Category: Insurance

Introduction

In the last seven years, Saudi’s insurance industry transformed from a small sector to an organized industry with stable regulation and growth (Saaty 5048-5055). This transformation is attributed to the government of Saudi Arabia, which streamlined the industry by establishing institutional and legal frameworks to guide its growth. The insurance industry plays an important role in Saudi Arabia because it enables the government and private economic entities to manage financial risks. This paper will analyze the profitability of insurance companies in Saudi Arabia. In particular, the profitability of Saudi-based insurers will be compared with those of their United States counterparts. Additionally, the factors that determine the performance of Saudi Arabian insurance companies will be analyzed.

Insurance Industry in Saudi Arabia

Saudi Arabia’s insurance industry is divided into two main sectors namely, life and non-life insurance. The life insurance sector has two main segments namely, annuity and mortality protection. The non-life insurance sector has several segments, which include health, accident, property, motor, and casualty insurance. Currently, the industry has over 30 insurance companies (Saaty 5048-5055). Additionally, the industry has several insurance agencies, loss assessors, and surveyors. The insurance companies are required to raise a minimum capital of SAR100 million in order to be licensed to operate in the industry.

Saudi Arabian Monetary Agency (SAMA) regulates the insurance industry through policy formulation and supervision of insurers. In 2004, SAMA implemented radical reforms in the industry by introducing an insurance system that conforms to Islamic law (shariah). Concisely, SAMA introduced the cooperative system of insurance, which operates on the principles of mutuality and cooperation among stakeholders (Saaty 5048-5055). In this regard, policyholders contribute to a common fund for the purpose of sharing financial risks rather than making profits. SAMA also liberalized the industry by allowing foreign companies to join it. Consequently, more firms have since joined the industry, thereby increasing competition.

Saudi Arabia’s insurance industry recorded organic growth in the last ten years. In 2011, the total gross written premium (GWP) was $5 billion, up from $4.3 billion in 2010 (Al-Amri, Gattoufi and Al-Muharrami 362-380). The health insurance segment contributed 53% of the total premium in 2011. Motor insurance contributed 21%, whereas other general insurance products contributed 20% of the GWP. However, life and savings accounted for only 6% of the GWP. In 2012, GWP increased to $5.6 billion, up from $2.27 billion in 2007 (Al-Amri, Gattoufi and Al-Muharrami 362-380). This represents a growth of 147% in the last five years.

This high growth is attributed to the introduction of mandatory health and motor insurance in Saudi Arabia. However, the industry’s growth rate is expected to decline to 13% in 2013. Additionally, the industry’s growth rate is expected to reduce from a CAGR of 21% in 2011 to 5.2% in the next five years. The decline is attributed to the maturity of the industry and low uptake of non-compulsory insurance products.

Profitability of Saudi Insurers Verses the USA Insurers

Most Saudi Arabian insurance companies have been making losses since 2010, due to low economies of scale and intense competition. In 2011, 18 out of the 31 Saudi-based insurance companies controlled less than 2% of the market. Additionally, most of the small companies in the industry incurred losses. By contrast, “Tawuniya and Medgulf, which are the two largest companies in the market, were able to make profits” (Al-Amri, Gattoufi and Al-Muharrami 362-380).

These companies accounted for over 75% of the industry’s total profits in 2011. Similarly, a few small insurers were able to make profits in 2011. For example, Al-Sagr had a return on equity (ROE) of 12.6%. Other small companies that were able to make profits include Arabian Shield and Wala’a. However, the combined income of these firms accounted to less than 10% of the industry’s total net profit in 2011.

Apart from the top two largest companies, other large insurers made very low profits while others incurred losses. Allianz Saudi Fransi, which is the fifth largest firm in the industry, reported a pretax loss in excess of SAR 8 million in 2010. By contrast, the company was able to increase its revenue by 30% in 2011, thereby making a pretax profit of SAR 1.6 million (Allianz Saudi Fransi). However, the company reported a net loss of SAR 300 million after paying Zakat, which amounted to SAR 1.9 million.

In 2012, the profits of most large firms continued to decline, whereas majority of the small insurers made losses. For instance, Tawuniya’s net profit declined from SAR 405.76 million in 2011 to SAR 319.5 million in 2012 (Tawuniya). In the first quarter of 2013, the company recorded a net loss of SAR 60.6 million. Similarly, Al-Sagr’s net profit decreased from SAR 204.8 million in 2011 to SAR 172.6 million in 2012.

Nonetheless, some companies were able to report an increase in their profits in 2012. For instance, Allianz Saudi Fransi’s net profit for the first nine months of 2012 was SAR 5 million compared to a net loss of SAR 600 thousand in the first nine months of 2011 (Allianz Saudi Fransi). The reduction in profits is mainly attributed to high competition that has forced firms to lower their premiums. This has led to a reduction in profit margins. Similarly, the demand for motor and health insurance, which accounts for over 70% of GWP, is declining because majority of the citizens have already purchased these products.

Unlike Saudi Arabian insurers, most insurance companies in the United States have been recording steady growth in profits in the last five years. However, the level of profitability varies from segment to segment. Health insurance has been the most profitable segment of the market in the last decade. In the first six months of 2011, health insurance companies recorded a combined profit of $7 billion. The top five largest companies, which “include UnitedHealth Group, WellPoint, Aetna, Cigna Corp, and Humana, had a combined net profit of $13 billion in 2011” (Laster and Raturi). Overall, the profits in the health insurance segment grew by 150% in the last ten years. The high growth is explained by the ability of the USA insurers to charge high premiums and to reduce their expenditure on real health costs.

The life insurance segment of the USA market has been recording poor performance. The combined revenue for the industry reduced at a rate of 6.2% per annum in the last five years (Lesch and Byars 411-431). The decline is attributed to falling demand for life insurance products and reduction in premium. Additionally, life insurance companies have been making losses from their investments in securities and real estate. In 2012, the top four largest life insurance companies accounted for 11.8% of the industry’s total profits. In 2013, most life insurance companies are expected to record a small growth in profits due to the anticipated increase in their returns on investments in securities.

Property and casualty insurance companies’ profits have been relatively stable in the last five years. Major players in this segment include AIG, Allied World, and Montepelier. In 2012, AIG managed to repay the full $182 billion it received from the government of the USA during the recent global financial crisis (Laster and Raturi 36-47). Additionally, it recorded an increase in its earnings per share by 21.9%. Property and casualty insurers attribute their profitability to high prices and the use of improved predictive analytics to manage claims.

Factors that Affect the Performance of Insurance Companies in Saudi Arabia

Compulsory Insurance Policies

In the last half a decade, growth in Saudi Arabia’s insurance industry was driven by the purchase of compulsory insurance policies. Demand for health and motor insurance products have increased significantly (accounting for over 70% of GWP) because they are compulsory policies. The high demand has led to the increase in GWP in the Saudi market. However, the sudden reduction in the growth of premiums for health and motor policies from 33.8% in 2009 to 12% in 2010 is an indication that the market is becoming saturated (Al-Amri, Gattoufi and Al-Muharrami 362-380).

As a result, the revenue of insurance firms is expected to decline in the next five years. Though demand for health and motor insurance is high, most firms have not been able to make profits in these segments due to high claim rates. In this regard, insurers should improve their claim assessment procedures in order to reduce the losses associated with fake claims.

Regulatory Pressures

Saudi Arabia’s insurance industry is subject to intense regulation. Insurers are required to “maintain onshore operations, list on Saudi Arabia’s stock exchange, and to have majority of Saudi ownership” (Al-Amri, Gattoufi and Al-Muharrami 362-380). Maintaining onshore operations limits insurers’ ability to supplement their revenues through offshore investments. Additionally, the minimum capital requirement set by SAMA strains insurers’ resources. For instance, 12 firms were not able to raise the required minimum capital of SAR 100 million, thereby exposing them to the risk of losing their licenses (Al-Amri, Gattoufi and Al-Muharrami 362-380). In this regard, the firms focused on utilizing their scarce resource to raise the minimum capital rather than to improve their profitability.

SAMA also regulates the distribution of insurance products through the internet by verifying product offerings and online marketing plans before approving them. The benefit of this regulation is that it improves data security and transparency (Lesch and Byars 411-431). However, it increases the time taken to develop and to launch or distribute insurance products through the internet. Consequently, insurance companies have had to revert to traditional distribution channels such as personal selling, which are very expensive.

High competition

The industry has a large number of insurers who are competing for the same clients. The entry of large international insurers has resulted into intense competition. Consequently, insurers have had to compete in terms of price rather than differentiation in order to penetrate the market (Saaty 5048-5055). This involves lowering premiums, which results into low profit margins. Demand for non-compulsory insurance policies is very low because Saudis believe that insurance is against Islamic teachings.

This limits insurers’ ability to diversify their product portfolios away from the compulsory policies in order to increase their profits. Thus, SAMA and insurers should intensify their marketing campaigns in order to convince Saudis that cooperative insurance conforms to Islamic teachings. This will improve the demand for non-compulsory policies.

Human Resource Challenges

Insurers in Saudi Arabia have to adhere to Saudization policies. In particular, majority of their employees must be Saudis. However, Saudi Arabia lacks adequate supply of underwriting skills and expertise in insurance and risk management. Approximately 60% of the sales executives in the industry are fresh graduates from high schools (Saaty 5048-5055). Thus, they lack adequate experience and skills in marketing insurance products.

Moreover, over 70% of underwriters in Saudi Arabia lack specialized degree qualifications in insurance. This reduces the competitiveness of Saudi insurers in terms of product development and risk management. Thus, Saudi-based insurers should improve the quality of their human resources through intensive training in order to boost their productivity (Hanna and Burns 1167-1177).

Conclusion

The profitability of Saudi Arabian insurers rose significantly in the six years to 2010. The rise in profitability was attributed to improved regulation and the introduction of compulsory insurance policies. However, demand and profitability reduced significantly in the last three years due to intense competition and the slow growth of the industry. The challenges facing Saudi-based insurers include regulatory pressures, intense competition, and scarcity of underwriting skills. In light of these challenges, Saudi-based insurers should focus on improving their competitiveness through innovative marketing strategies, as well as, staff training and development.

Works Cited

Al-Amri, Khalid, Said Gattoufi and Saeed Al-Muharrami. “Analyzing the Techniocal Efficiency of Insurance Companies in GCC.” Journal of Risk Finance 13.4 (2012): 362-380. Print.

Allianz Saudi Fransi. Annual Report: FY 2012. Allianz Saudi Fransi Insurance. 2012. Web.

Hanna, Backhouse and Nicholas Burns. “Linking Employee Behavior to External Customer Satisfaction Using Quality Function Development.” Journal of Engineering Manufacturing 218.1 (2004): 1167-1177. Print.

Laster, David and Mayank Raturi. “What Drives Financial Innovation in the Insurance Industry?” Journal of Risk Management 3.3 (2012): 36-37. Print.

Lesch, William and Bruce Byars. “Consumer Insurance Fraud in the US Property-Casuality Industry.” Journal of Risk Finance 15.4 (2011): 411-431. Print.

Saaty, Abdalelah. “Emperical Analysis of the Problems and Challenges Confronting Insurance Companies in Saudi Arabia: Executives’ Perspectives.” African Journal of Business Management 6.14 (2012): 5048-5055. Print.

Tawuniya. Financial Results: FY 2012. Tawuniya Insurance Company. 2012. Web.

The Ascent of Money: A Financial History of the World, written by a Harvard professor Niall Ferguson, provides a detailed historical overview of money as a means of trade and other related phenomena such as finance, credit, and risk. In particular, Chapter 4 The Return of Risk tracks the origins and development of private insurance and welfare state and examines the limitations of different risk management practices.

Since risk, in one form or another, has always been present in human life, people attempted to insure themselves against it since as early as the Middle Ages (Ferguson 185). One way to do so is the insurance model where people provide voluntary contributions to a fund from which they can receive compensation, should the insured event occur (Ferguson 195). However, private insurance remained limited in scope until one realization came to light: while calamities are uncertain, they are nevertheless not random (Ferguson 183). Modern insurance is thus based on six statistical measures that allow to estimate the insurance risk and, consequently, the coverage with enhanced precision.

These factors are probability, life expectancy, certainty, normal distribution, utility, and inference (Ferguson 188-190). As payouts became more predictable, the insurance business grew into a large industry (Ferguson 196). However, since private companies do not cover certain groups of people or events, state insurance, an alternative risk management model, is the second major element of Ferguson’s analysis.

The welfare state, based on the redistributionist model of taxation, was designed to provide universal coverage for the state’s citizens, including those who cannot afford private insurance (Ferguson 199). The rationale behind a mandatory state insurance is based on both social (achievement of social equity) and economic arguments: a large actor such as the government can take advantage of the economies of scale and provide relief for calamities that private companies refuse to deal with (Ferguson 204). The system enjoyed an unprecedented success in the 20th century Japan, significantly reducing the citizens’ vulnerability to risk.

However, it did not prove to be a universal solution as cultural and social differences made the model unsuitable for Britain (Ferguson 209-210). The changing demographics and consequently increasing costs of state insurance present a new challenge to the welfare state as the model becomes unsustainable in the 21st century (Ferguson 220-221).

Ferguson’s examination of risk management practices is particularly valuable because of his detailed coverage of historical events, supported with empirical evidence and analysis of cases from around the world. His comparative approach allows the readers to assess the advantages and the drawbacks of the models in different cultural, social, political, and historical contexts. By focusing on a few selected cases (namely, Japan and Britain), Ferguson can explain how historical developments in these countries impacted the success of private and state insurance practices.

This historical approach also allows the author to incorporate an analysis of the current state of affairs, characterized by such challenges as the increased threat of terrorism and the yet to be known impact of climate change (Ferguson 223-224).

This chapter thus serves as a valuable source of information for anyone interested in learning about different methods of organizing financial security in the society. The main message conveyed to the audience is that there is no universal answer as to which risk management model is preferable, as history has proved on several occasions.

Works Cited

Ferguson, Niall. The Ascent of Money: A Financial History of the World. New York: Penguin Press, 2008. Print.

There is an emerging trend in which insurance companies offer discount for multiple insurance contracts, and have resulted to various scenarios. Some experts in the insurance company sector argue that offering multiple services by the same insurance company does not guarantee that the customer will stick with them. There are some of consideration that must be taken in focus, for example, the terms and scope of the cover. However, previous studies have shown that, there is a likelihood of two scenarios to occur. Some customers would prefer differential services from multiple companies, for example, house insurance in one company and car insurance in another. Other customer would prefer to have all their services under one insurance company (Schindler 23).

Statement of the Research

The research aims at studying how multiple insurance contracts will affect customers’ decision when choosing their services from a variety of insurance companies.

Goals and objectives

• Goal: This study will help to understand the dominant pattern in the insurance companies and comprehend why some of the companies have established multiple insurance services.
• Objective: The study will provide useful information to insurance companies, which will significantly help them in policy making, pertaining to their strategies in multiple insurance services.

Background

Offering discounts for multiple insurance contracts is a trend that emerged in 1990s. Insurance firms such as, State Farm emerged as one of the most reputable insurance firms offering diverse services to its clients. State Farm offers a wide category of services which includes: house, car and banking services. State Farm has achieved success through offering differential services at a competitive rate in the market. Discount and the multiple services have captured a large composition of the market. Customer finds more appropriate to acquire all their insurance and banking services under one roof. However, as a result of diversity in offering of services, State Farm has experienced a number of challenges (Stevens 17).

Customers have always complained about poor services, and it follows that the company has less concern over their issues. Operating insurance firms who offer diverse services such as discounts for multiple contracts is not an easy task. Insurance companies must have reliable information concerning the market needs and strive to offer the best service to their clients. Customers, on the other hand, need to know the trend, by insurance companies, to offer multiple insurance contracts so that they can make the right choice when demanding insurance services (Stevens 17).

Design

The research will target a population of 60 households in Michigan State. A random sampling will engage 30 households that prefer using insurance firms offering multiple services, and 30 households that prefer services from different insurance firms. The study will randomly pick the respondents from different social and economic background: rich, middle class, poor families. The study will use a formal questionnaire with comprehensive questions regarding, their satisfaction with the insurance company, efficiency of the service offered, rate charged, experience, and their likelihood to shift to other insurance firms. Table containing the data collected will be drawn in numeric figures, which will provide useful information for analysis purpose.

Project Timeline

The first step in preparation of the study will initiate a field study of the households where the research intends to collect data. This will be helpful in gauging their cooperation, accessibility, language to use in questionnaires, and estimating the cost of the study. A formal letter will be send to the 60 households requesting them to participate in the study three weeks before the study. The research will involve 6 members who will present the questionnaires to 10 households each and will take a maximum of 2 days to complete the study. Compiling and cross checking of the data collected will take a day, before analysis (Kolb 9).

Anticipated Result

The study will provide varying result concerning consumer choice and preference of either single insurance firm or multiple insurance firms offering discounts. The research bases on different categories of consumers with varied social, economic background. The respondents also have diverse information concerning services offered by insurance firms and different priorities altogether. The study expects to find low income earner more inclined to insurance companies offering multiple contracts as compared to high income earners and informed respondents. This attributes to the fact that discount and less hustle will make them prefer getting insurance service under one insurance provider. Less informed respondents will tend to prefer using insurance firms they already know, and will depict a high resistance to change to other emerging companies for fear of the unknown. High income earner will tend to show a more inclination towards insurance firms offering single service at a time than the other two respondents groups. This attributes to the fact that, they are more concerned with quality services than discounts offered. This group is also more informed and thus their choice of decision will depend on overall services that will give them the greatest satisfaction. However, a disproportion pattern in preference among the respondents will occur, as social and other factors will direct their choice of insurance firm. The image and service provided by the insurance firms will play a significant role to determine customers’ choice.

References

Kolb, Bonita M. Marketing Research: A Practical Approach. Los Angeles: SAGE, 2008. Internet resource.

Schindler, Roberrt M. Pricing Strategies: A Marketing Approach. New Delhi : SAGE Publication Inc, 2002. Print.

Stevens, Robert E. The Marketing Research Guide. New York: Haworth Press, 1997. Print.

Abstract

The ultimate aim of Insurance is without a doubt to minimize the risks involved in various aspects of life and in addition to this, to cover and compensate the owner if any loss is suffered by the owner. Insurance may be taken to cover the risks involved in life, property and business. Mainly there are two types of insurance, namely, life insurance and general insurance. General insurance is all about covering fire and miscellaneous insurance. This type of insurance covers several things from burglary, theft, fidelity guarantee, livestock and crops, employer’s liability and lastly to insurance of motor vehicles. Insurance is a system of sharing risk and is responsible to pay the owner who suffers any kind of damage covered in the contract. Insurance is an ace card that compensates a person when everything is against the victim.

An Introduction to Insurance

The term life assurance better known as life insurance is basically a contract between two parties, one is the policy owner and the other is the insurer. A very common term is the face amount; this is nothing but the initial amount which is paid by the insurer to the policy holder when the policy matures or in other words the policy reaches the time frame. Life insurance policy covers all the risks involved in a person’s life but it does not cover other risks like fire, damage of assets etc, to cover such risks there is another insurance called non life insurance, this type of insurance covers all the risks involved other than the risks involved to ones life. Non life insurance covers risks ranging from fire, health, house and other important things. There are many agents involved in the process of getting a secured life insurance policy; these agents form a link between the insurer and the policy holder.

An Internet Source

“It’s best to establish clear parameters in your relationship with your insurance adviser. You should be clear about what your adviser can, and cannot, do for you. Discuss what you require for your business and make sure they are prepared to offer this level of service.” (Choose an Insurance Adviser and present your risk). It is always advisable to have an insurance policy to minimize the risks involved. The current period of recession has signaled the beginning of unprecedented situations and one must be geared up to face these risks. The most important step before getting a policy is to review the needs; according to the needs an insurance policy must be taken. The policy must compliment the needs and it should be in proportion to the needs of an individual. For instance, if a person opts to take vehicle insurance, if he sets a very high amount ignoring the other needs, this situation can be dangerous in the future so in order to secure the future to some extent proper insurance needs must be identified and an appropriate policy must be taken. There are several people involved in guiding the people who think they need an insurance policy, in the case of ambiguity, the people should not be reluctant to approach the other people who can guide them in order to accomplish this important task.

A Journal Article on Insurance Needs

“Most consumers depend on their employer for their health, life and disability insurance. But according to a recent report by the Center for Economic and Policy Research, this year’s recession will cause at least 4.2 million people to lose their health and insurance coverage. If the worst happens and the recession costs you your job, what would you do? (Recession- Proof Your Insurance Needs).

Both the articles stress upon the need to purchase an insurance policy. An In-depth reading of the articles suggests that the recession period has brought countless uncertainties with it and it is always good to be on the safer side. The need to purchase a policy becomes even more considering the fact that the recession is supposed to continue for another year or two. This is a clear indication of the fact that the future is not looking rosy for the businessmen as well as the normal people hence it is very fair to say that an insurance policy is a must at this point. It is now or never. If it is never then the people who opt to do the same are going to pay a very heavy price for this mistake.

Insurance often confuses the people and most individuals tend to stay away from insuring themselves from the uncertainties of the future. Many individuals tend to invest in stock markets, mutual funds, real estate etc but ignoring the important need of insurance can be devastating in the future. The awareness among many individuals about insurance is very low and this is another reason why individuals tend to stay away from purchasing policies. When an individual is not aware of a product, that individual is expected to avoid the product and the very same applies in the case of insurance too. Both the sources focus on the very same topic which is insurance and it should be made a point to be aware of the needs and accordingly the price of the policy should be decided. This is very important and both the sources used in the paper insist upon the same. An individual has to decide between a life cover or an investment plan and both the sources have given a good account of this. It is always good to go in for life cover because each passing day is making the life even more challenging than earlier and it is highly advisable to ensure that one’s life is secured. Insurance advisers plays a pivotal role in deciding which policy must be adopted and both the sources emphasize on getting the right man to advice. It is quite difficult to get the right man as there is commission associated with the deals that these people earn so they try to sell the policy which would benefit them the most rather than benefiting the insurer. Hence it becomes imperative to get hold of the right man. Family members are usually very helpful when it comes to finding the right man; any relative having good contacts can be very helpful in getting the right man. The final part is conducting a review which is another important aspect, for instance if a person opts for a child’s education plan than that individual has to ensure that the policy selected is in accordance with the goal set for the education. Goal refers to the monetary goal. All these points have been mentioned in both the sources used in the paper. If all these points are extensively followed than an individual can have a secured future.

References

Choose an Insurance Adviser and present your risk. In Business.co. UK. 2009. Web.

Recession- Proof Your Insurance Needs. In Wall Street Journal. 2009. Web.

Introduction

By the close of 2000, insurance companies initiated a new Commercial Property Insurance plan. The new plan, which is currently being employed by insurance companies, bears far-reaching modifications from earlier accounts. This limitation is applicable to the three insurance coverages offered by the ordinance (Rosenberg, Portner, & Stool, 2006). The three coverages include loss to the un-destroyed section of a construction, demolition charges, and high building costs. Attributable to the new Commercial Property Insurance Plan, the reality of an approval necessitating an existing regulation at the period of loss could create difficulties for people covered by the insurance. This paper discusses a number of drawbacks bordering insurable values as well as potential resolutions by taking into account property damages in addition to the physical loss and destruction of the asset. In the quest to understand risk management and commercial property insurance, one should understand the risks in society, the relationship between risk and insurance, risk management tools, and the legal principles of risk and insurance as underscored in this paper.

Risks in society

Some of the risks in society due to natural disasters like Hurricane Katrina as well as other catastrophes offer valuable lessons concerning the practice of acquiring and sustaining efficient insurance coverage in addition to the necessity of correctly approximating insurable ideals for real property assets. Other risks in the society that are covered by Commercial Property Insurance include risks of theft and fire (Gottlieb, Florio & Hoffman, 2008). Commercial Property Insurance is conducted by different businesses such as manufacturers, retailers, and non-profit making organizations, just to mention a few.

Risk and Insurance

Risk management denotes a planned advance to dealing with uncertainties that entail the identification, examination, and economical administration of the risks that threaten property and gaining capability of an enterprise. In a bid to alleviate the effect of risk, risk management embarks on methods like risk reduction and avoidance. In this way, the management has to come up with its manner of financing risks (Clement, 2010). It is evident that a relationship exists between risk and insurance, for whereas risks signify the exposure to misfortunes, insurance denotes a swap of a particular loss (premium) to another party (insurer) who sucks up all or a section of the negative impacts exposed to misfortunes.

Despite organizations having witnessed the recent occurrences of disasters (like Hurricane Katrina) that bring about loss of possessions, most of them still underinsure their property. Underinsured property, owing to impractical insurable value approximation, leaves the owner in a shaky financial condition in case of a loss. Certainly, owners do not deliberately underinsure their property, even though that is frequently the case (Gillette, 2013, p. 17). Insurable value approximations could be low due to a number of causes like failure to comprehend the uncertainties that a property is exposed to during its existence. Other causes include confusion concerning insurance policy conditions, wrongly developed or obsolete value computations brought about by rising costs of building, increasing market values, and modifications in construction codes. A different cause would be in a case such job was implemented under a foundation of worth not suitable for acquiring insurance cover and that only tackles the loss only without considering the aftermath, reconstructing, and losing business undertakings. These aspects could materialize and leave assets at risk in case of a catastrophic incidence.

Value

Insureds are frequently at a losing end during a collection on a claim from their insurers owing to their incapability to identify the parameters employed in insurable computing values, in addition to wrong interpretation of their strategy in this view. Think of a description of the insurable value from a characteristic policy of a Commercial Property Insurance that caters to “the cost to repair or replace damaged property with property of like kind and quality” (Clement, 2010, pp. 47). Looking at it shallowly, this description obviously sounds extensive by offering insureds the sense of guarantee that they can reclaim the economic worth of their property in case of a loss. Nevertheless, this aspect would raise an inquiry as to the value that, in reality, will be reclaimed. What would complicate the issue is the lack of standard descriptions of the complex terminologies existing in the insurance sector. Additionally, policy language has the tendency to strengthen the problem through ill-defined language that is subject to interpretation.

Insurable Value constituents

Frequently, insurance companies, as well as the insureds, will bear varying perspectives pertaining to what an insured is expected to recover in the event of a loss. For instance, insureds have to comprehend the variation between Replacement Cost Value (RCV) and Actual Cash Value (ACV) (Tadlock, 2002). Actual Cash Value is normally understood as the depreciated property value, whereas Replacement Cost Value is the cost to restore the property to a new state. Other than the cost of building, costs like insurance and the course of building, legal charges, payment to engineers, and architects are key aspects (Clement, 2010). All the costs that are acquired by the insureds when constructing ought to be included when approximating insurable value through either actual cash value or the replacement cost value method.

Insureds have to comprehend and have the ability to construe their insurance policy since it has a connection with insurable value when negotiating coverage and not in the event of a loss. Policy exceptions are an additional section where insureds have to be mindful of potential liability. Exceptions are the entities that will not appear in the insurance coverage in case of a loss. Exceptions could encompass construction components that are anticipated to endure a devastating event and could entail groundwork and belowground utilities (Tadlock, 2002). Moreover, exceptions might as well encompass some soft costs and engineer’s income. It is the accountability of the insured to comprehend the policy in order that the extent of the estimation can be established to satisfy the requirements of the insured (Rosenberg, Portner, & Stool, 2006). In instances where the insured involves a third-party evaluator to carry out the insurable value approximation, then the evaluator requires an understanding of these concerns too.

The cost perspective is characteristically the most suitable estimation technique to apply when planning an insurable value approximation. The cost perspective is employed in gauging property value through approximating the cost to build a replica of the existing building, encompassing an entrepreneurial inducement, and afterward subtracting depreciation from the overall outlay. When used in general estimation methods, the description as well demands the inclusion of land value. Nevertheless, this requirement is not valid in insurance estimation since land is characteristically not an insurable asset. Commercial property owners and investors faced a difficult situation in making sure that their resources, viz., real property assets, were not undervalued for insurance reasons. The real estate sector requires taking the teachings learned from recent occurrences to examine their strategies to acquire an excellent comprehension of exceptions, premises of value, as well as insurance coverage confines (Rosenberg, Portner, & Stool, 2006). They ought to ensure that their insurable values have been approximated anchored in suitable techniques and suppositions, if possible, by a specialist services firm that has the experience of carrying out insurable value approximations for real estate properties. Risk departments ought to operate closely with these experts to acquire an excellent comprehension of the fundamentals of the company’s insurance policy and employ those fundamentals in the estimates. In addition, companies ought to shift away from the present process of employing the insurable value approximations accounted for as a section of the financing evaluation to set the confines of their assets destruction coverage.

Connection of the insurable value approximation to market value

Additional common practice in the real estate sector is the unsuitable application of the insurable value approximation carried out as a section of funding or mortgage valuation as the foundation of a property’s insurable value (Rosenberg, Portner, & Stool, 2006). These evaluations are organized for a loaner that desires to verify that the worth of a mortgaged asset is greater than the worth of the mortgage whenever a problem crops up where the loaner has to be vigilant in safeguarding the venture. When employed in common estimation processes, the description as well demands the inclusion of land value though this aspect is not appropriate in insurance estimate as, like aforementioned, land is not considered an insurable property. In brief, the loaner desires having adequate insurance to cover the sum of the loan, not essentially the total worth of the property (Tadlock, 2002).

More significantly, the insurable value approximations are frequently carried out as reconsideration by the evaluator at the demand of the loaner, applying genetic marketplace statistics and policy exceptions anchored in presumptions instead of policy fundamentals by specialists with restricted building or insurance proficiency. Owners frequently naively presume that since they acquired their loan, partially since the evaluator bore the loan amount, insurable value approximations as appearing in the report are as well suitable (Gottlieb, Florio & Hoffman, 2008). Then they complicate the difficulty by utilizing this approximation as a foundation for shaping the insurable value of their properties.

Risk management tools

These tools permit planners to handle uncertainty clearly by recognizing and creating metrics, parameterizing, establishing alleviations, and finding risks. These capacities are very hard to find when there is no type of certification or with the initiation of information technology and the use of the software. Unsophisticated risk management tools give room for certification, while sophisticated tools present a visual demonstration of risks and are capable of amassing risks into a rational depiction (Gottlieb, Florio & Hoffman, 2008). Some of the remarkable risk management tools include the following.

• Capital asset pricing model: it is employed in establishing the applicable necessary rate of return of a property when that property is included in an existing and well-spread portfolio anchored in diversifiable risk.
• EasyRisk Manager: This denotes an Internet-based project, company, and tool that are greatly diversifiable to associate risk to any business representation.
• IBM OpenPages: Incorporated Company control, risk, and conformity resolution that encompasses components for operational risk management, strategy and conformity administration, fiscal controls administration, information technology governance, and internal appraisal management
• Probabilistic risk management: This tool is an uncomplicated model where approximations of the possibility of incidence are proliferated by the effect
• Risk register: A project designing and administration tool is normally called a Risk Log.
• Systems Analysis Programs for Hands-on Integrated Reliability Evaluations (SAPHIRE): This tool is a probabilistic risk and dependability evaluation software device

Legal principles of risk & insurance

In cases of Commercial Property Insurance, there are fundamental legal principles of risk and insurance (Gottlieb, Florio & Hoffman, 2008). Several normally quoted legal principles of risk and insurance encompass the following:

1. Causa Proxima: The reason behind the loss has to be included in the indemnifying accord of the strategy, and the leading reason should not be exempted.
2. Contribution: Insurers that have a comparable commitment to the policyholder have a say in the compensation in accordance with a number of schemes.
3. Indemnity: Insurance companies reimburse the insured in the event of loss just up to their interest
4. Insurable interest: The policyholder characteristically has to pay directly for the loss. Insurable interest has to prevail in case Commercial Property Insurance is engaged. The perception necessitates that the policyholders have a concern in the loss or destruction of the insured property. The character of concern is subject to the type of insurance engaged and the sort of property possession. The obligation of an insurable interest differentiates insurance from gaming.
5. Mitigation: When a loss occurs, the property owner has to try to maintain the loss to the lowest point as if the property were not insured.
6. Subrogation: Insurance companies obtain legal rights to find recoveries in support of the policyholder; for instance, the insurer could file a lawsuit against those responsible for the loss to the policyholder.
7. Utmost good faith: Both the “policyholder and the insurer are connected by a union of good trust of honesty and equality” (Clemet, 2010, p.47). Material details have to be revealed.

Conclusion

Towards the close of 2000, insurance companies embarked on a new Commercial Property Insurance plan to cover property. A number of the risks in society due to natural disasters like Hurricane Katrina as well as other catastrophes present valuable lessons on the subject of the practice of acquiring and sustaining proficient insurance coverage in addition to the necessity of suitably approximating insurable ideals for real property assets. Underinsured property, due to impractical insurable value approximation, leaves the owner in an unstable financial condition in case of a loss. Undoubtedly, owners do not purposely underinsure their property, though that is habitually the case. Insureds should realize and have the aptitude to construe their insurance policy since it has a correlation with insurable value when negotiating coverage and not in the event of a loss. Policy exceptions are an extra section where insureds have to be attentive to potential liability. Further common practice in the real estate sector is the inappropriate application of the insurable value approximation carried out as a section of funding or mortgage appraisal as the foundation of a property’s insurable value. Whereas the unsophisticated risk management tools give room for certification, sophisticated tools present a visual expression of risks and are capable of amassing risks into a normal depiction. In cases of Commercial Property Insurance, there are basic legal principles of risk and insurance.

Reference List

Clement, W. R. (2010). Is a Certificate of Commercial Property Insurance a Worthless Document? Probate & Property, 24(3), 46-49.

Gillette, B. (2013). Commercial real estate insurance rates increasing, but property owners can take steps to reduce premiums. The Mississippi Business Journal, 35(10), 17-21.

Gottlieb, S., Florio, N., & Hoffman, T. (2008). Damage control: Covering your assets: Has the commercial real estate industry learned its lesson regarding property insurance and insurable valuables? AACE International Transactions, 11-18. Web.

Rosenberg, J., Portner, M., & Stool, M. (2006). Insurance Industry Woes in the Aftermath of Hurricanes Katrina & Rita. Defense Counsel Journal, 73(2), 141-161.

Tadlock, T. (2002). A look at the ISO commercial property insurance program. American Agent & Broker, 74(5), 42-54. Web.

Introduction

Saudi Arabia is an attractive market for Allianz group to invest, firstly due to the fact that it has huge amount financial resources which can bring up huge profits. In addition to this if attention is given to chalk out such marketing campaigns which focus on increasing the per capita consumption, it could result in even more profits. Allianz group followed joint venture strategy which it pursued in many markets; the firm made alliances with the company to enter into the market. Since Allianz group was not at all short on funds, thus serious thoughts was given to invest directly into the market by setting up offices but this had its own challenges. But, before investing Allianz group considered a number of options of making alliances and distributing just to gauge the response of the target audience; and then if it is encouraging direct investments should be made. It should be observed that most of the firms coming from the other half of the world, commit the blunder of imposing the same marketing ploys and campaigns to the Saudi Arabia market; Allianz group should keep this under consideration and must outsource their marketing activities to some local advertising company.

Brief Company general history

Allianz Fransi was found in 2007 by two companies, Banque Saudi Fransi and Allianz Group as a joint venture. Since then through sound management and nimbleness at seizing opportunities, the Allianz Fransi has grown to a major industry player in Saudi Arabia. Allianz Fransi is involved in offering and has become the leading integrated financial services company in Saudi Arabia.

The Allianz SF and its activities in Saudi Arabia

In Saudi Arabia, the company is involved banking, asset management, and insurance. Its core businesses focus on property and casualty insurance, life and health insurance, and asset management for both corporate and private clients. The company engages insurances for property and casualty insurance for individuals and corporations and this includes motor vehicle, losses to any property, and travel and assistance. Meanwhile, corporate clients are provided with property insurance; motor fleet insurance; directors and officer’s liabilities; corporate credit; and insurance for the marine, transport, aviation industries. In terms health and life insurance, the Allianz Fransi provides private clients with endowments; annuities; term insurance; disability insurance; investment-oriented products; and private health insurance. Consequently, for corporate clients, the company offers group life products and pension product for employees. Through the years, the company had grown by adhering to several management priorities that focus on operating profitability, financial strength, and reduction of complexity and sustainable improvement of its competitive positioning (Allianz SF, 2). These management priorities are discussed as follows (Allianz SF 1):

1. Operating Profitability – continually strengthen operating profitability by pursuing operational excellence and continuous improvement in operational processes and effective implementation of distribution and market management functions;
2. Financial strength – strengthening capital management and group reinsurance program;
3. Reducing complexity – introducing the “target operational model which espouses a uniform organization capable of delivering effective and responsive leadership across global organizational platforms;
4. Sustainable improvement of competitive position – strengthen customer and consumer orientation, as well as maintaining the highest possible level of service quality.

From the table below, the company enjoyed strong sales and net income growth from 2008 to 2009, increasing 5.2 percent. Furthermore, the company posted a positive net income of 4.34 billion, thereby erasing the deficit incurred the previous year. Subsequently, despite the continued global crisis, the company’s retained earnings and soared by 36.3 percent by end of 2009. Previously the company had also suffered from the global financial crisis which weakened its sales and net income during that year. Consequently, the company incurred a negative net income in 2008, while its assets, liabilities, cash resources, retained earnings and total equity also declined.

The Allianz Group Financial Performance,

Source: The Allianz Group Annual Reports 2008 to 2009.

Mode of entry to Saudi Arabia

Expansion in a saturated market is a feat in itself. And an expansion in market that is filled with competitors, this is an even greater feat. Allianz’s expansion into international markets may be described by some as a result of its brilliant marketing strategies, but the fact of the matter is that the brilliant expansion is more of a result of strategic partnerships with local businesses. While others in this regard may have chosen to compete with the experienced and established businesses in new markets, through heavy investment in marketing campaigns and product development; Allianz group sought to make alliance with the Banque Saudi Fransi that is making a joint venture. Allianz SF understood the strategic importance Banque Saudi Fransi had and the manner in which they could allow Allianz’s products and services to infiltrate the market. Allianz SF knew that competing with local companies would be impossible without having the ability to reach the markets with relative speed and cost effectiveness, Allianz made strategic partnerships with Banque Saudi Fransi. The joint venture was designed to provide more profit than the competitors at significantly reduced costs did. Without these agreements with the Banque Saudi Fransi, Allianz Group would not have been able to expand throughout the international market at such a rapid pace.

Saudi Arabia Financial Services Industry

The Saudi Arabia financial sector is considered to be well developed according and is composed commercial banks, finance companies, investment fund companies, insurance companies, and companies trading in the equities markets. The banking sector was dominated by a few commercial banks, one of which is state-owned and one is foreign-owned. The banking sector in Saudi Arabia has been largely concentrated, with two of the largest bank controlling half of the sectors assets, loans and the deposits. Subsequently, a growing niche segment in the Saudi Arabia financial sector is the leasing business. Non-bank financial investment companies typically invested most of their resources in foreign markets, although domestic investments have been increasing in recent years.

The Saudi Arabia Insurance industry is dominated by several large, local insurance firms. These companies are linked with some of the others through complex ownership structures and arrangements. As far as the insurance sector was concerned, the value of insurance premiums generated by insurance companies in the country has been growing. However, the insurance industry in Saudi Arabia has been ascribed as the least active of all the financial sectors existing in the emirate. Essentially, the Saudi Arabia insurance industry has not kept pace with the growth of the insurance industries of other Middle East countries for several reasons and these are:

• The religious views against insurance; and
• The lack of enforcement to require the public to purchase health and life insurance

In the long term, financial experts predict that the Saudi Arabia insurance industry, as well as the other sectors in the financial services industry, will rebound and grow in 2011 due to the following reasons:

• Oil prices are expected to increase, thus expanding the country’s economy and stimulating the insurance, banking, and investment sectors;
• The Saudi Arabia government has a budget surplus. This was a welcome outcome considering that the Saudi Arabia government feared a budget deficit during this period;
• The government is gearing to implement more laws to reform the insurance sector and improve the regulatory structure;

Furthermore, the Saudi Arabia government is committed to promote the tenets of investment which allows investors to invest in:

• Industries except for those related to oil and gas exploration or production;
• Construction, operation, and management of infrastructure enterprises in the field of water, power, drainage, and communications;
• Banks, investment corporations, and foreign exchange companies which the Central Bank of Saudi Arabia agrees to consider incorporating;
• Insurance companies which the Ministry of Commerce and industry agree to incorporate;
• Information technology and software development;
• Hospitals and the pharmaceutical industry;
• Land, sea and transport;
• Tourism, hotels, and entertainment;
• Culture, information, and marketing except for issuance of newspapers and magazines and opening of publishing houses;
• Integrated housing projects and zone developments except for real estate speculation;
• Real estate investment through foreign investor subscription to the Saudi Arabia shareholding companies.

Indeed, since 2008, the Saudi Arabia government had implemented laws that aimed to make the county a more business receptive place to do business.

Problems Faced

Labor

One of the main concerns for a company entering the Saudi market can be seen through the issue of labor. The Saudization policy can be seen as one of the most important that can be mentioned in the light of such policy. In that regard, such policy was actually implemented to decrease the high unemployment rate in the Kingdom of Saudi Arabia.

Job creation was a major problem in the Saudi Arabia, in which the heavy dependency on foreign workers was one of the main characteristic of labor in the country. Accordingly, such characteristic led to that the unemployment rate among Saudis might have reached as high as 32 percent among young workers (Looney). The basis of the Saudization policy was in governing reforms according to which the employment for Saudi nationals would increase, while reducing the reliance on foreign workers. The initiatives governed by such policy included such aspects as banning the employment of foreigners, increasing the employment of Saudi nationals in companies by five percent each year, and increasing the fees on recruiting expatriates (Looney).

The challenges that can be seen from the perspective of Allianz Saudi Fransi Cooperative Insurance Company are mainly related to staffing issues, and the negative impact that such policy might have on FDI. On the one hand, the policy has goals favorable to the Saudi economy, decreasing unemployment rate of Saudi nationals. On the other hand, the side effects of such policy might have a negative impact on the decision of firms to enter the Saudi market. One impact can be seen through the disadvantage such policy puts the foreign company entering the market against foreign competitors, as well as the local ones (Ramady 370). The disadvantages might include the differences in the costs of hiring expatriates and Saudi nationals by foreign firms. Accordingly, tracing the initiatives governed by such policies and their changes, it can be stated that those policies are largely unpredictable with “rules and quotas changing without warning” (Ramady 370).

The Local –Regional Characteristic of the Insurance Market

The nature of the insurance market in Saudi Arabia can be seen among the main challenges before Allianz. First of all, the market itself is characterized by low penetrations rates, where for many Saudis are still not aware of the benefits of insurance and its real nature (Oxford Business Group). The religious views on the insurance is another major aspect that should be considered in terms of the insurance market, for which the compliance with sharia – Islamic laws governing the Saudi society is among the main factors that foreign companies should consider. Accordingly, one of the main notions that should be defined in the context of foreign insurance companies is takaful – sharia compliant insurance. The characteristic of such type of insurance is cooperation and risk sharing. Such cooperative concept is important and emphasized in Saudi insurance, for which the compliance with Islamic precepts is crucial (Oxford Business Group 100). It should be noted that according to such precepts, conventional insurance is considered haram, i.e. against Islamic laws and running contrary to sharia.

The main problem faced by market entrants can be seen in the absence of single sharia oversight board (Oxford Business Group), and the rapid transformations in the regulatory framework related to such market can be pose a challenge for foreign companies entering the market, requiring a cautious approach toward the changing regulations (Kuwait Times). The accompanying challenges derived from such peculiarities of the insurance market can be seen in such aspect as the lack of qualified staff who understands all the difficulties and the technical principles of takaful. However, the main problem for entry can be seen in the lack of awareness with many consumers being not aware of the fact that takaful is religiously acceptable and not haram (Ahmad, Masood and Khan), especially when such service is provided from a foreign company. Such fact can be seen significant to the Muslim world in general, rather than Saudi Arabia. Accordingly, such facts put a foreign entrant to the Saudi insurance market at a disadvantage to local competitors, who already had the first mover advantage. While foreign entrants analyze the results of the changes in the regulatory framework regarding the sharia –compliant insurance, local and regional competitors built dominant positions.

Competition

The environment in insurance market can be characterized with rapid growth. Accordingly, entering the market Allianz already faced competition with dominant position and knowledge of all aspects of sharia compliant insurance. The insurance sector was opened for foreign direct investment in 2003. Considering the fact that conventional insurance was available for over 50 years in the kingdom, with the first national insurance company being approved in 1986, it can be seen that competition was one of the main challenges before Allianz (Jaffer 97). The competition includes major companies with entirely local shareholding participation such as Tawuniya, Malath Insurance, and Wiqayah (Oxford Business Group 100). Additionally, there are other international major players in the market HSBC, as SABB Takaful – Medgulf, AIG, Ace and Bupa (Oxford Business Group).

In 2008, licenses were issued to nearly 2008 insurance companies, with 20 companies being listed on Saudi Arabia’s Stock exchange. Thus, it can be stated that the insurance market was and still competitive at the time of entrance. One of the main competitors in the market can be seen through Tawuniya, previously known as the National Company for Cooperative Insurance (NCCI), which was the only officially licenses insurance company prior to opening the gate for foreign direct investments. Having the first mover advantage, Tawuniya had the time to set up in the kingdom and adjust to the requirements of compliance with the sharia, and having the necessary expertise to operate within such environment. Considering the lack of expertise and the human resources’ crunch in such field, along with the Saudization policy, it can be stated that the competition posed a challenge to Allianz.

Management Style and Workplace Environment

Aside from the specifics of the insurance market, it can be stated that there are challenges of managerial and workplace environment nature. One aspect can be seen through the cultural characteristic of managers in Saudi Arabia. Considering the fact that the Saudization policy obliges foreign companies to employ Saudi nationals, Allianz should expect dealing with the cultural aspects, characteristic of Saudi management. Such aspects might include power distance, which implies the fact that Saudi managers typically would make “decisions auto critically and paternalistically, instead of making them after consulting with subordinates” (Baumann 52).

Other differences can be seen through the distinctions between individualism and the collectivism, characteristic to western and Eastern cultures respectively. Additionally, Islam and the Beduin tradition are stated to be influencing the business culture in Saudi Arabia. One of the aspects can be seen the challenge in both employing women and dealing with them as customers. The segregation in genders that lie within the cultural and religious tradition in Saudi Arabia poses a dilemma for foreign firms. The latter is especially significant considering the fact that Saudi women have an estimated wealth of $11 billion in bank, which makes them potential customers (Power). At the same time, the strict laws in the Kingdom put restrictions on being in women either as customers, women-only are good examples in that matter, and through the employment relations between men and women in the workplace.

Solutions

Pre-entrance Initiatives

One of the main solutions to the aforementioned identified problems can be seen in the formation of a joint venture between Allianz and Banque Saudi Fransi. In order to adapt to the market, it can be stated that the formation of a joint venture can be seen as a suitable solution. First of all, the creation of joint ventures can be seen from the perspective of complying with specific local requirements. Joint ventures in general are viewed as a methods of entry that creating greater synergies which are said to reduce the barriers to entry, bringing about faster access to areas such as “consumer awareness, marker penetration, product design and customer service” (Jaffer 94).

The choice of the partner in the joint venture can be seen of strategic importance, where choosing Banque Saudi Fransi (BSF) is one of the ways the company targeted the challenges identified in entry. Banque Saudi Fransi in itself is a joint stock company affiliated with Credit Agricole Corporate and Investment Bank. The use of the distribution channels of the bank, providing opportunities for the group to penetrate the market. Accordingly, Allianz was following successful examples implemented previously by the same company in other regions as well as successful examples in Saudi Arabia as well. The example in Saudi Arabia can be seen through the formation of the joint ventures between Saudi British Bank and the International Banking Group HSBC. The support of the choice of joint ventures, as a solution applicable specifically to the insurance market, can be seen through the statement of Amine Bentaleb, associate director and portfolio manager at Arqaam Capital. Citing the differences between conventional insurance and takaful, Bentaleb stated that “(Given) the fundamental differences between the two models, there is need for joint ventures and collaboration in a nascent segment where even the regulation is not up to date,” (Kuwait Times).

Another solution can be seen through the way Allianz planned the entrance to the Middle East market, as well as the Muslim market in general. Allianz started targeting the takaful market in Indonesia and Malaysia, obtaining an expertise in countries with large Muslim population, namely Malaysia which began working through takaful operators in other parts of the world. The justification for Indonesia as a choice can be seen through the large Muslim population and the size of the market. Accordingly, among Arab countries, Allianz started from Bahrain. The choice of Bahrain can be justified through the fact that it has similar market conditions, while at the same time functioning as a regional financial centre since 1976, being open to open banks. Saudi Arabia, on the other hand, was opened to foreign direct investments only recently, licensing only majority locally owned institutions. The latter can be added to the fact that “Bahrain has more Islamic financial institutions than any other centre, with twenty-four Islamic banks and eleven Islamic takaful insurance companies, most of which serve the regional rather than the local market” (Wilson 26). Thus, prior to entering the market which was estimated to grow to $ billion, Allianz gained an expertise in takaful and Islamic financial services. In that regard, it should be mentioned that despite voicing the intentions of having a presence in the Middle East the company was already present in the region since 1978, through representative offices (Allianz Allianz in Middle East: Dubai).

Post-entrance Initiatives

In order to maintain compliance with sharia standards prior to establishing a unified board in the country, Allianz established a sharia board, headed by Abdullah Bin Suleiman Al Manea, a member of the Supreme Judiciary Committee of Saudi Arabia. Sheikh Abdullah is a chair member of many financial institutions in Saudi Arabia, where his interpretive opinions serve the company in establishing the legal framework for the insurance operations.

The HR problem can be seen solved through the compliance with the Saudization policy, while at the same time providing training initiatives that invest into the company’s human resources. In that regard, among the company’s goals in the first years of entry, heavy investment in human resources was prioritized, in addition to distribution networks and IT systems (Saudi Fransi Cooperative Insurance Company). The investments into human resources can be seen in supporting training efforts through a wide spectrum of “customer service and technical training courses, backed by Banque Saudi Fransi and Assurances Generales de France -, plus Allianz Group experts” (Allianz “Exciting Entry Opportunities – Big Challenges”). It should be noted that through not only following the Saudization policy, but also through making the majority of the company owned and or operated by Saudi employees, the company improved its position through allying itself with Saudi interests (Rice). The latter can be seen through the way the company increased the proportion of Saudis in the company as well as including more Saudis in the company’s organizational chart.

Alternatives

One of the alternatives available before the company is conducting coaching as a way of developing managerial skills and attributes compatible between the Western and the Saudi staff. Building the expertise in the Islamic insurance filed is as important as building managerial and leadership skills. The latter includes the collaborative decision making as an important point of cultural contention. One of the ways the company can overcome the labor crunch, in addition to the training courses is the cooperation with educational institutions in order to develop the skills necessary in the field of Islamic financial services. It can be assumed that the Saudization policy will follow with more quotas along with increasing the number of Saudi nationals in the working force. Thus, the company might consider preparing specialists in the insurance field through educational institutions, as a part of the HR investment considered by the company. Additionally, training seminars in and insurance workshops and summits, can be beneficial for the exchange of expertise and the development of a unified legal and framework for Islamic insurance.

In what concerns competition, it can be stated that one of the alternative can be seen through increasing the market share of the company through forming alliances with other insurance market participants. In that regard, despite the favorability of the government to the majority owned Saudi companies, there are no restrictions in terms of the foreign investments share in a company. At the same time, the alliance can be formed with fully owned Saudi companies. The list of potential market participants for mergers and acquisitions might include Weqaya Takaful, Malath Insurance, and others. The outlook for the insurance market states that small companies will find it difficult to compete with the major players. Accordingly, considering the fact that the majority of products and services in the insurance market were already established, one of the solutions can be seen through increasing the market share and consolidation.

The focus on the provision of services in the health and the motor insurance, which are considered as fields having growth potential, is a perspective direction. With the company receiving the license for motor coverage, the need for good local knowledge and a good geographical spread can be seen as one of the suggestions that support the consolidation alternative (Oxford Business Group). Although mergers and acquisitions are still uncommon the Saudi Arabia (Ramady), they can be viewed as an option with the legal and operating framework, concerning labor, company, and bankruptcy laws develops.

One of the alternatives that will enable larger market penetration and increasing the awareness of the customer can be seen through adapting some of the aspects of the business model of the company according to the cultural concerns of the Saudi citizens. Developing the trust of the consumer the company might consider rebranding the company in accordance to the established cultural and religious traditions. In that, regard the company can utilize the increase in the female workforce in the kingdom, and segregates workforce to provide services and products to other females in the country. A segregated workforce can be seen among the advantages of local insurance companies, and considering the challenges involved in the gender mix in the work force, such alternative might be seen as a good option for the building trust with consumers.

Analyzing the alternatives, it can be stated that the solutions that company used to tackle the challenges and the problems faced might be seen through the perspective of the time of their implementation. Accordingly, many of the solutions was taken prior to entering the market, considering the fact the company already had an experience in a similar environments, i.e., gulf countries such as Bahrain and United Arab Emirates. Similarly, the same can be said about the expertise in takaful insurance, with the company having already entering Malaysian and Indonesian markets. Nevertheless, some of the problems can be attributed to the dynamic nature of business and changes in policies, trends, etc. Thus, the proposed alternatives shall not be perceived as mutually exclusive to the solutions already implemented by the company.

Main players of the industry

The operational scale of Allianz SF can be compared to a regional player such as A’ayan Leasing and Investment Co. is clearly evident in the huge disparity in revenues, income, and overall financial resources. The Allianz SF may surpass the A’ayan Leasing and Investment Company in terms of financial resources and product diversity; the latter still have several distinct advantages. The company has become well-versed in the political and economic dynamics of the country, as well as the other Arab states. This has proved advantageous particularly in dealing with the Saudi Arabia bureaucracy. Another aspect lies in its strong real insurance capability, which allows the company to seize opportunities in this sector. The Allianz SF is primarily insurance company, and as well do have knowledge in real estate development and construction through asset management activities. Thus the main strengths of the Allianz SF lies in their global, diversified product portfolios, which allow them to spread operating financial risk. Of course, their massive financial resources allow them to invest in lucrative, growing financial markets in anywhere in the world.

Future plans of the company in Saudi Arabia

The above case clearly shows why organizations which seek to merge, acquire, or enter into joint ventures or partnerships, in Saudi Arabia. Saudi Arabia is thus, a country which attracts foreign direct investment because of their receptiveness and their cultural, social, and attitudinal behavior, which is very different from western countries. This just goes to show that culture plays an important role when organizations switch over their operations or merge with local companies abroad. This example also clearly illustrates which country would ideally suit organizations seeking partnership, merger, acquisition, or joint ventures. This study also helps the management understand how important decisions are to be taken (Leontiades, 231).

In addition to this, there are also the sentiments of the organizations involved in the merger, acquisition, joint venture, or partnership to be considered. When an organization makes adjustments to its existing cultural, workers tend to interpret this as being provocative. No organization would like to be looked at as the inferior one to the other, and this could cause friction among the working group in domestic mergers. Efforts may be on to acquire new ideas and machinery to enhance production and quality. The import of such technology or idea may not find favor with the working class of one of the mergers, and this cause considerable damage to production and alliance. Such cultural invasion may be seen as a provocation into their privacy or existing practices which they may seem more productive and operational. In such situations, workers take a rigid stance to block entry of technology or idea that make them insecure and go on the defensive. Therefore, when such decisions have to be made, decision maker(s) must take into consideration these two vital aspects (Dickinson and Ramaseshan, 29).

Implications for future use in Saudi Arabia

There is no doubt that the backbone to any successful business is the attitude and efforts of its workforce. Essentially, all decision-makers will pay a lot of attention to this, and the better the perks are the better will be the performance.

Many organizations, faced with the prospect of global competition have had to downsize their workforce and decentralize their operations to cut production and operational costs. Will this suffice or would the decision-maker think out of his/her hat and propose an alternative to this? As a critical thinker, one should evaluate his/her environment in which the decision-making is mandated and so, if the decision-maker s planning on establishing an effective and supportive workforce, they would obviously focus their attention on answering the following question; what kind of arrangement would help the organization compete in the highly competitive global market? A lot has been read into the advantages of team work and today, just about every organization practices this theory. However, not all teams are equal. There are teams that irritates, the team that one would be reluctant to approach, or that special team that one is excited to associate with. Obviously decision-makers would opt for the third option as this team would be able to support any initiative the management throws at them as a challenge. Shared responsibilities and accomplishments among them bond them together and this is the kind of team that excites the management.

Because of the changing global business environment and challenges associated with this, many organizations have changed the face of their earlier HR practices to accommodate a highly flexible system of work ethics, where employees enjoy a healthy and enjoyable work environment. New employees, more often females than males, are offered the option to work part-time and at home as subcontractors, or consultants, temps and interims.

Pay and rewards are good practices to improve employee performance and increase productivity. The welfare of the employees is also another aspect of healthy factor in motivating personnel to perform.

With so much at stake at their workplace and with so much pressure on the home front, a large number of employees find their frenetic lifestyle far too demanding and seek greater flexibility in their roles and responsibilities. Offering flexible working hours for both men and women is a great idea in this direction. It is estimated that seventy per cent of companies, of which ninety per cent in the public sector, have begun schemes to support their staff balance their work at home and office. This reduces unnecessary burden on their shoulder leading to lack of interest and below par performance at work.

HR policies should promote and inspire confidence, and so any policy that motivates employees would be favorable. Motivation comes from cordial employer-employee relationship, a supportive and encouraging manager-worker relationship, and recognition. Recognition in the form of rewards and promotions will go a long way to instigate hard and dedicated work. This way, employees will strive to support the management’s initiative to achieve their goal. This is another area where decision-makers would have to use their critical thinking. Thus, in order to manage uncertainties, the future of management and organizations would be by taking correct decision-making by engaging in critical thinking and challenging key management assumptions.

Conclusion and recommendation

The company should utilize it strengths to take advantage of economic opportunities in the Saudi Arabia. However, they should also be mindful of their weaknesses and the threats in the environment. The opportunities can be found in tapping promising markets in the recovering real estate and construction sector, and increasing popularity of leasing activities not only in Saudi Arabia, but also in other Gulf states as well. The company’s Arab heritage and strategic partnerships in Islamic financial institutions allow it to better maneuver in bureaucratic circles and customize financial products and services to clients in the entire region. In the medium to long-term, the company can intensify its activities in the equities market since they have already established a credible track record in fund management. However, it is suggested that the company should diversify quickly into other business segments in the Saudi Arabia financial sector such as banking since its financial resources are ample compared to most its competitors. As an influential regional player, the Company’s main strategy should be to strengthen its hold in its core business areas and secure vital market share growth.

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Saudi Fransi Cooperative Insurance Company. The Board of Directors’ Report, 2010. Print.

Wilson, Rodney. “The Development of Islamic Finance in the Gcc”. 2009. The Centre for the Study of Global Governance. Web.

Company brief history

Empire Blue Cross Shield Company is a US-based hospital insurance firm. This insurance firm offers a broad range of insurance products; all in various funding arrangements (Empire Blue Cross Blue Shield Homepage, 2008). Boasting of over 75 years experience in the insurance industry, the company has expanded its activities to cover all market segments.

Throughout its existence, the company has operated a “unique” quality policy differentiated by the following key factors:

• Diverse product portfolios
• Robust employee and member websites
• Use of cutting-edge technologies
• Superior services
• Seamless implementation processes
• Strong and data integrated business partnerships

Problem identification

Before the year 2007, Empire Blue Cross Shield used to apply a fixed co-payment to all insured clients. This meant that whether the insured clients were purchasing prescription drugs, visiting offices or undergoing emergency X-rays, they had to part with the same co-payment figure (estimated at $ 20).

However, things changed in the years succeeding 2007 when the company reviewed its health policy. During this time, the company established a new co-payment plan. This plan required that each insured member’s co-payment was to correspond to the contributions or the policy insured against. This requirement meant that the company had increased its workload since it had a large of clients under its membership. As the insured members continued to frequent offices, hospitals and chemists for various services, the management could not successfully establish the exact co-payment quotations to be paid by each member. At some instance, the insurance firm quoted $ 15 for office visits, $ 10 for emergency services such as, X-rays and $ 8 for prescription drugs. The determination of the exact co-payment proved a difficult challenge for the firm management.

As the management lagged behind in determining the member’s co-payments, most members’ health bills kept on increasing as they kept checking in for their services. A dispute therefore arose when members started complaining about the insurance firm’s delay in settling their health bills. When the situation worsened, some members contemplated withdrawing their membership.

Study of the problem and the chosen measurement tools

Being a survey kind of study, the researcher chose to use conclusive descriptive research approach in carrying out the study. This approach was chosen based on its suitability in answering the; who, what where, when and how questions of any quality assessment research which formed the core questions of the study (Housden, 2008, p.62). The study population consisted of the firm’s insured members in New York. The study area was chosen because being the global headquarters of the giant insurance firm; it emerged as the best location on which the qualitative studies could be carried out and inferences to other locations derived.

The researcher used random sampling technique to select 20 insured clients for interviewing. This technique was preferred since a very large population was to be involved. The technique gave each user an equal chance of being interviewed thus ensuring that objective inferences were made to the study population (StatPac, 2011).

Presentation of results

When the researcher interviewed respondents to establish their levels of satisfaction in the reviewed co-payments, the following table 1 captured their responses. 5 represented highly satisfied while 1 represented less satisfied.

Table 1 capturing respondents’ results on the quality of the new co-payments

Result Analysis

From the two diagrams above, it clearly emerged that the insured members, at Empire Blue Cross Blue Shield, were dissatisfied with the company’s reviewed co-payment scheme. Though most members had high expectations when the plan was reviewed, the same members were ready to express their dissatisfaction with the suitability of the new scheme. Members who had taken multiple medical covers thought that by subscribing the multiple and “split” payments, they were likely to be paying “more” for their services. A good example can be taken of a parent who insured his 8 family members with different covers. To stress that each of the insured members needed to subscribe to the above plan, meant that this parent was making ‘repetitive’ payments for the services. This interpretation was as expressed by these categories of such members.

Beside, “small” contributors were of the view that the system could exploit them especially in instances where they were purchasing prescribed drugs of fewer amounts. They justified their claims by stating that by purchasing drugs of fewer amounts and paying the stated co-payment figures, they were likely to be benefiting the insurance firm by covering part of its costs.

Members also feared that the delayed settlement of health bill could result in their household belongings being auctioned by health institutions to recover their costs. Likewise, they could be restricted from seeking hospital services.

Proposed action plan

The researcher, after presenting and analyzing results, proposed that the insurance firm should revise its adopted structure to cater for the wishes of its insured members. This is so because for many businesses to survive, the customer should always come first. The insurance firm should hire a reputable consultancy firm to carry out studies on the above subject. In carrying out its studies, the consulting firm should start by providing a framework on which it is going to achieve its stated aim and goals.

The researcher proposed interviewing of affected insured members as the best method to be used by the firm in the collection of data. A review of old co-payment articles would also be ideal in this study.

Having collected and analyzed its data, the consultancy firm should present its findings to the insurance firm’s management. The management should then study the report’s findings and recommendations after which they will be in a position to establish a suitable co-payment scheme for its members since in any service business, the customer is the only one who judges quality; and thus will always be right (Fitz-enz, 2000, p.239).

Conclusively, to help assimilate the proposed solution, the researcher proposed that the management should evaluate the performance of the proposed scheme. This was to be attained by subjecting the “new” scheme to measurement variables. For example, the management of the insurance firm could decide to carry out studies to establish the number of new members. Increasing numbers will point to the success of the scheme and thus more improvements to anchor the changes.

References

Empire Blue Cross Blue Shield Homepage. (2008).The Empire difference: Our company.

Fitz-enz, Jac. (2000). The ROI of human capital: measuring the economic value of employee performance. New York: AMACOM.

Housden, M. (2008). CIM coursebook: Marketing information and research. Oxford: Butterworth-Heinemann.

StatPac Inc. (2011). Survey sampling methods.

Why Get Insured?

In 2017 harbor wealth survey stated that 60% of adults in the United Kingdom do not have any form of life insurance. Many people in the UK and worldwide think about saving their loved ones, especially when they have families. Elderly people think about life insurance or what they will bequeath to their family after death.

Nowadays, people get more educated, and even small families and people who work in dangerous fields think about leaving value when they pass away; it also depends on the personality whether they want to add value to their beneficiary after death or not. Ford et al. (2020) note that life insurance is not just a way to protect yourself and your family from financial losses in unforeseen situations but also an opportunity to provide for old age and even earn money. Nevertheless, there is a problem of understanding the need and functions of life insurance among the population, which becomes an obstacle to the registration of such services.

Life Insurance Industry in the UK

The United Kingdom, as one of the world’s largest financial centers, is the leader of the European life insurance industry. According to Rudden (2022), as of 2019, UK life insurance companies had over 70% of the total UK insurance market, providing a wide range of insurance and financial investment products. In 2020, the top three UK life insurers were Legal & General, Aviva, and Scottish Widows (Rudden, 2022). Such growth is associated with the onset of a global pandemic and greater attention to health among the population.

Types of Insurance

There are many types of life insurance policies out there; in this blog post, I will focus on the two main types, whole-life insurance, and term life insurance.

Whole life insurance is insurance that charges higher (premium) payments and its maturity due on death date. On the other hand, Term Life insurance charges lower prices, but it is restricted to a pre-agreed period. Whole life insurance, unlike term insurance, does not end until a person makes constant premium contributions and also offers the same sash value, which can be a source of additional funds. Term life insurance, on the contrary, is concluded for a fixed period, and benefits are paid only if death occurs within this period. This type of insurance does not offer additional cash value.

Whole Life Insurance

Pros

• Death date is the maturity date (no expiry date).
• People are able to borrow against their insurance.
• Can build up cash value depending on the policy and claim date period.
• Tax-free.

Cons

• Higher payments cost.
• Less return if compared with potential investment.
• Benefits will be lower if there is current debt or mortgage.

Term Life Insurance

Direct and Indirect Financing

Nowadays, life insurance is used not only for protection, but for investment and collateral. It has created new debate and much confusion about the effectiveness of dividends and the benefits of indirect recognition versus life insurance with direct recognition.

First, it is necessary to consider the features of each of them. Insurance companies use two different methods to process loanable cash value – direct recognition and indirect recognition. In an indirect recognition company, the rate of return on cash value is completely independent of any borrowing against the cash value. In a direct recognition company, rates of return on loanable cash value are affected both positively and negatively when the cash value is used as collateral.

As part of insurance financing, indirect recognition is the preferred option. Indirect recognition is the most preferred for long-term loans, as it provides more stable, albeit lower margins. As part of life insurance, where interest rates are low and fixed, one does not have to worry about their increase, which makes indirect recognition highly risk tolerable. Additionally, indirect recognition provides faster monetary value growth than the direct variant. At the same time, life insurance offers rather low dividends, which may result in lower margins than expected. Thus, indirect recognition offers the best conditions in the long term, providing better liquidity and minimizing risks. On the other hand, for higher and shorter margins, direct recognition is more suitable, which is irrelevant within life insurance options.

Challenges in the UK Insurance Industry

Life insurance has three causes of problems in the industry, dictated by the three factors described below (3 reasons why the life insurance industry is struggling, n.d.):

New Technologies

Many insurance companies have not implemented technology into their existing ecosystems, so they are losing potential customers. However, filling this gap can help improve both internal and client processes through cost reduction, efficiency gains, simplified management, simpler products, and the ability to assess risk better.

Changing Customer Expectations

The Internet and the transition of businesses to it have led to a change in customer expectations. Customers now expect companies to respond quickly and deliver flawlessly. Clients, especially well-connected urban populations, want information exactly when they need it. They also expect more personalization as companies collect data about their visitors. In addition, people’s financial situations are unique and require unique solutions.

Financial Situation of the Client

The high cost of living is a major barrier, and real incomes have not changed over the past decade. From 2012 to 2017, household debt and unsecured consumer debt increased (Deloitte, n.d.). With such a large portion of income going into debt, it is not surprise that any savings or investment in life insurance falls by the wayside. Finally, people with pre-existing medical conditions must go through the lengthy and painful process of getting insurance. This acts as a huge deterrent.

Based on the above, three strategies can be identified to create new opportunities by extending existing challenges:

• Personalization of every aspect of customer interaction.
• Development of flexible product solutions suitable for complex regulatory and percentage environments.
• Rethinking skills and capabilities.

Opportunities in the UK Insurance Industry

Several trends are encouraging for the life insurance industry in the next decade. According to Deloitte (n.d.), customer demand is at an all-time high. The COVID-19 pandemic has forced people to pay attention to their health and take life risks more seriously. Moreover, the global middle class is expanding, bringing with it higher incomes, growing financial prosperity, and increased risks.

Thus, the life insurance industry faces a key, dual opportunity: the chance to meet the growing needs of customers, returning to profitability and growth. According to Deloitte (n.d.), life insurers can use the described levers below to achieve these goals.

Risks and Decisions

Bernard et al. (2020) provided an industry outlook for the UK life insurance market. The pension risk reduction market is expected to pick up in 2022 and 2023, supported by strong structural demand from corporations to reduce risk on their balance sheets. It is facilitated by the improvement in the level of funding for pension schemes and, consequently, the increase in the number of schemes seeking to reduce risks.

British life insurers continue to be exposed to low-interest rate risk, mainly due to the impact of low-interest rates on their bottom line. They are expected to have limited exposure to rising inflation, due primarily to hedging of inflation-related liabilities and the limited impact of growth in the cost base.

UK life insurers’ investments remain subject to some degree of asset risk affecting sectors struggling post-pandemic. This risk is mitigated by high portfolio diversification, which also means that such risks are usually limited in size. However, insurers’ exposure to credit risk is expected to remain moderate and corporate defaults low and manageable.

Cyber risks are another area of growing concern for regulators, even if life insurers do not directly sign cyber insurance policies. Regulators are certainly paying more attention to this. A study by Ford et al. (2020) shows that most cybersecurity incidents where data and/or systems are potentially compromised are the result of employee actions such as opening phishing emails or insecure data transfers. Thus, much of the work in this area involves working closely with HR peers and organizational consultants to improve safeguards through tougher work practices and staff training.

My View

Life insurance is still a responsible step for every person and has a lot of subjective reasons for and against. As reported by Reassured, insurance companies rate of payout is 97.4% regards to term life insurance, and the percentage goes higher to whole life insurance with a payout rate of 99.99% (Life insurance payout rates: Do life insurance providers pay, n.d.). That sounds protected for risk-averse people, which means they prefer to secure the capital over earning a high return. People who are more prone to risk can invest their capital with the possibility of further earnings. However, in such a case there are no guarantees and mechanisms for risk mitigation – most insured events are still undesirable for clients.

In modern conditions, the life insurance market expects gradual growth. The experience of the pandemic has changed people’s attitudes towards health, and the restrictions associated with the spread of the virus have forced us to rethink the value of life. The main risk in this situation is the instability of the market, as well as rising inflation. The opportunity is greater customer dispute over various types of short-term insurance due to the threat of loss of property and funds. Investment and returns strategies in the industry are also affected by increasing uncertainty, so companies need to take a more informed approach through the integration of data analysis and forecast techniques. To mitigate existing risks, companies should expand the options for providing temporary insurance to minimize long-term losses. The main recommendation for improving the risk management model in the industry is the need for better customer demand research and modification of insurance products in accordance with it.

References

3 reasons why the life insurance industry is struggling (n.d.). SPIXII. Web.

60% of UK adults don’t have any form of life insurance. (2021). Harbour Wealth Limited. Web.

Bernard, P.-I., Ellingrud, K., Godsall, J., Kotanko, B. & Reich, A. (2020). The future of life insurance: Reimagining the industry for the decade ahead. McKinsey & Company. Web.

Deloitte. (n.d.). UK life insurance futures: Growing the retirement opportunity. Deloitte. Web.

Ford, M., Ring, B., & Narker, W. (2020). The UK life insurance market 2019-2020: A snapshot.Wtw. Web.

Life insurance payout rates: Do life insurance providers pay? (n.d.). Reassured. Web.

Rudden, J. (2022). Life insurance industry in the United Kingdom (UK) – statistics & facts. Statista. Web.

The scope of this assignment will be to assess the status of diversity within an organization. This study will show the bottom-line benefits when corporations are diverse. By incorporating diverse management practices, companies achieve greater profitability and productivity. Therefore, an organizational culture that fosters diversity is a key factor in sustained business performance and value creation. Progressive insurers are committed to ensuring that workplace culture and work environment reflect the diversity of employees, clients, and shareholders. The research is dedicated to providing a safe, vibrant, and welcoming place for all employees, regardless of their race, origin, or gender. Progressive insurers welcome people from all backgrounds who want to join in creating value for our company, clients, and communities.

A diversity audit is an evaluation that measures where an organization is, in terms of its change efforts. It can be used to assess the effectiveness of diversity recruiting and retention efforts, measure the value of diversity training, and survey workers about the success of diversity initiatives, such as supplier programs, employee resource groups, and diversity councils (Kaur et al., 2020). Progressive Insurance is one of the leading companies to adopt this practice. Their diversity, equity and inclusion program is a model for others to follow. This audit provides a clear, concise, and metrics-based assessment of their progress in achieving this goal. It is about cultivating inclusive environments for all employees that enable their contributions to company goals through fair, equitable treatment and appreciation.

The diversity audit is designed to be a capstone assignment that measures where an organization is in terms of its change efforts. Diversity audits are evaluations based on qualitative and quantitative information about the status of diversity within the organization (Harvey, 2022). Today, many organizations conduct audits to assess their progress in determining the effectiveness of diversity initiatives, measuring the value of diversity training, and surveying workers about the success of diversity initiatives, such as supplier programs, employee resource groups, and diversity councils. These audits reveal whether a gap exists between what is being done and what the organization should do in terms of diversity and are used as a basis for action planning.

This research on insurance is critical to the outcome of your diversity audit and will provide critical information on where your organization stands, as well as help realize an organization’s progress in diversity. The goal is to be able to assess the status of the current efforts against those needed for a truly diverse culture (Muinde & Prince, 2022). This research paper will investigate multiple stakeholders’ perceptions, such as how diversity affects the quality of services provided to customers, whether it is a legal requirement or an ethical duty for service providers.

An inclusive and diverse workplace is a place where everyone has the opportunity to contribute, both in their immediate roles and across different levels. This is true throughout the organization. With progressive diversity equity and inclusion training, you will learn how critical it is to ensure that diversity policies and practices are implemented throughout the organization, giving everyone an equal opportunity to succeed. Through this program, you will gain insight into how to create an inclusive environment that values the unique contributions of people from different backgrounds and cultures (Kaur et al., 2020). This family of inclusivity tools includes an audit tool to measure the status of diversity at Progressive and includes a diversity planning module to help organizations assess their progress in diversifying the workforce.

Progressive Insurance is committed to conducting comprehensive, high-quality audits that offer practical solutions to business challenges. Our diversity equity and inclusion audit is designed to be a capstone assignment that measures where an organization is in terms of its change efforts. Diversity audits are evaluations based on qualitative and quantitative information about the status of diversity within the organization. Today, many organizations conduct audits to assess their progress in determining the effectiveness of diversity recruiting and retention efforts, measuring the value of diversity training, surveying workers about the success of diversity initiatives, such as supplier programs, employee resource groups, and diversity councils (Rodrik & Stantcheva, 2021). These audits reveal whether a gap exists between what is being done and what the organization should do in terms of diversity and are used as a basis for action planning.

The diversity audit is a tool to measure the current state of cultural inclusion and effectiveness in the workplace. Audits are a critical piece of the change management process, as well as a reflection of an organization’s commitment to diversity and inclusion. A diversity audit is a comprehensive evaluation of the organization’s initiatives for diversity and inclusion. Audits measure progress in developing and implementing diversity programs, monitoring how well these programs are working, reviewing the people organizations have hired due to diversity recruitment and retention efforts – often called outreach – establishing an accurate baseline of what organizations are doing right now, and determining if there are any gaps between what is being done and necessary next steps.

The baseline audit is a tool to assess the current state of diversity in your organization. It reviews the following areas: recruitment, hiring and staffing, inclusion and recruitment efforts, labor unions, leadership development, and succession planning, retention strategies, compensation/benefits, and workplace culture/climate. Progressives use diversity audits to determine the status of diversity within an organization. A diversity audit collects quantitative and qualitative information about how well an organization is involved in building a diverse workforce, as well as whether there is a gap between what it does and what it should do in this area. Progressives use this type of audit when planning to build their outplacement group’s resume database, recruiting new employees, and raising awareness about discrimination.

References

Harvey, P. Carol (2022). Evaluating Diversity Management. Conducting a diversity audit rubrics. Suffolk University.

Kaur, R., Kaur, G., Sahay, U., & Saini, K. (2020). A study of diversity management in different companies and different sectors. International Journal of Advanced Science and Technology, 29(3), 284-303.

Muinde, J. V. S., & Prince, R. J. (2022). A new universalism? Universal health coverage and debates about rights, solidarity and inequality in Kenya. Social Science & Medicine, 115258. Web.

Rodrik, D., & Stantcheva, S. (2021). Fixing capitalism’s good jobs problem. Oxford Review of Economic Policy, 37(4), 824-837. Web.

Three Type of insurance

Insurance firms aim at covering the losses or other adverse events that may hamper a firm’s ability to meet its goals and objectives. Apart from property insurance, there is life insurance; it covers the lives of the insured persons. In essence, the entire concept of insurance deals with the mitigation of risks for better management of future activities.

Risk management, therefore, is the process of identifying, analyzing, assessing, controlling, minimizing or eliminating unacceptable risks to help in apt management of prospective functions. A plan of this nature entails techniques and strategies that recognize and confront the threats directly. Organizations should strive to have operational and effective risk management strategies to assure insurance companies of their commitments to loss prevention and reduction.

Insurance is an important tool for risk management for individuals and businesses. Even though insurance cannot avoid the occurrence of bad things, it has the capability of transferring the financial consequences of the events to an insurance carrier, thus limiting the financial commitments of the insured firms.

The essay discusses three different types of insurance, namely life, travel, and automobile insurance. To enhance the analysis, the discourse identifies different companies in the United Arabs Emirates (UAE) that offer the types above of insurance. Finally, the paper looks at different types of health insurance and analyzes the ethical standpoint of insurance in general.

Life Insurance

Life insurance covers the lives of persons. Here, the insured pays a determined amount of premium, while the insurer offers a lump-sum payment in case the insured dies. This type of insurance has two broad categories – whole life and term insurance. Whole life insurance is calculated to cover the entire life of the insured. In its permanent basis, it entails an investment fund as well as a cover for an insured’s life.

Term insurance has no investment category as in whole life option. In this option, an insured purchases a policy for a specific period with an already determined monthly premium. In the UAE, several firms have come up to offer this type of insurance. Some of the major players in this industry include American Life Insurance Company, Alliance Insurance, Oman Insurance Company, and Abu Dhabi National Insurance Company (ADNIC).

Since its establishment in 1975, OIC, with its headquarter in Dubai has expanded to 15 branches; it remains one of the leading providers of insurance solutions in the UAE. OIC provides varied packages of suitable life insurance policies comprising of endowment insurance; unit-linked plans, critical illness, and term insurance (Life Insurance: Oman Insurance Company, 2014).

The critical illness is a stand-alone product covering 40 key illnesses. The Lifeplus package under critical illness offers the insured the much-required peace of mind for family members, as well as assist in quick recovery from critical illness.

Automobile Insurance

Automobile insurance covers vehicles by meeting costs that are connected with auto accidents. The firms offering this type of insurance determine a certain amount of premiums for vehicle owners on an annual basis such that in case of vehicle damages, the insurance company meets the total costs. Also, this type of insurance assumes the risk of loss that the vehicle may cause to persons in case of accidents.

Just like in other types of insurance, the two parties have to agree on the content of the coverage policy. In this package, there are different coverage touching on medical, liability, and property. OIC, ADNIC, AIG, and Emirates Insurance Co. (RSC) are some of the companies offering this type of insurance in the UAE. Emirates Insurance has divided this type of insurance into three main categories.

Third Party Only (TPO) is a category that covers financial losses incurred by the policyholder’s car on the third party. In a single accident, the company gives coverage of approximately DH 500,000 (Emirates Insurance Co. (PSC): Motor Insurance, 2014). Lastly, Comprehensive Car Insurance insures losses incurred to a third party’s vehicle, as well as damages caused to third parties.

With assets of more than AED 1.5 billion, the company is one of the longest formed insurance firms in the UAE (Emirates Insurance Co. (PSC): Motor Insurance, 2014). This pioneer insurance firm was integrated in 1982 and is listed at the stock market of Abu Dhabi.

Travel Insurance

The last type of insurance is the travel option. This type covers those traveling locally or internationally. Besides, it covers financial losses caused by suppliers while on transit, cancellations of trips, and medical expenses. Just like all other types of insurance, this type tries to cover the costs and decrease the risk incurred in events unexpectedly. Markedly, the cost of insurance varies depending on the conditions of the destination.

For example, when traveling to high-conflict regions or regions prone to bad weather, an insurance company will charge high premiums. AIG and AXA travel insurance offers this type of insurance to travelers. The American International Group, Inc. (AIG), for instance, aims at making travelers feel comfortable and have peace of minds during their journeys. Its comprehensive travel insurance package covers trip cancellation, loss of luggage, and medical expenses (AIG Travel Insurance UAE Plans: Travel Guard Insurance, 2014).

The company’s Travel Guard offers its services worldwide, making it provide a global protection policy, uncomplicated claim procedure, as well as online purchases.

This global insurance firm enjoys a presence in over 130 countries worldwide. AIG has comprehensive policy packages that suit the needs of individuals and businesses. As a way of remaining relevant and gaining a competitive advantage over its competitors in the dynamic market, the company consistently develops new services and products (AIG Travel Insurance UAE Plans: Travel Guard Insurance, 2014).

Type of Health Insurance

According to Money Essentials: Types of health insurance (2014), managed care and indemnity plans are the two forms of health insurance. Under indemnity insurance, the insured has the option to choose the laboratory or hospital she/he needs to receive assistance. However, the insured has to part with Lara ger amount of money for health care services than in the managed care option. This type covers only accidents and illness at an agreed fee.

Managed care, on the other hand, have low costs; it has a preferred provider organization (PPOs), health maintenance organization (HMO), and a point-of-service plan (POS) that helps lower its prices with the specified hospitals, laboratories, and doctors having contracts with the insurance company.

Ethical Standpoint of Insurance

Different ethical issues have come up in the manner insurance firms handle health reports of the insured. Notably, the option of informing family members or not has attracted varied opinions (Fulda & Lykens, 2006). With people viewing insurance as an essential product, a sound financial plan, and a product bought on trust, it is imperative for persons in this industry to maintain customer focus, reduce red tapes, and offer effective leadership in order to maintain the publics’ trust in the industry (Van Wyhe, n.d.).

References

AIG Travel Insurance UAE Plans:Travel Guard Insurance. (2014). Web.

Emirates Insurance Co. (PSC): Motor Insurance. (2014). Web.

Fulda, K. G., & Lykens, K. (2006). Ethical Issues in Predictive Genetic Testing: A Public Health Perspective. Journal of Medical Ethics, 32(3), 143-147.

Life Insurance: Oman Insurance Company. (2014). Web.

Money Essentials: Types of health insurance. (2014). Web.

Van Wyhe, P. (n.d.). Ethics in Insurance. Web.