insurance company strategic management

8/10/2019 insurance company strategic management

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North South University

Introduction

Insurance is not a new business in Bangladesh. Almost a century back, during British rule in

India, some insurance companies started transacting business, both life and general, in Bengal.

Insurance business gained momentum in East Pakistan during 1947-1971, when 49 insurance

companies transacted both life and general insurance schemes.

The government of Bangladesh nationalized insurance industry in 1972 by the

Bangladesh Insurance (Nationalization) Order 1972. Through an ordinance passed in 1984

amending the Insurance Act 1938 and the rules under the Insurance Corporations Act 1973, the

initial entrants into the market, including Pragati Insurance Limited (PIL), by the way of their

.professional approach were instrumental in bringing a change and gave the insurance sector a

decent shape and structure. However when subsequent insurance companies entered into the

market, the insurance sector found itself saturated which caused unethical practices and

relentless competition.

Pragati, as being the first generation insurance company in Bangladesh, realized the

problems within the industry at the very outset and were able to commission a very structured

and pragmatic base for managing the affairs of the company.

Company Information

Pragati Insurance Limited was established in 1986. A group of young entrepreneurs of

Bangladesh who had earlier launched a commercial Bank in the private sector sponsored the

company with 30 million taka worth of capital. Sponsors included Shipping Magnets, Engineers,

Road Builders, Top Garment Exporters and Importers.

Equipped with a team of experienced personnel, the company is ever-ready to cater to all the

insurance needs required by people of Bangladesh thus providing protection to personal


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properties and cover unfortunate casualties. Almost all the Multi-nationals working in

Bangladesh are in Pragati Insurance Companys port-folio and they provide them with

international standard services.

The Company looks forward to reaching people through their personalized services as well as

through various media communications. They are ensuring quality services at a competitive price

and promises to be beside anyone as soon as they need

Business Details

Board of Directors

Abdul AwalMintoo - Chairman

Khan Mohd. AmeerVice Chairman

Mohammad A. Awwal - Director

Abdul Monem - Director

Al Haj KhalilurRahman - Director

Syed M. AltafHussain - Director

Md. SyedurRahmanMintoo - Director

Mohammed A. Malek - Director

Md. Sarwar Kamal - Director

TabithMohd. Awal - Director

A.S.M MohiuddinMonem - Director

TafsirMohd. Awal - Director

NigarJahanChowdhury - Director


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Md. MushfiqurRahman - Director

Mrs. NahreenSiddiqua - Director

NasirLatif - Director

AhmedulHoque - Director

A.K.M ShamsuddinIndependent Director

Md. Manirul IslamManaging Director

Type of Business

Pragati Insurance Limited is a Public Limited Companies where shares are bought by public and

are freely transferred.

According to Public Limited Company properties:

1. Stockholders are the owners of the company

2. The stockholders come to a mutual agreement for electing the Board of Directors

3. Management teams are divided into various categories which include Top Management,

Middle Management, and Supervisory Management

Share Capital

The Authorized Share Capital of the Company is20,00,00,000/- (Twenty Crore) ordinary sharesof Tk 10 each and Issued Share Capital of 49,258,325 ordinary shares of Tk 10 each

Formation

The name of the Company is Pragati Insurance Limited.

Incorporation: January 27, 1986

Commencement: January 30, 1986

Listing with Dhaka Stock Exchange (DSE): April 04, 1996

Listing with Chittagong Stock Exchange (CSE): April 06, 1996


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Registered Office:

Pragati Insurance Bhaban

20-21, Kawran Bazar

Dhaka- 1215, Bangladesh

Phone: PABX: 88-02-9133680-2

Fax: 880-2-8122980

www.pragatiinsurance.com

E-mail: [email protected]

Mission and vision statement

Vision: Our vision is to be customers first choice when selecting insurance products and

services offered by the industry and to operated by code of conduct driven by a value system that

promotes performance, integrity and personal growth in all dealings with stakeholders and to

maintain our leading edge in the industry by striving to enhance financial strength and

profitability

Mission:Our mission is to provide innovative and cost effective general insurance solutions to

our clients and an acceptable return to our shareholders through committed and professional staff

New Vision and Mission

Vision

To be the most admired life insurance company by securing the financial future

of our customers

Mission


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We are an honest life insurance company, committed to doing what is

right

We serve our customers through long-term savings, protection and

retirement solutions, delivered by our high quality Agency and Multi Channel Distribution

Partners

We are a business with strong social relevance and contribute to society

by supporting causes in health and well-being

Our Values

Caring :Listens with respect and values differencesActs with compassion

Credibility : Demonstrates knowledge and creates trust in others

Collaborative : Works together to achieve results

Excellence : Pursues highest quality

Products & Services

Pragati Insurance Limited provides a wide array of general insurance services such as the

followings:

Fire Insurance

Fire & Allied Perils Insurance

Motor Insurance

Comprehensive Insurance

Act Liability Insurance

Health & Accident Insurance

Overseas Mediclaim Insurance

Personal Accident Insurance

Peoples Personal Accident Insurance

Health Care & Hospitalization Insurance


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Employees and Customers

Employees:Like most of the organizations, PIL wants its employees to be energetic, visionary,

and talented. Minimum qualification for entry level is an undergraduate degree in the related

field. Job experience is preferable. After selection, the selected candidates have to go through

relevant information about the organizational activities which are shared with them as much as

possible. Plus, PIL puts high emphasis on working in a team oriented environment. So entry

level employees get a sense of belonging in the organization also making them enthusiastic with

their career with PIL.

For the middle level jobs, a minimum of postgraduate degree in related field is required.

Experience plays a primary role for middle and supervisory jobs. So either employees within the

organization are promoted or, if a new individual is given the job, his/her prior job experience is

taken into consideration In the middle level, recognition for job performance serves as a

motivating factor.

Customers:PILs target market is relatively broad since they cover a large portion of the

insurance services. Their services are acquired by various large organizations ranging from

multinational companies, manufacturing industries, aviation companies who needs the services

of fire insurance, marine cargo insurance, general aviation industries,etcand many others while

they also provide smaller services to the general public like motor insurance.

Managerial Analysis

8 Managerial Functions

On 18/08/2013, an interview by several group members was conducted with Syed SehabUllah Al

- Manjur (Assistant Managing Director and Head of Underwriting) of Pragati Insurance Limited.


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According to him the 8 managerial functions are carried out in the company in the following

ways:

PlanningThe prime objective of the organization is to earn a target amount of new insurance

policies on an annual basis, at the same time providing service to the current clients. The target

amount is set based on current market trends and performance of the yester years. According to

Mr. Manjur, any insurance activities begin from his department as he is the head of underwriting

of all insurance policies where they accept risks which are considered consumable in terms of the

financial capabilities. Another task carried out by Mr. Manjurs department is to make

arrangements to achieve current goals and objectives and planning in advance for any unforeseen

occurrences as a failure in one activity affects the whole chain of activities involved in the whole

process

Decision MakingA number of factors, both internal and external, influence the decision

making in the organization. Mr. Manjur says, he needs to check the support of re-insurers every

time he undertakes risk on behalf of his clients. This was one internal factor. He believes external

factors such as law is based on ethics, so both goes hand in hand. As a result it is mandatory for

everyone to always take legal issues in consideration while making a particular decision.

Political unrest is another issue that has to be taken into account as it increases the risks in the

type of business done by PIL. Even after being aware of the risks involved, PIL considers it

mandatory to keep the customers satisfied

OrganizingAll the objectives are set through meetings consisting of senior management

members of PIL. Objectives of the meeting involve the following:

Review weekly performance of the company

Track investment performance of the previous week and provide guidelines

Generate new ideas through brainstorming in relation to business development

and improvement of operational efficiencies

Discuss and resolve problems affecting two or more departments/divisions

Improve coordination among various departments and members of the staff

Review investment of companys surplus fund and company assets


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StaffingMr. Manjur was very straightforward and honest with his thinking about the fact that

hiring procedures are not exercised properly as many of the applicants come through references

from higher ups. But still Mr. Manjur and the respective department for hiring employees

prioritize the necessary qualifications, academic backgrounds, and experience required for thejob.

The hiring process starts from posting of circulars in newspapers and jobsites. CVs are

gathered and sorted by the recruiting team. Qualified applicants are called for written exam out

of which the recruiting process is further narrowed down into a walk in interview with the senior

management

CommunicatingWhen it comes to communication PIL follows the two ways of communication

systems. For upward communication, PIL has an open-door policy where employees of all level(entry and mid) can contact directly with the manager regarding any problems they face while

working.

MotivatingWhen it comes to motivating employees, both the elements of Herzbergs two

factor theory are present. Hygiene factors such as salaries and bonuses along with motivators

such as achievement, recognition and responsibility are there too. Mr. Manjur personally

believes in giving added responsibility to employees to motivate them as it gives them a sense of

belongingness and not only that, it directly contributes to the development of employees.Lunchbreaks, tea breaks, and flexible timing also help in contributing to day to day motivation of

employees.

LeadingMr. Manjur has a democratic approach when it comes to leadership. Decision makings

are mostly team-oriented and on the views of the employees, he takes the most appropriate

decision. Also during the interview, we observed that Mr. Manjur follows values based and

humane oriented leadership styles

ControllingIn PIL, the leaders have the tendency to convert unfavorable outcome into

favorable results at any circumstances. This is the only way they see fit for their organization

given the fact that the environment is ever-changing and full of uncertainties.

Wilsons 12 Managerial Skills


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Based on the interview conducted with Syed SehabUllah Al - Manjur (Assistant Managing

Director and Head of Underwriting) of Pragati Insurance Limited, the company follows the 10 of

the 12 Wilsons managerial skills -

Technical Expertise

Clarification of Goals and Objectives

Problem Solving

Imagination and Creativity

Listening for Insights

Directing and Coaching

Solving Problems as Teams

Coordinating and Cooperating

Standards of Performance

Control of Details

Details on Wilsons Managerial Skills

Technical Expertise

The management uses their educational and past work experiences to understand and

communicate key technical details of the organization. They also use their experiences in

decision making process.

Clarification of Goals and Objectives

Top level management draws blue prints of the tasks required to reach the goals and objectives

for the whole organization. These tasks are then assigned to the middle level managers whose job

is to fulfill the tasks through the employees under their control. Middle level managers are held

accountable for most of the objectives carried out in PIL.

Problem Solving

Employees can contact the manager in terms of any issues related to work.Management solves

each and every problemto develop team collaboration.Thus making their operations smoother

and flexible and leaving no room for any lags.


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Imagination and Creativity

In PIL, carrying out daily tasks involve a constant need to think out of the box to suit the varied

types of problems faced every day. It is the task of management to push employees with their out

of the box thinking to ensure productivity on a daily basis. The management gives assignments

to the employees to ensure creativity.

Listening for Insights

Management closely observes and supervises the employees making sure that their performance

in up to the mark.

Directing and Coaching

Though there is no formal training after the selection of employees, the management ensures that

the skill level of the employees develop as they work along.

Solving Problems as Teams

Management of PIL encourages employees to bring their ideas and helps them to generate their

ideas as well.

Coordinating and Cooperating:

The day to day work in PIL requires a lot of coordination between peers and cooperation at all

levels of the organization to ensure smooth operations.

Standards of Performance

Management keeps pushing themselves to the extreme level to keep their standards of

performance.

Controls of Details

Management over sees the performance of the employees at a close level to ensure work-

standard and objectives.

Skills that are not followed in Pragati Insurance Limited

Energy- A lack of readiness in work was observed in between the managers

which can greatly hamper the cooperation needed in between the colleagues, as a result

decreasing efficiency of the organization as a whole.


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Exerting pressureAlthough PIL can stretch their targets both efficiently and

effectively but it never happens as the managers in PIL do not believe in pressurizing their

employees to reach targets.

SITUATIONAL ANALYSIS

PESTEL ANALYSISPESTEL is an important and useful tool to analyze the strategic situation

for the organization, this tool help organization to anticipate and understand

the growth potential by exploring the potential drivers and barriers that are

external in nature and can have negative or positive impact on the

organizations operations (Kotler 1998). Hence using PESTEL support

organization to set an strategic direction. This tool has particularimportance for the organizations that are operational in more than one

country since each country has different political, economical, social,

technological, environmental and legal influences and implications.

Additionally, having an in depth understanding of PESTEL is critical for an

organization to set its fundamental 4Pof marketing and perhaps their

extension if the organization is falling in service industry.

By doing PESTEL analysis for pragati shall help organization to review its

marketing Ps to customize its communications in various market fromvarious segments point of view since the operation of AXA is based on

several products or segments however having the nature of business

same.


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POLITICAL & LEGALThere are several positive impact on insurance organization and hence

also to Pragati due to increase awareness amongst the people because ofdifferent countries campaigns in particular to travellers due to severe

consequences of travelling without insurance may lead to high expensive

costs on medical treatment out of home.

A mandatory third party car insurance policy by several governments has

pushed people to go and get their insurance done. It Means, more cars on

the road prosperous growth opportunities for the insurance organizations.

As per Speedy (2004), cited at Book rags (n.d.), Data revealed that people

under the age of 40 have made most critical illness claims, which isobviously positive news for the insurance organizations since less cover

claims represents fewer liabilities.

The increase in taxation in various countries shall have a negative impact

on Pragati since the spending of the people would be lowered down since

people would not be willing to pay higher premiums or packages.

TECHNOLOGICAL FACTORSThe emergence and progress in internet has given organizations an

opportunity to have its operational cost lower but information spreading

cost effective and quick due to integrated information and communications

technology.

Consumers currently using internet as a best replacement for yellow pages,

rather more than that since they have no opportunity to compare theofferings of different organizations, sharing the knowledge with the

community, posting their feelings and comments on the blogs. Every thing

is just a click away from the


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Internet has cut out the middle man from the business transactions and

hence helped organization in saving huge amount of money from paying

commission. This has given organization a room to review their prices and

bring them at a lower level for the consumers.

SOCIAL FACTORSThere has been an increased proportion of young drivers in the society is

creating huge opportunity for insurance organizations since young drivers

are more prone to get accidents and there for organization tend to fix high

premium for those young drivers.

Another change in today's society is the increase in the 'racing culture' withlarger emphasis placed on driving faster and better looking cars. Modified

cars are a cheaper alternative to buying a sports car also increasing

insurance costs.

The increase disposable income is resulting in increase in affording second

cars and so being insured on is creating opportunity for insurance

organizations making money.

ECONOMIC FACTORSEarning more money is in the trend which is resulting in large disposable

income hence people are having more tendencies to spend more to live

comfortably and taking advantage of expensive schemes which ultimately

result in getting them insured to be on safer side.

People in the developing are getting better off due to last stage of

recession which shall result in coming back in living in expensive and better

life due to more affordability in shape of clothing, houses, cars etc. Which

ultimately improve the health of people and insurance companies shall be

paying out less on the illnesses.


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Internal Analysis

Strengths and Weaknesses

Strengths

Proactive approach

Senior management embraces and communicates in a proactive approach to assessing risk within

the organization.

Innovation

The management of Pragati Insurance Limited Company believes in innovative, out of the box

thinking so the employees are encouraged to generate new ideas.Management frequently gives

out difficult assignments which require them be out of their comfort zone whichflexes their

tendency to think creative.

Employee support

In the decision making process the management gives certain powers to all level employees in

order to gain employee support in terms of achieving objectives. Employees feel a sense ofbelonging and it motivates them to give best effort. It also increases their commitment to the

company.

Team effort

The management believes in team effort rather than individual effort. So the work is done more

efficiently by the employees working in a team. A team effort enables the company to reach its

objectives most effectively as well as efficiently.

Financial Capacity

The financial status of PIL is very good comparing to the other life insurance companies in

Bangladesh. So this insures a client to depend on this company rather any other company.

Weaknesses


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Vague accountability

Accountability of the management for managing risks is not clearly defined. They should

mention their accountability in the company so that employees and clients can rely on them.

Lacking in term policy

The Pragati Insurance Limited has some lacking in their term policies which confuses the clients.

No formal training

The management does not give the new employees any kind of formal training. They give

informal training which cannot help the employees to be more productive.

Reinsurance

The company largely depends on reinsurance which can sometimes cost them extra risk because

reinsurer may have a greater risk appetite than the insurer.

Biased recruitment process

PIL prefer references while hiring employees rather than qualifications.

Escalation of Commitment

PIL has a tendency to follow one size fit all approach when it come to the controlling functionwhich results in an Escalation of Commitment.

Value chain

The insurance value chain

Product Management

Market analysis


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Product profitability simulation

Customer segmentation/ value analysis

Sales & Distribution

Bancassurance/ distributor process/ activity improvement

SFA planning and implementation

Sales process improvement

New Business Underwriting

Business process improvement

ABC/ value-driven design

Policy administration system selection/ implementation

Business case development

Claims

Leakage

Non-payment of claims review

Claims process improvement

Payments

Payment system implementation

Payment process improvement

Customer Service

CRM


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Call centre improvement

Data driven marketing

Marketing theme for the insurance company

While most small- to mid-market companies cant afford the multi-

million dollar ad budgets from the Madison Avenue agencies, they can

create effective and memorable campaigns leveraging different media

such as:

Online media, including interactive ads and banners on

websites

Print media

Social media

Publicity

Direct mail

Email

Radio

Television

Telemarketing

Events and trade shows

Search engines

Outdoor media

True marketing campaigns are more than just advertisements.

Complex campaigns leverage multiple mediums, use a sequence of


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messages over an extended timeframe, support positioning, define a

brand experience, and handle the campaign fulfillment and selling.

Campaigns can also be simpleusing a single medium, with a single

message and call-to-action. Here are three examples of very simplecampaigns:

Short and long term strategies for the company

Accountability of the management of PIL in terms of managing risk should be specific.

The management should provide some sort of formal training to improve the performance of

their employees.

They should have all the information regarding the reinsurers company so they can avoid extra

risk and premium.

Another big weakness they have is their term policy they should differentiate between

temporary and permanent term policy so that clients can choose the best policy for them.


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Long term

Pragati Insurance Limited is one of the largest insurancecompanies in Bangladesh. It has grown

over the years and has helped to absorb the risks for many organizations both local and

multinational in numerous sectors. We thank our honorable teacher TasnimRezoanaTanim for

assigning us to the field work which gave us the opportunity to work with such a company. Thepeople who we interviewed were very enthusiastic in helping us with this project which greatly

contributed to the fulfillment of this project. Most importantly this assignment has greatly

contributed to our learning as it has given us the opportunity to apply our education in a more

practical approach

Investment Options

We believe to maximize The Power of Diversification, you need access to a wide

range of traditional and nontraditional investment options. Our investment lineup

has grown to over 80 investment options representing 31 money manager firms

and 38 distinct asset class styles.

+ Non BD. Fixed-Income Portfolios

+ BD Equity Portfolios

+ Non-BD Equity Portfolios

+ Alternative Strategies Portfolios

+ Sector Portfolios

+ Asset Allocation/Balanced Portfolios

Please refer to the product prospectus and additional prospectuses, statements

of additional information, and annual and semi-annual reports for the underlying

funds for more detailed information. For additional information and details about

fund availability, see the prospectus. Guarantees, including optional benefits, are

subject to the issuing companys claims-paying ability and do not protect the

value of the variable investment options, which are subject to market risk.

Pragati Life's variable annuity products offer a wide variety of variable investment

options. Each variable investment option invests in a corresponding portfolio of

the Banglaeshi Century Variable Portfolios,


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Third-party trademarks and service marks are the property of their respective

owners.

Investors should carefully consider a variable annuity's risks, charges, limitations,

and expenses, as well as the risks, charges, expenses, and investment goals of

the underlying investment options. This and other information about Pacific Life

are provided in the product and underlying fund prospectuses. These

prospectuses should be read carefully before investing.

Pragati Life refers to Pragati Life Insurance Company and its affiliates, including

Pragati Life & Annuity Company. Insurance products are issued by Pragati Life

Insurance Company in all states except New York and in New York by Pacific

Life & Annuity Company. Product availability and features may vary by state.

Each company is solely responsible for the financial obligations accruing under

the products it issues. Insurance product and rider guarantees, including optionalbenefits and any fixed subaccount crediting rates or annuity payout rates, are

backed by the financial strength and claims-paying ability of the issuing

insurance company and do not protect the value of the variable investment

options. They are not backed by the broker/dealer from which this annuity is

purchased, by the insurance agency from which this annuity is purchased, or any

affiliates of those entities, and none makes any representations or guarantees

regarding the claims-paying ability of the issuing insurance company.

Value Enhancement and profitability of Insurance company Pragati

Value Enhancement

From Spencer Pragati's perspective, our paradigm for value creation

encompasses improving the performance of the target company,

removing excess capacity from an industry, creating market access for

products, acquiring skills or technologies more quickly or at lower costthan they could be built in-house, and picking winners early and helping

them develop their businesses to industry optimum.


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Strategic Initiatives: In many of our investments, the major

source of value creation is our focus on strategic initiatives. Such

initiatives may include new products, deployment of new technology,

acquisitions, disposals, renegotiation of terms from suppliers,outsourcing, rebranding and international expansion.

Financial Structuring: We aim to create the optimal capital

structure for any deal and specifically the right proportion of debt to

equity, thereby ensuring the right balance between capital efficiency and

flexibility to pursue strategic and operational objectives

Operational Improvement: We will collaborate with

management to design a program of operational improvements that can

be made to the business post-investment, as the specific opportunity

allows. We will ensure that management has the necessary resources and

support to deliver on this program. Integrating low cost and efficient

technology to drive value forms one of the main foundations of ourstrategic objectives.

Market Access: We will work with management and various

stakeholders to help identify new market opportunities for products

alongside developing products or brand extensions. We also help

renegotiate existing terms with current distribution channels to extractmore favorable terms for our portfolio companies.


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Reference List

Banglapedia. (n.d) Bangladesh Insurance Company .[Online] Available From

http://www.bankersbd.com/bangladesh-insurance-company.html [Accessed 15th August 2013]

Akram, Md. (2010) Rule Book: Pragati Insurance Limited

Akram, Md. (2012) Annual Report 2012: Pragati Insurance Limited

Cassidy, C.M. and Kreitner, R. (2011) Principles of Management.12th ed. South-Western,

Cengage Learning.

www.businessdictionary.com/

http://www.investorwords.com/

insurance company strategic management

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