suitability of the applicants. The result is the recruitment of individuals that may not fit in the organization, leading to a high rate of turnover. It is recommended that PMIC should find an alternative graduate recruitment method to net the right graduate trainees that can work and be retained in the organization.

Discussion

General Mental Ability

General Mental Ability represents individuals’ capacity to learn, solve problems, and demonstrate reasoning skills (Samson & Daft 2012). The psychometric assessment tools used in this model include scales that involve measures of verbal, spatial, and mathematical constructs. According to Muchinsky (2011), GMA is an effective indicator of job performance. However, senior managers can manipulate the assessment and impose their conclusions on the final selection decisions. Pearl and Mutual are advised to consider an alternative recruitment process.

Recruitment and Selection Overview

Many organizations have recognized the significance of managing their human resources more effectively. The strategic management of the human resource is all about adaption and integration. Recruitment and selection determine how a business perceives its human resource requirements with regards to its competitive advantage (Samson & Daft 2012). The recruitment process involves sourcing for potential employees and interviewing them. The selection process, on the other hand, involves staffing and training the recruits into their job roles (Samson and Daft 2012).

The adoption of best practices in human resource management helps an organization to meet its goals and objectives. It is important to analyze the strengths and weaknesses of the recruitment process. The company should also carry out an analysis of its human resource requirements. Thirdly, the firm should also evaluate the sources of the candidates. The above are significant factors that should be taken into consideration in the planning stages of recruitment and selection. When a recruitment program is well planned, it attracts more candidates. Consequently, the company has more choices.

Recruitment

There are four major stages in recruitment and selection:

Define requirement

The process starts with the definition of the organization’s human resource requirements. It involves the preparation of job descriptions and specifications. The terms and conditions of the job should be made clear and specific. The definition of the organization’s human resource requirements is based on the job description (Podsakoff et al. 2011). A job description is the detailed specification of the requirements that inform the compilation of an internal announcement for specific recruitment. The definition of requirements may also include such decisions as to whether the job is permanent or not.

Attracting candidates

The second stage involves reviewing the alternative sources for candidates. The sources can be inside or outside the company. It involves advertising and using consultants and recruitment agencies. The information given in the advertisement should allow potential candidates to decide on their suitability for the job (Nikolaou & Oostrom 2015).

Selecting candidates

Selection involves sifting through the applications. It also entails testing, interviewing, and assessing the candidates. Successful candidates sign the employment contracts at this stage (Nikolaou & Oostrom 2015).

Induction-introduction

Once the candidates are identified and the employment contracts are signed, the employees are then introduced to the organization (Nikolaou & Oostrom 2015). The candidates are also introduced to the terms of employment.

Graduate Recruitment Programs

High-potential management programs

In this approach, the organization may target a small sample of highly qualified candidates with opportunities to fast-track their career progression. Such candidates expect to be included in strategic decision-making processes after a short stint in the organization (Nikolaou & Oostrom 2015).

Cross-department programs

The strategy is useful to organizations that may not have defined the roles the recruited graduates are to perform. As such, the graduates are expected to work in each department for a few months. The program allows the employer to evaluate the roles that best fit the skills of the graduate (Gilmore & Williams 2012).

Hold on to the graduate recruits

After the recruitment, the company is most likely to invest in the new employees’ time and resources to develop a skilled team. As such, the management should avoid losing the employees to other institutions. There are a few things that the company can do to retain graduate employees. It is essential to implement the set checkpoints for the graduates’ salary progression, give regular feedback, and gradually increase their responsibilities (Gilmore & Williams 2012).

Employment Selection: Personality Tests

General Mental Ability is one of the most suitable selection methods. Many employers are using the model to recruit and select employees. The personality test seeks to identify individuals possessing the skills and knowledge needed to succeed in the job (Banks & McDaniel 2014). The reason why Pearl & Mutual may be having a high graduate trainee turnover may personality mismatch between the employees and the positions they are assigned to. As such, it is recommended that the company should adopt the Personality Test in the selection process.

Like the General Mental Ability, Personality Test is a product of psychology (Richardson & Norgate 2015). Psychology can help to assess the personality and emotional intelligence of employees. Personality refers to each individual’s behavioral traits, which are constant. On its part, emotional intelligence is the ability to express emotion, as well as understand and regulate emotions. By utilizing a scientific approach in the recruitment of graduate trainees, Pearl & Mutual can hire and retain successful employees.

Theory and Practice: Personality and Emotional Intelligence

The association between personality and emotional intelligence and an employee’s performance is compelling. The cognitive measurement instruments are successful predictors of performance. However, the tools do not measure human personality, which determines the success of employees (Banks & McDaniel 2014). Personality is the total of an individual’s reaction and interaction with other people. The behaviors are measurable traits exhibited by an individual. One of the popular models using in measuring personality is the Big Five Model. The model is made up of five dimensions used to capture the variations that abound in human personality (Ashton 2013).

There are a few tests used in the selection process about the Big Five theory of recruitment and selection. They include the NEO-Personality Inventory. The test comprises of 150 questions that test extraversion, conscientiousness, and other variables (Ashton 2013). The second is the Personality Characteristics Inventory (PCI). There is also the Hogan Personality Inventory (Thomas & Scroggins 2006). The test focuses on normal personality traits.

Emotional intelligence is not a trait. However, its tests are viewed as reliable even though their measure is limited to abstract reasoning and verbal fluency. The emotional intelligence test comprises of several elements. The first component suggests that individuals should have the ability to perceive emotions within themselves and in others (Kaplan & Saccuzzo 2017).

The individual should also be able to express their emotions. Secondly, the subject should be aware that their emotions shape their thoughts and coping mechanisms. Thirdly, individuals should be able to understand and analyze their emotions. Fourthly, it is important to regulate emotions and chose positive ones to improve communication. It should be understood that it is not possible to change emotional intelligence (Banks & McDaniel 2014). It remains constant throughout one’s life. To this end, it is recommended that Pearl & Mutual should adopt the Personality and Emotional Intelligence Tests as a replacement of the current General Mental Ability.

Pros and Cons of the Personality and Emotional Intelligence Test

The approach is an effective indicator of job success. Consequently, it helps in the retain-ability of Pearl & Mutual’s student trainees. The success factors are dependent on its ability to identify the characteristic behavior of individual graduate recruits (Ashton 2013). Compared to the General Mental Ability, the test offers a wider and more inclusive method of measurement. However, some people believe that personality tests are invalid and can be faked. The strength of the measurement lies in the structure of the questions raised by the reviewers. To find the right graduate trainee assessment tests, this report recommends the Personality and Emotional Intelligence tests.

Organizational Examples

Google, Apple Inc., and McDonald’s are forgoing traditional recruitment methods in favor of personality and emotional intelligence models. They aim to avoid recruiting the wrong people (Cote 2014). The companies are using personality and emotional intelligence as measures of performance because the approaches involve self-awareness, motivation, self-regulation, empathy, and social skills (Drasgow 2012). The individuals with such skills are viewed as good performers who can work in teams.

Conclusion and Recommendations

The General Mental Ability assessment test has been used by Pearl & Mutual for a long time. The approach is ineffective and senior managers have abused it, leading to the excessive turnover among graduate trainees. It is recommended that the organization should adopt Personality and Emotional Intelligence tests as alternatives to the GMA. The effectiveness of these models is validated by blue-chip companies, such as Google and Apple, who rely on these tests to recruit and select employees. The revised Graduate Selection Process will take five months to implement. The process will cost Pearl & Mutual $15,000.

Reflective Commentary

Personal Reflection on the Learning and Experience of the Module

The analysis of the recruitment and selection process at Pearl & Mutual was an interesting exercise. It was undertaken under the instructions of the human resource manager after it was discovered that the results from the GMA tests and interviews were being influenced by the opinions of senior managers. As a consequence, the company had invested in graduate trainees who left for other firms. The interesting finding was that the graduate trainees did not go to work for financial institutions like Pearl & Mutual.

The finding was intriguing because the training they received entailed exposure to finance. It can be deduced that the recruitment and selection process was flawed. The company was recruiting graduate trainees who did not fit in a financial institution. As such, it was necessary to remedy the situation by changing the recruitment approach. I was assigned the task of reviewing the mode of selection and compiling a report with recommendations regarding alternative methods.

I believed that the GMA approach, which is still used by many organizations as the initial sifting process, was the best approach to recruitment. However, it turned out that there are other methods used by some of the most successful companies, such as Google and Apple Inc. To this end, the search for an alternative model involved the perusal of books and periodicals. It also involved personal visits and interviews with other human resource practitioners.

I discovered that many successful organizations have moved from GMA to personality and emotional intelligence as indicators of employees who can perform and be retained within the firm. I had heard about the personality model, but I had not anticipated how widely it was used in the industry. According to the literature that was perused, the evaluation of an individual’s personality can reveal a lot about the candidate, especially on how they relate with other people in a group setting.

Emotional intelligence buttresses the personality attributes of the employee. It achieves this by offering the emotional stability that an employee requires to operate in demanding working conditions. Pearl & Mutual could benefit by overhauling the current recruitment process and adopting the Personality and Emotional intelligence model. My report recommends that the organization should consider adopting this model. Its adoption is not expensive and can be done within six months. The period is adequate and can accommodate the training of the managers with regards to administering the tests.

I found the exercise an interesting learning process. I have gained a lot of insight into how to conduct graduate trainee recruitment. I have also learned that not all highly qualified graduate trainees are interested in working for one company. Many have ambitions that drive them from one organization to another as they pursue their dream career. I hope that the proposed model will help Pearl & Mutual to recruit the right graduate trainees and retain them. I intend to be part of the recruitment process and help in implementing the new human resource policies at Pearl & Mutual.

References

Ashton, M 2013, Individual differences and personality, 2nd edn, Academic Press, London, UK.

Banks, G & McDaniel, M 2014, ‘Meta-analysis as a validity summary tool’, in N Schmitt (ed), The Oxford handbook of personnel assessment and selection, Oxford University Press, Oxford, UK, pp. 156-178.

Cote, S 2014, ‘Emotional intelligence in organisations’, Annual Review of Organisational Psychology and Organisational Behaviour, vol. 1, pp. 459-488.

Drasgow, F 2012, ‘Intelligence and the workplace’, in IB Weiner, NW Schmitt & S Highhouse (eds), Handbook of psychology, industrial, and organisational psychology, 2nd edn, New York, NY, Wiley, pp. 184-210.

Gilmore, S & Williams, S (eds) 2012, Human resource management, 2nd edn, Oxford University Press, Oxford, UK.

Kaplan, R & Saccuzzo, D 2017, Psychological testing: principles, applications, and issues, 9th edn, Cengage Learning, New York, NY.

Muchinsky, P 2011, Psychology applied to work, 10th edn, Hypergraphic Press, Summerfield.

Nikolaou, I & Oostrom, J (eds) 2015, Employee recruitment, selection, and assessment: contemporary issues for theory and practice, Psychology Press, Abingdon.

Podsakoff, N, Whiting, S, Podsakoff, P & Mishra, P 2011, ‘Effects of organisational citizenship behaviours on selection decisions in employment interviews’, Journal of Applied Psychology, vol. 96, no. 2, pp. 310-326.

Richardson, K & Norgate, S 2015, ‘Does IQ really predict job performance?’, Applied Developmental Science, vol. 19, no. 3, pp. 153-169.

Samson, D & Daft, R 2012, Management, Cengage Learning Australia, Sydney.

Thomas, S & Scroggins, W 2006, ‘Psychological testing in personnel selection: contemporary issues in cognitive ability and personality testing’, Journal of Business Inquiry: Research, Education, & Research, vol. 5, no. 1, pp. 28-38.

When doing business, insurance is a helpful resource for companies to protect themselves against different kinds of risks. A lawsuit or even an emergency such as fire can bring significant financial damages to an organization, especially if it is a small business. Today, there is a range of insurance types for protecting businesses. The list of these solutions is presented below:

• Commercial property insurance. This type of insurance is imperative to have to protect buildings, infrastructure, furniture, and other property owned by a company. When insuring commercial property, businesses should consider the following risks:
• Age of buildings. This factor is usually taken into account because some buildings may have greater likelihoods of being damaged. For instance, old electrical wiring may cause a fire, which will then translate into expensive repairs, especially if there is a need to complete new wiring according to code.
• Location and size. The larger the space owned by a company, the more it will cost. Also, depending on the rates of crime in a specific location or the prevalence of natural disasters, insurance companies will charge different prices.
• Types of equipment. This aspect is especially important to businesses that manufacture products. Large industrial equipment usually costs more to ensure in contrast to smaller machinery.
• Age of equipment. Similar to the factor of buildings’ age, insurers look at how old the equipment of a company is. This is so because higher premiums will be needed if the equipment is old and hard to repair, or even may need replacing.
• IT Insurance. This category of business insurance is tricky because there is a lack of coverage when it comes to losing information and not all insurance companies agree to take the risk. However, data has value, and those companies that protect it usually put a specific dollar amount on the information that a company has.
• Company vehicle insurance. For many companies, especially those that deal with distribution and logistics, ensuring vehicles is imperative. On the one hand, if cars owned by a company are titled in the name of that company, these commercial vehicles require insurance for complete coverage. When insuring a business for different risks, it is important to consider a variety of risks that can take place. Most of the risks can be addressed with implementing appropriate precautions, planning, and getting the right insurance coverage. The list of possible business risks to consider for insurance is presented below:
• Property damage. There is a variety of reasons for property damage, ranging from natural disasters to arsons. Because many companies do not have comprehensive continuity plans, insuring themselves against the damage of property.
• Data breaches. With the growing expansion of technologies and the ongoing cyber-attacks on businesses, companies have to protect themselves against such risks. Unfortunately, there is no comprehensive approach to cyber insurance, which means that this risk remains the least addressed.
• Human capital costs. This risk is associated with human errors done by companies’ employees. Whether a worker is responsible for performing labor-intensive tasks or driving a delivery vehicle, there are always risks of errors, misconduct, or fraud.
• Mistakes in professional services. This risk is especially relevant among companies that offer accounting, consultation, web development, marketing, and other services. However, apart from the risks associated with mistakes, customers can initiate lawsuits even if they are generally unsatisfied with the services they were offered. In any instance, unwarranted lawsuits can be disrupting to a business in terms of financial resources and time.
• Issues of international manufacturing and transportation (transit/exports). In cases when companies utilize foreign factories to manufacture products or if they export internationally, there are different risks. For instance, products can get damaged during transportation, vehicles can get lost on their track and cause delays, and so on. Insuring against such risks is important, especially since international operations are more problematic than domestic.

Mapping Assets to Threats

Mapping assets to threats lies at the base of all security assessments, and is especially relevant in business insurance. The end goal of the process is finding a finite set of assets and a finite set of threats to create a workable matrix explaining their interactions.

• It starts with the identification of different asset types, which are usually differentiated into hardware, software, and information a company owns. Also, within each category, there may be various sub-categories and groupings necessary to make to identify asset types.
• Next, the identification of threats is completed. If there is an agreement to follow the CIA model, then all business risks can be divided into confidentiality, integrity, and availability categories. Other approaches to defining business threats can classify such risks as human resources, infrastructure, and data. Therefore, mapping assets to risks means aligning different assents that a company has with risks to which the assets may be exposed.

Considering Asset Values

The aim of insurance policies is providing a replacement for damaged, lost, or destroyed assets. Because of the wide variety of assets and different values they have, it is important to consider which value should be taken into account when insuring companies. Examples are presented below:

Replacement cost value. In regards to this point, insurance companies compensate an insured party based on the cost necessary for replacing an asset with the same or similar value. Replacement cost values are not fixed because fluctuations in the market make prices go down and up.

Actual cash value. This aspect is different from the replacement cost value because it considers the depreciation of an asset that has been purchased for cash. Thus, while the cash value will be sustained, it does not mean that the company will be able to make a replacement due to depreciation.

Book value. This type of value accounts for the determination of how much an asset will be valued on the company’s books. Therefore, the book value allows companies to be completely reimbursed for the loss or damage of assets.

Risks Associated with Automation

As mentioned previously, technologies have been developing to support businesses by reducing their costs and increasing efficiency. However, with the development of Artificial Intelligence and highly effective robotics, several work lines in the wider economy are becoming more and more automated. With this automation come new risks apart from cyber attacks. There are several reasons why intelligent robotics presents some benefits for many businesses:

• The improvement of company efficiency and decreasing the risks of injuries;
• Undertaking a wide range of repetitive, dangerous, and strenuous assignments;
• Allowing individuals to look for more fulfilling employment.

Nevertheless, researchers showed that increased automation poses a threat to high-skilled workers, especially in cases when machines take much less time to complete complex tasks compared to humans. In the next twenty years, there is a risk of almost half of the jobs in the US being automated. While it may be confusing to see why automation can be risky for businesses, there is a list of threats associated with this problem. Today, no insurance for automation-related risks exists. However, as more and more companies invest in AI and other solutions, they will be exposed to some major threats. In particular, a large shift in the labor market can result in the following:

• The decrease in personal and employees’ liability insurance will decrease, thus making companies accountable for any labor-related accidents;
• High rates of unemployment leading to social, political, and economic unrest, which subsequently lead to the damage of businesses’ property, fraudulent activities, and business interruptions. This risk is especially complex because insurers usually avoid covering such risks as terrorism or public unrest. If unemployment leads to strikes and protests, many businesses ranging from 7/11 shops to large supermarkets may experience high-value property damage and interruptions in operations. Importantly, companies will need to ensure that their automation supplements human labor instead of making it obsolete.
• The increase of cyber-related risks targeted at disrupting the automation process. As businesses become automated, cyber criminals will target AI systems to cause disruption and pursue financial gains. Cyber risk insurance
• The high demand for cyber-related insurance among companies will lead to insurers raising prices thus increasing the costs businesses will pay for coverage. The increase of costs companies will pay for insurance and covering uninsured risks in cases when accidents and other unpredicted situations occur.

Because there will be a dramatic shift in labor organization and the way companies will prioritize machinery over human labor, structural shifts in the overall economy will take place. This will lead to the raise of potential new avenues in business insurance. Some examples are below:

Start-ups and small companies may expand the demand for insurance. This spike in demand will be associated with sectors offering equipment for the entertainment and leisure industry. Insurance, in this case, will be important because higher responsibility will be placed on machinery, and risks of accidents should be insured.

Changing nature of insurance coverage. Both small and large companies will require more sophisticated coverage in regards to the use of IT systems, AI, and overall automation. Any disruptions will cause businesses to lose money and time, which is always an issue in terms of profitability.

Insurance Audits for Automation Risks

It is a common practice for insurance companies to audit businesses. In a case when a company purchased a commercial insurance policy, not all premiums assigned are final but are rather estimates because carriers usually make informed guesses based on the previous business activities. As businesses change, estimates can become irrelevant, which means that premiums should change. The purpose of an insurance audit is to review actual data on operations and sales to identify the accuracy of estimated premiums. At the moment, there are no audits to target machinery-associated insurance programs due to the lack of development in this area. It is expected that insurance audits for machinery-based risks will develop because predicting the premiums for such risks is near to impossible. Because of this, audits will be necessary to continuously evaluate the applicability of premiums.

The case study has been developed on one of the top UAE insurance companies named “Oman Insurance Company”, Dubai. According to the requirements of combining information technology and information system relating to the internal and external environmental elaboration and development purpose, critical analysis of technological background and overall judgment of competency regarding the selected industry purpose, Oman Insurance Company of UAE has been chosen for its versatile insurance services with a wide array of using upgraded technological surface.

Thus, the forthcoming analysis of each of the requirements will introduce a number of inquiring schedules as below:

• Observation of overall company view with related association of technology in each aspect of operations and methodology.
• Overview of industrial background with critical evaluation technique like SWOT and PEST analysis.
• Internal and external analysis of Oman insurance to identify strategic competency in terms of technology.
• Influential factors affecting the systematic development of the company.

Thus, to run the entire research work, it is very much essential to know about Oman insurance company as the selected factor to idealize its present external and internal information system and technological cues.

Company view

Oman Insurance Company is an UAE-based Insurance Corporation having approximately 10 branches in all states of Emirates with a very strong and established existence as in top position in Dubai. According to the website of Oman Insurance Company (2008) it can be found that the company has been formed up in 1975 that offers some insurance services like- life insurance including entire, term, annuity, endowments, unit-linked etc. and non-life insurance considering property, personal, liability, agricultural, business intermission, financial, marine, aviation, goods transportation, railways, all liabilities of constructors etc. products as well as additional mileage of tailoring of preparing special coverage. After a long period of its establishment, the company is providing such kinds of service to a number of insurers and to successfully wheel its operational programs, it uses a number of tools and techniques offered by INSIS (Insurance Information System) and Fatada Company Ltd.

From the Website of Oman Insurance Company (2008) it also found that establishing itself as a financially sound and professionally managed corporation, the year 2007 had recorded a huge success of earning Dhs 1.5 billion premium turnovers and technical reserve of Dhs 517 million by Oman. It is very much serious in the promised customer-oriented service by delivering better quality offer. Thus, the company has been positioned as the prime insurance organization in case of gulf in having a fanatical call center to serve exclusive facilities to its premium holder. Rather than, it is a single company of providing financial services for gulf by occupying an establishment of R & D department for benefiting the improvement of forthcoming insurance goods and methodologies for satisfying the specific customers as well as some of the slow served insurance which needs the population of gulf.

Regarding the employment issue, Oman is proving its competency by involving much high quality and experienced employees who are capable of deal with a large variety of clients in the route of surveys, conferences, meetings, seminars and ceremonies of being get together continuous intervals. Additionally, it serves daily domestic magazines named “l Aman” which is served for the purpose of increasing customer interaction.

Being specialized with its products, services and individuals, OIC has been specially identified as a quality concerned company having an extra systematic mechanism for continuously improving own performance by the year 2000. Fadata™ Ltd (2008) provides the information that it has recorded as first UAE Company for the acquisition of Dubai Quality Award for the financial sectarian performance for the same year. In this way, it also won ISO901:2000 certification, Sheikh Khalifa Excellence Award, Dubai Quality Gold Category Award from the year 2000 to 2003. In this light, it has also won Life Insurer, Social Responsibility, Training Initiative etc. forms of awards in 2005, 2006 and 2007.

Therefore, OIC occupies a vision of becoming a world-level provider of financial service having a public purpose concern and a model for excellence. Griffin, R. W. (2006), argued that to maintain a harmony with this broader objective, the company embodies its value generation in regard to the trustworthiness of its human resources. For it they are aiming to “Protect” their target markets as:

• P for Proactive
• R for Reliable
• O for Openness
• T for Team oriented
• E for Excellence
• C for Committed
• T for Trustworthy

Finally, its mission compasses are related with every day activities by granting it to perform and in shifting its OIC image into a “World-class” corporation by the following promises:

• Acceleration of mental peace in the time of uncertainty.
• Value addition service in the served goods or services.
• Maintenance of strong partnerships with trade-related vendors and bodies.
• Incremental stakeholder value by persona, process and technological assimilation.

Scope of the required proposition in Oman’s perspective

After analyzing this short overlook of Oman Insurance, it can be understood that Oman is positioning and building its representation with not only the traditional strategic focus ensuring wealth and property but also macro-focused used of technological sophistication in each of its selected attributes.

At 1^st, in this regard its call center service is mentionable which induces the following value-added services:

• Swift product judgment.
• Rates and quotations.
• Use of personal phone lines by travel, home, mobile and other equivalent insurance policies.
• Renewals of policies.
• Cooperation in processing claims.
• Management of problems and complaints.
• Instant investigation of balance by an account statement.

Then, its management believes that OIC’s giant success comes out because of proper application of INSIS software application as:

• Stack of technology.
• Customer and object subsystem.
• Product and policy administrational system.
• Unit Linked Extension for life insurance policies.
• Remuneration system for agents.
• Settlement of claim.
• Module for claiming process.
• Analytical reporting.
• Data security and general referencing system etc.

Further, market integration lies in its loyal involvement with Fadata Corporation as a high technically expertise supplier of system modules and other needed software. Fadata™ Ltd (2008) argued that this activity turns into the initiative of utilizing automated life portfolio which is a flexible resolution practice as maintainable for meeting all of their requirements as a perfect module for the overall IT infrastructural recognition of Oman.

In case of Middle East’s insurance market, a high growth can be located during the year 2008 because of enlargement of demand level for private health care insurance as well as the explosion of Islamic complaint insurance and the growing concern of inducing life insurance as the industrial “Best Strom”.

Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2001) stated that since external environments are more complex, turbulent and becoming global, it is turning to adopt for those companies for adopting with that environment. For achieving this capacity, firms tend to involve in a process called environmental analysis on continuous basis basically involves four activities by which technological association can be tailored according to their own need. This can be exemplified as below:

• Through scanning, companies can identify early signals of potential IT changes in general environment by detecting such changes that are already underway. It is very much important for UAE insurance companies as it is highly impulsive. A relevant report has discovered that while world’s average insurance premium reached $550 per capita, the insurance market of GCC could be worth out of bed to $20 billion.
• Monitoring engages the ability for detecting the meaning of several environmental events influencing IT.
• By forecasting, companies can develop feasible projections about what might happen, how quickly and as a result of technological changes how the first two steps would be modified.
• Finally, assessing will determine timing and significance of the technology throughout the firm’s strategic management team.

A number of drivers in this industry can strongly influence the variation in utilizing technological advancement a lot which can be regarded as economic, demographic, social, legal, global and most virtually technological figures. Thus, the environmental analysis using those variables can be shown by discussing SWOT, PEST and competitor analysis as below:

SWOT analysis of UAE insurance industry

David, F., (2008) provides the importance of the SWOT analysis for the insurance industry.

Strengths: A number of factors that work as a catalyst of strengthening this industry can be recognized as:

• Involvement of Insurance Information System encounters many facilities for serving a high-quality customer service.
• With various product assortment relating to life, motor, health, cargo, hull, general accident, fire, liability, engineering and personal issues, the UAE insurance companies are now capable to compete with world-class top insurance and financial institution.
• Introduction of call center as very important service by imitating many impulsive opportunities to meet customer requirements, many local insurance firms have positioned positive brand feelings in people’s mind.
• Nowadays, some top-level insurance firms are receiving the magnificent support and effort from specialized hardware and software system integration companies with an extensive introduction of information system incorporation and wider information technology programs as an additional feature of competitiveness.
• Significantly Middle East has recorded a top achievement in growth for professional Takaful insurance.
• Many successful companies are now orienting effective training and certification programs which will be helpful to stabilize and effective human resources for gaining more premiums.

Weaknesses: Some of the weaknesses that the insurance market is facing are below:

• Traditional attitude of some people to view insurance as gambling.
• Although having a number of systematic developments, this industry has been regarded as a “non-exclusive” sector from the governmental consideration.
• Investment opportunities are decreasing day- by- day in this sector.

Opportunities: Increasingly, this industry is being subjected to numerous opportunities, as:

• Global expansion in utilizing Takaful insurance as a present growth of $7.4 billion and $14 billion within the year 2015 while this zone is optimizing for setting up the highest growth in this criteria.
• Scope for getting major support for increasing community of clients for the previous year has been notified which makes this industry a special watershed year for this region.
• The last year has also been forecasted for rising home and auto insurance services at an optimum level for the coming period.
• All the scopes and diversification of the industry will be very much helpful to attract brilliant advisors and talented personalized resources for UAE insurance business.
• Statistics have shown that in 2004, the country owned around 4.3 million of total population involving about 3 millions expatriates. Ren, H., Dobson, I., & Carreras, B., (2008) argued that it is also occupying the most diversified populations located in Middle East of local Emirati of 19%, Arab and Iranian of 23%, South Asian of 50% and others of 8% as Westerners and East Asians. Besides, Abu Dhabi is the largest and densely populated Emirate having total population of 1.4 million while Dubai has 1.2 million, Sharjah has 570000, Ajman 200000, Ras Al Khaimah 190000, Uman Al Quwain 55000 people in 2005. This sort of high population can be served by multiplied insurance materials.

Threats: Finally, UAE insurance businesses are not beyond potential threats. Such as:

• Non- investment recommendations of those companies may fall themselves in a situation of financial shortage.
• Need of experienced and forecasted claims for insurance.

PEST analysis of UAE insurance industry

Porter, M. E. (2004), argued that the modern political, demographic, social, technological factors are reformulating this industry’s historical potential. This can be experimented by a PEST analysis as below:

Political factors: Recently, UAE government considers its domestic insurance sector as a less attractive one. For this, many public companies tend to opt for health insurance from some insurers in order to offer employees with that aspect in straight competition with Daman which has the right for the government-regulated plans for intelligence in both private and public issues and billing with general public providers. The year 2008 has also revealed modern rules and regulations relating health insurance as well as Takaful market.

Economic factors: The past year’s study has recommended UAE insurance business not make expectation of gaining profit- making purpose from claims of investment as a core business motive. Thus, the health insurance organizations should forecast future benefits by maintaining the inflow of bills to the ultimate insurers. A study result by Standard and Poor rating Services disclosed that the GCC insurance industry can build up the properties to $20 billion.

Socio-cultural factors: UAE is Muslim based country while male consists 70% and women only 30% of the total population. The worldwide climb up of insurance companies can also be reflected in this zone with a number of global insurance companies that are successfully running their operation for providing satisfactory customer support.

Technological factor: Porter, M. E. (2004), said that technological changes affect many policies and procedures of this industry since players of health insurance are regarded to visualize their profits on technical services as this business’s basic view as “premiums minus claims equation”. From ITP DIGITAL, (2009) it can be found that topmost companies are also highlighted in implementing INSIS functional system in main process, object system, life insurance-linked extension, maintenance, data security etc. Lose of time and energy is also being controlled by software infrastructural modification for meeting diversified and changed customer demands. Similarly, projection of ERP system can introduce Oracle AIM methodology for operating several projects. Additionally, INSIS functions are leveraged enough for process efficiency IS integration, high control and productivity, important insight practice, actuarial and calculation by reporting alternatives and future growth support for insurance companies are demanding day-by-day.

Competitor analysis of UAE insurance industry

UAE insurance business market has already been saturated by a number of established public and private competitors as:

• Al Buharia National Insurance Company,
• Oman Insurance Company,
• National General Insurance,
• Neuron Qatar National Insurance Company,
• Lebanese Insurance,
• Mednet,
• AXA,
• Nasco Karogolan,
• Ras Al Khaimah Insurance,
• Al Wahba National Insurance,
• NAS,
• ALICO,
• Al Sagr Insurance,
• Tokyo Marine Insurance Company,
• Al Buharia,
• Good health,
• Al Dhafra etc.

Thompson, A. et al (2007) argued that the competitor analysis can be observed in the light of 5 forces model of competition that recognizes that along with those direct competitors, suppliers and buyers could become competitors as following:

Threats of new entrants: UAE insurance market is not exceptional in this regard as it is unfortunate as the new entrants frequently have the potential to be quite threatening to incumbents. Thus, here exists a valid threat that few inexperienced newcomers may move to the market with less capable level of premium that will be unsuccessful in covering the medical costs as well as a threat for insurers which can simply damage the market. Skinner, S. J., Ivancevich, J. M. (2003), argued that a new firm’s entry into the market has two major tasks:

• barriers to entry encompass economies of scale as marginal improvements in efficiency as an incremental size increase, product differentiation as life, marine, health, automobile, engineering, liability etc. form of policy, capital requirements necessary resources for investment as a reluctance of current investment recently, switching cost regarding customer’s taken service from other company, access to distribution channel and government policy.
• Expected retaliation from the existing firms.

Bargaining power of suppliers: Fatada’s expertise is one of the major suppliers of UAE insurance companies. If Fatada can exert power over firms, those will be unable to recover costs and prices that will reduce profitability:

1. Bargaining power of buyers: Involves demand for high quality, service, and call centers with lower premiums.
2. Threats of substitute products: A number of national and international banks and financial companies are also providing services for security of life and property.
3. Rivalry among competitors: This competition exists among national and global, private and public institutions and generally local insurances of each Emirate.

Competitor analysis components

Skinner, S. J., Ivancevich, J. M. (2003), mentioned that by overviewing all the components regarding future objective, current strategy, assumption, capabilities and responses, it can be unstated that the use of IT or IS will be influential for making competitive advantages in terms of product differentiation, fast service, project management, insurance account management, payment control, scheduling and processing, accounting records and reinsurance processes in current and future perspective.

The components of internal analysis can be motivated to competitive advantage and strategic competitiveness of developing the utilization of IT/ IS program as following:

Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2001), provides the internal analysis diagram, from it can be identified that customer value is the source of Oman’s potential to earn above-average return. What it intends to create value for facilitating the new insurance supportive programs including products and ideas for satisfying the definite and other below-average insurance decides to choose its business-level strategy as differentiation and organizational structure. Here, core competencies like high-quality goods, swift services Gap analysis, data migration, life insurance products configuration etc. are actually value-creation through which the company seeks strategic competitiveness and huge returns. By, initiating leveraged INSIS systems for increased efficiencies to the insurance business, close association of IS, complete coverage regarding this process from horizontal and vertical integration, useful observation, powerful and accurate calculation and global application are very much supportive for Oman to set its strategic competitiveness.

The 1^st inputs of the diagram indicate some of the tangible and intangible resources obtained by the firm, such as:

• Financial resources– It indicates Oman’s capacity to borrow capital from external sources as well as the ability to generate internal capital. For this issue, it achieved Dhs 1.5 billion for premium turnover, Dhs 2.36 billion pf shareholder equity and total assets of more than Dhs 4.69 billion.
• Organizational resources– Involving the firm’s formal reporting structure which is automated facilitated by INSIS support associated with planning, controlling and coordinating system.
• Physical resources– The approximate 9 branches in each of the Emirate of UAE including plant and equipment.
• Technological resources– Act as the most important catalyst of Oman’s success in gaining customer’s loyalty and goodwill for offering quality goods and services through a proper subscription of upgraded technology and software for life, health and other general insurance simulation. It had also recorded Dhs 517 million as technical reserve.
• Human resources– This also plays a major part in conducting with clients at a simultaneous interval.
• Innovative resources– Creative idea amplifies in the new dimension of call center, R & D efforts and outsourcing decisions.
• Reputation resource– It includes reputation with customers, perception of product quality, brand value, reputation with suppliers, efficient, supportive, effective and beneficial relationships.

Hill, C., and Jones, G., (2007) mentioned that in relation to the question of organizational capabilities which refers to the capacity to develop resources that have been purposely integrated to achieve a desired end state. Thus, the internal capabilities of Oman enable it to create and exploit external opportunities by developing sustained advantage while utilizing insight as well as adroitness. Those capabilities are based upon developing, carrying and exchanging information systems and knowledge through the firm’s human resources and management procedures. It can be stated as:

• Employment of INSIS with the unification of entire set of technological systems for timeline of everyday activity’s swiftness and elaboration of monthly balance sheet.
• Implementation of insurance integrated solution for managing current business, accounting records and ERP application for managing financial situation.
• Professional knowledge for adopting the rapidly diversified IT market in order to obtain efficiency.

All that factorial impact of IT to build up Oman’s internal capabilities can be shown as:

And finally, core competencies are the mentioned resources and capabilities that serve as a source of competitive advantage for the firm over competitors. Thus, it distinguishes a competitively by reflecting its personality. An important question is- “How many core competencies are required for Oman to have a competitive advantage?” Response to this question will essence its running strategy on the basis of home service as well as outsourcing which all are interrelated to build up value- chain of the firm, as below:

Need of outsourcing for formulating internal core competency

Saloner, G., Shepard, A., and Podolny, J., (2001), argued that sometimes, a firm within a specific industry seeks the strategic value that can be captured through effective outsourcing which means the purchase or utilization of a value-creating activity from external supplier. In this issue, the strategic view of Oman insurance largely focuses on outbound logistics by an effective implementation of Fatada intellectual and INSIS programming.

From Fadata ™ Ltd (2008), the firm hires facilities from the following fields:

• Project management- It is used for supporting all commercial perspectives inducing vertical service proving matter.
• Insurance account management- It enables to act each of the processing of pre- accounting for collection of premium involving necessary accessories like:

• Control of payment- Used to keep a notification of entire due payments that is further used for addressing customers, agent and agent supervisor by systematic automation.
• Scheduling of payment- Used to keep track of all transactions from due to refused or paid.
• Processing of payments- Here, the premiums are being isolated into fractions by insurance mathematics. The allotment of premium and corresponding data schedule permits cost/ benefits explanation.
• Accounting records- Result of payment processing can be joined to this chart based on systems for creating records by normal software ledger.

Similarly, Oman gets support from INSIS from the following field:

• Modification of reinsurance and co-insurance projects by complete automated administration with the help of proportional and non-proportional treaties by involving RI clause, ceding of premium, ceding of claim and ceding of loss reserve. Additionally, web-based Java software helps it in selling insurance goods and addressing marketing activities along with custom proposal, quotation serving and binding regarding absolute invoicing and recording.
• Skinner, S. J., Ivancevich, J. M. (2003), expressed that document management software is a management and solution of workflow offering full automation for document chain, processing of task and controlling decision control for operating effectiveness.
• Prolonged search for solution of insurance problems.
• Supplying modern package of current business for flexible advantage in next period by presenting enforceable management.

Strategic focus at Oman insurance

Johnson, G. & Whittington, R. (2006), said that by employing personal resources, capabilities, core competencies and outsourcing a number of technical advantages, Oman insurance company has clearly disposed of itself as a pioneer of implementing differentiation strategy. With this, the unique attributes and characteristics of its insurance goods provide value to the customers. Kotler, P. (2006), argued that because a differentiated product can satisfy unique needs of customers, it should maintain its pricing strategy up to that standard level. The overall dimensions of Oman in seeking and utilizing differentiation strategy are as following:

• By undertaking all types of general risks, it offers the facility of customized insurance services.
• It has proven its significance by establishing exclusive call center. It posses an R & D section to innovate new insurance materials and low- volume products.
• Talent and qualified workforce are its other characteristics by which manpower is being successfully used to obtain and retain customers.
• Highly responsive concern towards problem.
• Automated life portfolio.
• Strong IT infrastructure than many other similar insurance firms in UAE.
• Updated software formulation.
• Employment of tools for OS/ dB/ Development.
• Informative website in order to acknowledge customers about current products and services.
• Oracle internet development suit.
• Networking and Ethernet.
• NT servers.
• Life insurance tools and procedures discussion and configuration with INSIS.
• Third party integration module by GL, AP, AR etc.
• Customized software.
• ERP implementation for motor, property, personal, financial, agriculture, aviation, marine, goods transportation, railway and risk for developers etc. forms of non- life insurance.
• Close integration with IS.
• Use of manual and automotive documentation.
• Larger MIS issue etc.

After disclosing the overall internal graphics of the company, it can be summarized that Oman insurance company can finally be analyzed by an “effect/ probability/ action” grid in which simulation of a specific project (life insurance) by information technology can be exemplified as follows:

In this flowchart, specific time can be estimated for implementing automated simulation in life insurance projected. Ren,H., Dobson, I., & Carreras, B., (2008) held that next, the decision for average IT support can be taken considering existence and time. After considering outsourcing, problem identification and margin, final decision for enough simulation is to decide.

Task – 4

The 4^th task is concerned with entire discussion of internal and external issues regarding the system development of the company. So, to elaborate this relationship, it is necessary to have a clear view of system development which can be defined as a conceptual framework that can be utilized in project management which explains the phases included in an IS development project from a primary viability study by taking care of the entire implementation. Or it is the engineering of system and software linked to the development of many processes for improving systems while the mechanisms used to modify the systems by generally computer and technological methodologies. So, this concept is constructed for structuring, planning, and controlling the entire external and internal information system by software management system. A number of factors like- resources, capabilities, core competencies, strategic competitiveness and other value development efforts can have a major influence on this SDLC.

Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2001), argued that system development model can be developed by a number of processes like- waterfall model, RAD, JAD, fountain model, build and fix, spiral as well as synchronized and stabilize model of which must generally follow the following phases for feasibility:

• The 1^st phase will evaluate each of the components of internal and external environment by idealizing deficiencies. For this, interviewing and consulting services will be applicable.
• Deficiencies will be noticed for present systems with adequate requirements for improvement.
• Designing of new system concerning the internal resources and capabilities.
• New system development by installing new components and techniques. Trained users and performance testing is obligated with top most adjustments.
• Use of new system may be introduced by systematic replacement of previous one or closing it down.
• After running up of one, exclusive evaluation, maintenance and updating are essential.

Therefore, the environmental impact on the system development process is elaborated below:

• Planning or initiation stage: For generating a top-class view of current insurance planning for product, policy, call center and employment efficiency, desired goal must be determined. Feasibility study is needed for presenting the plan to the top management to raise funds. Each of the projects should be tested in terms of 3 criteria, as- economical, operational and technical. Additionally, references will be required for spotting and disseminating by Management information team since this stage is termed as analysis stage.
• Gathering of requirements and analysis: Here, the primary objective is to identify any fixed problem in the industry or internal capacity. Breaking down the project into number of parts with diagram projection will be helpful to locate the problem more significantly.
• Design: This will measure screen layout, rules of operation, process diagram, premium policies, accounting records and other documentation. The result will then be useful for the completely new or converged system.
• Coding: At this phase, both subsystem and modular codes will be associated. However, it will be joined together with after processing units under examination for adding them with main project accompanied with scenery goals, targets, timing and budgeting plan for full package of software.
• Testing: The result of previous phase can be examined in various ways while system, unit, and customer-oriented testing are also accepted. It is often a difficult situation referring to the question of subject and quantity in case of iteration that is not simply an element of waterfall model, but happens to some extent. Some types of testing can be data set, unit, set, black and white box testing, module, system, integration, automation, user agreement and regression testing.
• Operations and maintenance: This phase involves the changes and inducements before sunset of the main system. Maintenance is an abstract part of this process. Since, important replacement of individual occurs within the company, it should adopt new system implementation in order to upgrade the system.

Kotler, P. (2006), expressed that management of positioning control will be dependent upon threshold of Work Breakdown Structure or WBS for describing the targeted project of Oman for enabling the project manager to appropriately describing the project task. This would reveal the addressing of WBS in the categories of:

• Planning
• Acquisition
• Delivering
• Monitoring

All of those aspects would be effective enough to direct the overall placement of Oman from a creative and facilitated point of view. Such as:

• It will appear as a programmatic quotation for each project task by providing flexible and stable route for attaching projects into a reliable adjustment through the scope of development.
• Each phase has a specific objective with functional recommendations, deliverables, and useful control procedure for efficient MIS team though the project supervisor will face complexity in monitoring each phase while operating it.
• Control will be helpful for issuing transparent statement for the target result a through out research.
• WBS is also effective in recognizing top stages and milestones of the task in a narrative model. Upper section is helpful in identifying complete issue and time line with necessary description. Middle section is a guideline for WBS task strategy while each task must have time and origin opposing the activity.
• Stoner, J. A. F., Freeman, R. E., Gilbert, D. R. (2006), argued that tasks will also have specific documents, decisions and analyses by relying on software and system engineering with close coordination relative to the external or internal project linkage. Here, outside contractors can be used to get services like- preparation and submission of results and suggestions for review purpose, better- level design dedication, set- up configuration, training, logistics, migration of data, documentation, maintaining, SW and HW supply etc. with external resources.
• Functional, product, modified product and allocated baseline will be required as a significant milestone.
• Similarly prototyped software, development for end- user, RAD, JAD, and XP etc. can be used in lieu of SSM analysis.

Thus, a successful implementation of this process will be frequently useful for Oman insurance company as it consists of many logical stages for the company’s R & D to build up an information system with requirements, feasibility, training and customers’ wide acceptance. This can be the key component for ensuring the image of consistent high-quality image for the company brand in the customers’ mind by exceeding their expectation by cost assumption, working efficiency, developed IT infrastructure and cheaper cost imagination.

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About Insurance

An insurance policy is a document that forms the basis of the insurance business. An insurance policy is a “financial contract between a policyholder and an insurer” (Texas Department of Insurance 2009). Insurance services are often provided by insurance companies. The company often pays the person seeking insurance services (the insurer) a sum of money if the peril covered by the policy occurs. It is worth mentioning that the insurance company will only pay for losses mentioned in the policy. In return for the services offered, the insurer makes periodic payments known as a premium to the insurance company (International Monetary Fund 2012).

Before agreeing with the insurer, the insurance company often evaluates the risk factors of the insurer and the probability of occurrence of such risks. The amount of premium to be paid is based on the amount of risk estimated by the insurance company. This process is known as underwriting. The process of underwriting often differs across various insurance companies. This results in different premium rates for the same risk in a different insurance company. However, all insurance companies have a coverage limit. Thus, the companies cannot cover 100% of the property being insured. Thus, taking insurance covers is a way of managing the risk of the possible occurrence of loss (Texas Department of Insurance 2009; Cornell University of Law School 2013).

Explanation of fraud in insurance

In the majority of cases, Insurance fraud occurs in two ways. The first way is when “someone knowingly lies to obtain some benefit or advantage to which they are not otherwise entitled” (California Department of Insurance 2013). The second way is when “someone knowingly denies some benefit that is due and to which someone is entitled”(California Department of Insurance 2013). “False insurance claim filed to defraud the insurance provider is an example of insurance fraud. Insurance fraud existed since the start of the insurance business” (International Monetary Fund, 2012). Fraudulent claims account for the highest percentage of claims received by insurance companies.

Insurance frauds are numerous and they occur in all types of insurance covers. For instance, the insurer can intentionally cause an accident so that he receives compensation from the insurance company (Irish Insurance Federation 2013). Such extreme cases of insurance fraud are quite detrimental to the insurance company and the life of innocent third parties involved in such deliberate accidents. This leads to the classification of insurance fraud as hard and soft. Hard crime occurs when the insurer intentionally causes the peril to occur. An example is organized theft and accident. This type is less common. On the other hand, soft fraud is quite common.

It is a scenario where the insurer overstates the number of legitimate claims. For instance, the insured might claim more compensation for damages when a peril occurs. Another example of soft fraud is when the person obtaining the policy overstates the value of the property being insured. This will result in higher compensation when a peril occurs (California Department of Insurance 2013).

The governments of various countries have attempted to set up institutions to help mitigate insurance fraud since these frauds cost billions to insurance companies. Also, nonprofit organizations have joined hands with the government to mitigate the crimes. An example is a coalition against insurance fraud. It is difficult to estimate with precision the exact amount of losses as a result of insurance fraud because most of the frauds go undetected. However, the value runs into billions in a single year. Insurance fraud has contributed, to a larger extent, to the high premiums that insurers are expected to pay. This is because the insurance companies shift the amount lost as a result of insurance fraud to policyholders in the form of increased premiums(California Department of Insurance 2013).

Triggers of insurance fraud

Insurance premiums can be viewed as a white-collar crime where the criminals intend to make undue gains from the fraudulent transactions. Thus, insurance fraud is punishable just like any other fraud. The key trigger of the fraud in insurance is the loopholes in the contractual agreements between the insurance company and the insurers. This also limits the possibility of obtaining justice for such kind of crime through the legal system. Another factor that triggers these frauds is over insurance. It is a scenario where the amount of the property insured is more than the exact value of the property.

The insurance company can over-insure a property to make more gain. In such as scenario, the insurer will be motivated to destroy the property to obtain money over the real value of the property. Finally, insurance fraud is propelled by the insurance companies. The insurance companies allow people to file for wrong claims and they pay without carrying out an in-depth investigation. This could be an indication that the insurance companies are parties to the crime.

How insurance companies detect insurance fraud

Due to the volumes of claims received in a single day by the insurance companies, it is often difficult to adequately review all claims received by the companies. Detection of fraud often goes through two steps. The first stage entails carrying out statistical analysis of claims received. This is always done on the computer to help identify the existence of an occurrence of irregularities. The second stage entails carrying out further investigation of the claims. Most claims do not go through the second stage thus creating room for payment of fraudulent claims. The insurance companies also rely on the information provided by the public concerning the occurrence of an incident.

Categories of insurance fraud

The types of insurance vary depending on the cover taken by the person seeking services. The first category is life insurance. Under life insurance, the insured fakes death to receive compensation. The person then reappears several years after being compensated. An example is John Stonehouse. The former minister disappeared from a beach. After being compensated, he was found living in a different country. The other category relates to health care insurance. This kind of fraud occurs when the person seeking insurance services does not give accurate information that results in the benefits to be paid. Both the members and the service provider do commit these frauds.

A member can give wrong information regarding the number of dependents and fail to disclose all health conditions. On the other hand, the service provider commits fraud by claiming compensation for services not rendered, charging higher prices than their rate for services rendered, manipulating the returns filled by increasing the amount of the claim, and provision of services under revoked licenses among other ways. Health care providers are notorious for committing health care fraud. This is because they take advantage of their unique code of conduct such as loyalty to patients, among others. Another category of insurance fraud is found in automobile insurance.

In this category, both soft and hard frauds exist. A group of people can stage collisions to receive compensation. In addition, they can also inflate the number of claims they expect to receive. The fraudster executes their stage collision on busy highways. For instance, they can stop suddenly at a junction and implicate the other party for reckless driving. Thereafter, the fraudster makes exorbitant claims for such stage-managed collusions. Further, they also claim injuries as a result of such accidents. These groups of fraudsters operate in a cartel. The various agencies set up by the state to combat insurance fraud have been able to track the network of these agencies.

Another example of soft automobile crime is filing for a claim twice. Also, the fraudster can claim compensation for injuries that did not relate to the accident but were preexisting before the accident. Another kind of fraud is when the insured evade rates by seeking insurance services in states where the rates are low. Finally, another automobile fraud is where the fraudsters jump in front of expensive cars. This occurs especially in regions that have bad weather. This makes the working driving conditions bad and thus increases the chances of accidents. It is worth mentioning that some frauds are well organized and complex and they often go undetected (Jing 2008).

Another category of fraud is property insurance (Insurance Fraud Bureau, 2011). The possibility of fraud in this kind of insurance is limited due to the nature of possible risks. Fraud in this category is triggered only when the amount insured is more than the value of the property. Most perils in this category are always in the form of arson. An example is the John Magno case. He paid people to set fire on his property located in Canada to receive insurance compensation (Bourhis 2005)

Impact of insurance fraud

Insurance fraud has a serious impact on various stakeholders in an economy. The first impact is a financial loss. For instance, in the US, insurance companies lose about $80 billion annually to insurance fraud. Secondly, insurance premiums result in higher premiums. Thirdly, insurance fraud results in higher costs of goods and services because businesses pass on the higher cost of insurance to consumers (International Monetary Fund, 2012).

The fourth impact is that fraud in health care insurance jeopardizes the health sector. The fifth factor is loss of income especially in instances where the fraudsters directly rob the policyholders. The sixth impact is the diversion of government resources to tract on combat fraudsters instead of dedicating them to key issues in the economy. The State dedicates resources to set up institutions to combat the crime such as state fraud bureaus, police, prosecution, and federal government among others. Finally, insurance fraud can lead to loss of jobs especially for people implicated in the frauds (Coalition Against Insurance Fraud 2013).

Ways to reduce insurance fraud

Verifying the identity of the customer

Mitigating insurance fraud is a big challenge for all countries in the world. Various insurance companies are pursuing preventive measures. One way of mitigating fraud is by having proper documentation and background check on the customer before entering into partnerships with them (Insurance Fraud Bureau 2011). One way is by identifying the customers adequately. This will involve carrying out a detailed Know Your Customer (KYC) of the customers. KYC involves carrying out several checks to the customer such as verifying the details of the customer on the electoral register. Secondly, investigate instances where the customer does not use the actual address but instead makes use of the P.O. box.

The company should go further and find the actual address of the customer. Still, under KYC, the company needs to investigate royal mails. Even if the customer pays premiums, the company should investigate the real identity of the feeder. Also, “the company can make use of the various commercial databases to ascertain the address of the clients. Further, the company should verify the National Insurance number of the customer and confirm that the order of the numbers is correct” (Geary 2004). Finally, under KYC the company should carry out payment validation of the customer.

This will reveal more information about the customer. The second way of mitigating insurance fraud is by obtaining information on whether the customer is a known fraudster. The company can use available commercial databases (Geary 2004).

Ways of mitigating misrepresentation of rating factors

As mentioned above, one way which fraudsters use to defraud insurance companies is by giving false information especially on health care insurance, and giving the wrong value of the items being insured. It is worth noting that the calculation of the premium is based on the information by the client. Thus, the insurance companies should go the extra mile to investigate if the rating factors are manipulated for fraudulent gains.

First, the company should put in place measures to verify key factors provided by the customer (Skajaa 2004). The company should come up with systems and controls for verifying the information. Secondly, the company should monitor the trends of various rating factors in the various types of insurance. Such activity will help reveal any deviations from the normal trend (International Monetary Fund 2012). An example is in a case where customers from a specific source take their services for cars before taking policies with the insurance company to obtain better premiums. Such trends help companies to discover the possibility of an organized group of fraudsters. Further, insurance companies should validate the representations and various rating factors. This helps in detecting fraud in the early stages. Also, the companies should verify proof for NCD on motor insurance.

The insurance company should also investigate the possibility of motor insurance fronting. This can be found by checking any mismatch between the person who pays premiums and the owner of the property. This practice is common in motor vehicle insurance and property insurance. Further, the company should verify the claim history of the customer, patterns, and trends in these claims to help reveal the possibility of a fraudster. Some of the other information that can be verified or broker reporting mandates, vehicle annual mileage, motor insurance – use of the vehicle, occupation of the client, motoring convictions, driving licenses, postcode manipulations, and finally common sense check (Boyd 2006).

Ways of reducing risks that may result from the backdating of cover

The insurance companies should closely monitor the quality of the work of the cover issuers they work with. This will entail carrying out periodic audits of the cover issuers. Secondly, the insurance company should come up with systems and controls that identify anomalies regarding the dates of the cover (Dempsey 2010).

Reduction of fraud by education and warnings

The insurance companies should educate the customers adequately on insurance fraud. This should be done before making sales of the policy to them. The company should also inform the customers of the severe penalties for committing the crime. When communicating such information to customers, the company should stress the consequences of attempting to or committing the crime. Besides, the company should also make it known to the customer that if they fall a victim, the information will also be circulated to other financial service providers. This can help discourage the fraudsters from taking policies with the company for the fear of being caught. Besides, it could indicate to the fraudsters that the company has put in place adequate measures and controls to identify the fraudsters (Tilman 2007).

Use of market and own intelligence

The company should make use of information on insurance fraud available in the market to identify the possibility of fraudulent activities before claims are made. This will help reduce the number of fraudulent claims. Thus, the insurance companies should work closely with federal bodies such as Insurance Fraud Bureau, the Insurance Fraud Investigators Group, and Serious Organizes Crime Agencies. The companies should also make use of their intelligence to help identify the fraudsters (Ford 2003).

References

Bourhis, R 2005, Insult to injury: insurance, fraud, and the big business of bad faith, Berret-Koehler Publishers, USA.

Boyd, P 2006, Identifying and reducing fraudulent third party tort claims against public, Transportation Research Board, USA.

California Department of Insurance 2013, What is insurance fraud. Web.

Coalition Against Insurance Fraud 2013, Impact of insurance fraud. Web.

Cornell University of Law School 2013, Insurance fraud: overview. Web.

Dempsey, J 2010, Introduction to private security, Cengage Learning, USA.

Ford, M 2003, Marine insurance fraud in international trade, Witherby, USA

Geary, E 2004, International marine insurance fraud and conspiracy, iUniverse, USA.

Insurance Fraud Bureau 2011, Helping reduce insurance fraud when a customer applies to products. Web.

International Monetary Fund 2012, Australia: insurance core principles—detailed assessment of observance, International Monetary Fund, USA.

Irish Insurance Federation 2013, Insurance fraud – a victimless crime. Web.

Jing, A 2008, Supervised and unsupervised PRIDIT for active insurance fraud detection, ProQuest, USA.

Skajaa, D 2004, Tackling insurance fraud: law and practice, LLP, USA.

Texas Department of Insurance 2009, Summary explanation of how insurance works. Web.

Tilman, R 2007, Global pirates: fraud in the offshore insurance industry, UPNE, USA.

Introduction

People have invested a lot of money in business activities and buildings and this has exposed their money to serious risks. Human life has become very vulnerable to diseases, accidents, and injuries that make people unable to do their activities (Feinman 2010). However, insurance companies have stepped in and helped people by alleviating their fears. The policies and covers offered by these companies ensure people can invest their hard-earned money in risky activities without fearing that they will suffer losses. In addition, people have insured their lives to safeguard them against diseases, injuries, and death. This paper explores common insurance frauds and how they can be managed using case examples from the United Kingdom.

Definition

Insurance refers to the services offered by companies that are willing and able to undertake risk prevention and compensation services to individuals and property. There are two broad categories of insurance that include life assurance and property insurance (Goldwich 2009). The first one refers to the process of safeguarding the life of an individual against injuries, loss of jobs, diseases, and death. The last one involves safeguarding property against losses caused by fire, theft, accidents, and industrial strikes.

Fraud refers to all attempts to obtain financial or material gains through false means. This means that insurance fraudsters use deception, tricks, falsehood, and wrong evidence to obtain favors as a result of suffering losses (Madura 2011). This behavior has become common especially in developed nations and this has forced insurance companies to incur heavy losses. As a result, they have become very strict to ensure they are not conned again.

Types of Insurance Frauds

Insurance frauds have become very common especially in the United Kingdom and this has made insurance to be an unattractive investment. This company aspires to make profits by ensuring only genuine claims are compensated (Gerst 2008).

However, this has not been the case due to the high number of insurance claims being filled and compensated. Some of these companies have been forced to close their operations since this business has become a futile investment. Even though, the role of this business is to safeguard and compensate its clients when they incur losses or injuries this should not exceed the profits generated. Unfortunately, most insurance companies are spending more money on compensations than expanding their operations (Madura 2011). This means this business is no longer a viable investment. Some of the common insurance frauds in the United Kingdom include the following.

Inflation of Losses

Insurance companies compensate individuals by restoring them to their initial financial positions before the loss occurred. This means that if the insured has a vehicle worth $ 10,000 and an accident occurs forcing the vehicle to be declared junk the insurance company will either buy another car worth the same amount for the owner or give the money to the insured to buy another car. In addition, life assurance policies compensate individuals with a similar amount of money they spent or wasted in treatment or due to loss of jobs (Longcore 2011). This policy is specified by the principle of utmost good faith that requires clients to claim actual compensations and avoid inflating their claims.

Unfortunately, this has not always been the case since people have been inflating their losses. This means that instead of an insurance company paying for the actual amount of money spent in treatment or in repairing vehicles they are forced to pay almost double the actual amount of money used (Shernoff 2011). Therefore, these companies have been subjected to economic sabotage since their operational costs are almost equal to their profits. This crime is always committed by the insured in collaboration with professionals like doctors and lawyers who certify that the victim deserves to be compensated.

Over Insurance

Insurance companies demand that customers must pay premiums that reflect the actual value of their property or salaries. This means that a property with a high value will have a higher premium compared to a low-priced property. However, most people do not consider the principle of indemnity that requires the insurer to put the insured in their former positions before the damage or loss occurred (Archer 2012). People overprice their property so that they can claim a huge amount of money in case they incur losses. This is a serious insurance crime that violates the principles of utmost good faith and indemnity.

In addition, people must ensure their property or life with one insurance company. However, this does not mean that they cannot consider the services offered by other companies depending on their conditions and rates of compensation. The principle of contribution claims that when an individual has registered property in more than one insurance company the costs of damages and losses will be shared equally amongst all companies (Madura 2011). However, most people claim double compensations since this principle is hardly followed. They present claims to all companies and demand compensation. This amounts to higher compensations than the actual price of their property or damage incurred.

Underpayment and Delayed payments

Insurance frauds are not committed by the insured only but also by these insurance companies. Even though, these companies are investments expected to generate profits they should not do this at the expense of their clients. This means that they should follow their principles and provide proportional compensations to their clients (Markson 2010). However, there are many cases where clients have been poorly compensated due to fraudulent considerations that lower the compensation packages. Some companies do not conduct full investigations before deciding to pay their clients. Therefore, they make wrong decisions and give their clients very little money which is not equivalent to the losses suffered.

In addition, clients are supposed to be compensated immediately they incur losses. This means that they must report the incident to their insurance company and the nearest police department to ensure the occurrence is documented. However, despite these efforts, some insurance companies take too long before they compensate their clients (Jones 2013). They claim to conduct investigations to establish the validity of these claims before compensating the victims.

This process can sometimes take months or years before the insured is compensated and this means businesses will stop operating for that long. In case of loss of jobs, people follow their claims until they give up since the expenses incurred in following their cases are more than the compensations expected. This is an insurance fraud perpetrated by insurance companies and subjects victims to suffering.

Cancellation of Policies

Some unscrupulous insurance companies frustrate their clients by changing their policy covers or deleting their information from their database. In some cases, they even cancel their contracts or claim to have compensated their clients and threaten to sue them for extortion. The contract between the insurance company and its clients is an important document that outlines their terms of engagement and specifies the policies covered by the insurance company. In addition, it specifies the losses that can be compensated and the conditions that may trigger this situation. Therefore, in case of any loss or damage, the insured must present the insurance certificate issued when signing the contract before any other step is done. This is the initial stage of compensation that shows the insured and the company had an agreement.

However, some insurance companies may delete this information from their system or change it to reflect other policies that were not covered in the initial agreement. This means that if the loss is not specified by their terms of engagement the insured will not be compensated (Jones 2013). In case a loss occurs the insured cannot be compensated and continues to suffer as the company continues to deny any engagement with the person.

False Claims

This has become a common insurance fraud, especially in the health and motor vehicle sectors. Some people cannot be trusted even with their property and lives. Health insurance schemes like Medicaid and Medicare have offered fertile grounds for fraudsters to steal money from insurance companies. In addition, lawyers, doctors, and mechanics have contributed to an increase in this crime due to the role they play in advancing illegal compensations.

Insurance companies demand that there must be sufficient evidence that there was a loss, damage, or injury before they compensate their clients. In addition, they demand that there must be a relationship between the insured and the property destroyed, damaged, or stoles (Rejda 2010). The loss must be measurable to ensure the company compensates the victim with the same amount of money or similar property. However, these principles have never been considered seriously by medical practitioners, investigators, mechanics, and lawyers.

Some doctors have collaborated with patients and claimed false compensations for the treatment of diseases or injuries that did not exist. On the other hand, mechanics and motorists have cooperated and presented false claims for nonexisting damages and repairs done on insured vehicles (Orsina 2011). Similar cases have been widely reported in the United Kingdom where other motorists and members of the public have colluded with motorists to claim they were accidentally hit and injured.

Intentional Losses and Damages

Insurance companies compensate clients when they experience losses that are directly connected with their insurance covers. However, sometimes it may be difficult to decide whether an accident was intentional or not and this puts the client at risk of suffering the losses without compensation. They have become creative and now most clients are setting fire on their property or intentionally causing accidents and colluding with other victims to claim compensation.

Ownership

The United Kingdom has many insurance companies that offer different covers for different groups of property and owners. New motorists are forced to pay higher insurance premiums compared to experienced drivers since they are likely to cause accidents. In addition, first-time car owners are exposed to more risks than those that have many cars. Moreover, some regions like urban centers are riskier compared to rural areas (Giles 2012).

This means that new motorists and those that live in urban areas must pay high insurance premiums due to the nature of their experience and location respectively. However, some parents and motorists evade these regulations by registering their vehicles in rural areas and showing different owners to reduce the premiums they are supposed to pay to insurance companies. This is an insurance fraud that goes on unnoticed unless insurance companies conduct long investigations to establish the owner and residence of such vehicles.

Causes of Insurance Fraud

Greed for money and wealth is the main cause of many cases of fraud in many government and private organizations. Even though, people know the consequences of this behavior they are motivated by greed to commit these crimes regardless of their punishments (Jordan 2011). There are many cases where people have been convicted of other crimes due to greed and insurance frauds are not exceptions.

People wish to have money and wealth irrespective of what they already have. Even though, they know the right way of generating wealth is through hard work they rarely follow this path because it is slow (Girgenti 2011). However, they consider cheating their insurance companies as the shortest way of getting wealth quickly. Greed makes some of them engage in activities like arson that risk their lives as they attempt to seek compensation from insurance companies.

In addition, living expenses have escalated and this has forced doctors, lawyers, and other professionals to engage in illegal activities to earn money (Madura 2011). Sometimes, insurance brokers, agents, and investigators collaborate with clients to steal money from insurance companies in terms of compensations. Most doctors and lawyers are paid low salaries that cannot sustain their families until the next payday. This makes them vulnerable to manipulation from unscrupulous insurance clients.

Effects

Tax is an important asset in a nation and all citizens must follow all processes to ensure they pay taxes. These funds are used to finance various local and national projects. However, fraud in the insurance sector is a serious challenge to local and national authorities in terms of collecting revenue (Jones 2013). Businesses must present their annual reports for auditing to establish the amount of tax they should pay based on their profits. However, the endless instances of fraud in the insurance sector make it impossible to calculate the profits generated by a company.

Most of them estimate their profits and do not have actual figures that show how they have performed. Some companies do not present accurate figures since their compensations are usually marred with doubts (Bourhis 2011). In addition, it leads to losses and frustrations in insurance companies forcing them to close their operations. This leads to joblessness and increases the dependency ratio in a country.

Secondly, most cases of insurance fraud lead to losses of lives, property, time, and energy. In addition, they contribute to an increase in injuries and death when people try to jump in front of speeding vehicles in stage-managed accidents. Even though, they may be compensated and earn good money they suffer injuries that may interfere with their normal lives or lead to other serious complications in the future.

Lastly, insurance fraud leads to unnecessary expenses and discourages investors from venturing into this business. Nobody is willing and ready to invest in a business that cannot generate enough revenue to finance its projects. Therefore, this sector is left with very few players who are in charge demand huge premiums from clients since they have huge markets for their services.

Solutions

The insurance industry is an important sector that ensures people are free to invest in any activity regardless of the risks associated with it. However, this sector is facing a serious financial crisis due to fraud perpetrated by clients, agents, and other parties. However, the following measures can be beneficial in curbing these incidences.

First, there should be severe punishments for those who engage in this crime. The United Kingdom established the Fraud Act 2006 and Financial Services Act 1986 that ensures all fraudsters are fined, imprisoned for ten years, or get both sentences. This was a good way of deterring people from committing this crime. In addition, there is the need to establish offices that will facilitate investigations that will help the authorities to arrest fraudsters (Jones 2013). The United Kingdom established the Serious Fraud Office in 1987 to ensure all fraud cases are investigated and suspects prosecuted.

Secondly, public awareness campaigns must be established to educate the public on the evils of insurance frauds and how to detect and report them. This will ensure the public is very careful and avoids participating in suspicious activities. In addition, there should be qualified bodies to conduct investigations on all suspicious activities. This should culminate in the prosecution of perpetrators and ensuring all second and third-party participants are given severe punishments for colluding with the initial criminals.

Lastly, all the principles that guide this industry must be respected by all stakeholders and applied in equal measures. There should be clear warnings regarding those who break insurance rules to ensure this industry is protected from clients with criminal intentions.

Conclusion

The insurance sector is a base for all other business activities since it safeguards their operations. Therefore, this industry must be protected and developed to ensure people can engage in risky legal activities without fear of losses or injuries. Insurance fraud is a major letdown in this sector and should be condemned by everybody. The above solutions will help to alleviate insurance fraud perpetrated by clients, insurance companies, and their agents.

References

Archer, N 2012, Identity Theft and Fraud: Evaluating and Managing Risk (Critical Issues in Risk Management), University of Ottawa Press, Ontario.

Bourhis, R 2011, Insult to Injury: Insurance, Fraud, and the Big Business of Bad Faith, Berrett-Koehler Publishing, California.

Feinman, J 2010, Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claim and What You Can Do About It, Portfolio Hardcover, New York.

Gerst, E 2008, Vulture Culture: Dirty Deals, Unpaid Claims, and the Coming Collapse of the Insurance Industry, AMACOM Books, New York.

Giles, S 2012, Managing Fraud Risk: A Practical Guide for Directors and Managers, Wiley, New York.

Girgenti, R 2011, Managing the Risk of Fraud and Misconduct: Meeting the Challenges of a Global, Regulated and Digital Environment, McGraw-Hill, New York.

Goldwich, M 2009, Uncovered: What Really Happens After the Storm, Flood, Earthquake or Fire, High-Pitched Hum Publishing, Indianapolis.

Jones, H 2013, Principles of Insurance: Life, Health, and Annuities, Loma Publishing, California.

Jordan, B 2011, Fundamentals of Investments with Stock-Track Card, McGraw-Hill, New York.

Longcore, R 2011, Insurance Claim Secrets Revealed, Trafford Publishing, Bloomington.

Madura, J 2011, International Financial Management, South-Western College, Connecticut.

Markson, B 2010, How to Become an Independent Insurance Adjuster: A 3-Step Action Plan to Entering the Profession, Insurance Adjuster Resources, LLC, New York.

Orsina, M 2011, Insurance Company Operations, Life Office Management, New York.

Rejda, G 2010, Principles of Risk Management and Insurance, Prentice Hall, New Jersey.

Shernoff, W 2011, How to Make Insurance Companies Pay Your Claims and What to Do If They Don’t, Hastings House, Washington.