History and Growth of Insurance Australia Group
Management refers to the organization and coordination of resources and process with the aim of an achieving a specified objective in business. Management is critical to every business since it is the factor of production that brings control to all human capital, financial capital, and technological capital together to reach the goal (Achier 2017, p.9). Management has different functions that are planning to control, organizing and leading. The paper covers various aspects of management of an Insurance Australia Group with the emphasis on the history of the organization and the corporate strategies that have facilitated the growth of the organization to date. The paper further discusses the environmental analysis of the of IAG using the PESTEL analysis, opportunities and threats of the company, and the organizational culture.
IAG’s was founded in 1920 as the National Roads and Motorists Association (NRMA) begun issuing insurance cover to the members of NSW and the ACT through CGU(Walland 2016,p.13). As a result of the internationalization strategies and the stable government order, the NRMA emerged as the insurance Australia Group incorporating other government offices and other insurers. Since then AIG has grown to become a group insurer that has diversified products across nations such as New Zealand, Thailand and Malaysia, China, many other countries and has a total of 15,000 employees (Tooth 2016, p.11). The IAG’s score lines incorporate home protection, engine vehicle protection, business protection, customer credit protection, item obligation protection, labourer’s remuneration protection and expert hazard protection.
The purpose of the business is to help make the world of customers, employees, shareholders or part of the community a safer place to be by providing insurance and another service such as risk management. The ambition of the company is to be the most admired risk cover in the market segmentation (Lane 2018, p.8). The company’s vision is to deliver a great experience to all stakeholders. The great experience makes all the stakeholders have confidence and feel secure in the hands of IAG, with the assurance that services are delivered in appropriate and urgent ways. This is achieved through the set services standard that shapes the culture. The second vision is to be the best organization to work for by creating exceptional job opportunities for people, and offer excellent leadership, inclusiveness to the employees in every developmental stage. The third vision is to be the most trusted risk cover by all the Australian, through keeping and working on all the promise made in a fair and ethical approach and that is satisfactory to any stakeholder (Radacsi & Hadi 2014, p.356). Lastly is to deliver sustained high performance in every aspect of the business operations, to remain the best in the market.
Corporate Strategy of Insurance Australia Group
IAGs business distributed directly or an indirectly wide variety of personal and commercial insurance products through intermediaries’ connections. The personal insurance products that are directly distributed to customers in Australia are under NRMA insurance, SGIC, RACV, SGIO. (Ulla & Ahmad 2017, p.132)The e-commercial insurances cover CGU Lumley, EFI and Swann brands and also on the enterprise operations support services such as people and culture procurement and supply chain, information technology, both commercial and personal insurance.
Corporate strategy refers to the general scope and direction of a company that shows the ways and various operations take place to achieve the goals and objectives.
Customer-Centric Strategy
The group has tried to be the world-leading customer experience group through diversification of products and services (Hermansyah, Sainsbury & Kras 2017, p.8). In the beginning, the group provided insurance to motors only in Australia, however, have grown to other places such as Asia and China to provide various services to motors, personal and commercial insurance covers through various risk management strategies(Mclntosh et al. 2018,p.19). The group has automated all its customer connection process facilitating quick and timely access to large number of customers across the regions and applies the embedded cognitive and artificial intelligence to understand and anticipate the varied customer’s needs.
Simplification Strategy
The IAG have adopted the simplification strategy in masking the models simple to understand for the customers during the marketing and reduces the cost of the operating model. The group has leveraged the operational partners of the group to optimize the operating model resulting in an increase in the economies of scale across the value chain in various regions (Polypharmacy 2018, p.1).
High Innovation Spirit
The IAG has employees that are agile to innovation and executions skills as a result of the created business and leadership culture. The strong leadership and business culture facilitated the formation of talents and skills based pipeline that has enabled the group to transit through various development stages. Among the current technological approaches of the IAG include the use of electronic signatures. IAG currently applies the electronic signatures to capture the customer’s signatures whenever forms are needed to be signed as it saves postages costs, reduces the number of paper handling and storage and eliminates signature verification need during any transaction. Additionally, the use of digital signature has helped the group in reducing the fraud cases that it faces in the past number of insurance subscribers to various companies, hence reducing the company’s revenue. Threats of new entry of insurance firms tend to reduce the market share of IAG.
Environmental Analysis of Insurance Australia Group
Niche strategy
In the beginning, the group mainly focused on the small group that was motor owners. The group provided members of the NRMA with insurance.
The Five Forces Model Strategy
The five forces model is a strategic analysis that helps companies to understand the profitability of products and services through identification of the strengths and weakness to avoid market failure. The five forces include threats of the new entrants, bargaining power of buyers and suppliers and substitution threats.
The IAG Five Forces
Buyer power- the buyer power entails the efforts of those insured to drive down the interest percentage of the risk covers, as a result of having multiple options to turn too, hence must be offered favorable price. Competitive rivalry posed by potential rivalry such as WoolsWorth Life Insurance companies reduces the revenue collected by the IAG as customers are shared. Entry of substitution programs .such as free health medical on the Aboriginal communities affect the
In the past, the business has been criticised by many organizations, media, and individual over some of the practices such as conflicted remuneration (Puppatz ,Burmeister & Deller 2017) .This resulted to many customers being duped of their cash and some paying more than expected through agents.in most occasion customers found themselves paying different interest and at the end of the day they almost meant the same thing. This resulted in something like a double payment. Therefore most of the consumers had difficulty in understanding the terms and conditions of the payment as they looked almost the same and yet far much different. Most of the agents did not have proper credentials hence a large number of people had difficulty in identifying the authentic IAG staff. As a result, a lot of consumers fell to be preys of the “company’s Staffs.” This was resolved through proper training of the employees, hiring and firing of the employees in favour of the customer, and change of the policies that differentiated every risk and categories (Jandaghi & Hosseini 2015, p.36). The differentiation of the risk resulted in clarity, making more customers to subscribe to the group.
Another example of the critics is when the New Zealand IAG registers amazing revenue at the end of the year 2013. The insurance profit was about 12% that translated to $132 million the company was critiqued as aiming so much on profit more than the customer’s needs. The critics were strong has it resulted to some of the customers quitting reducing the revenue collection. The brand image was also on the verge of being affected as the part of the public thought that the group was out to milk resources from them against their purpose of providing as a safer world to be. These claims were addressed by various methods such as the rebranding of the group image and logo that aimed at engaging customers and reflected the group’s future aspirations. IAG embarked on the community development and project participation order to recapture the lost trust among part of the customers (Health Fund Update 2017, p.170). The mangers speech to the customer, members, and the community also assured them of the unwavering goal of safety provision and counteracted the claims. The manager said that for efficient, healthy and satisfactory services from the group, then there is a need for stable financial ability so that all the services sought can be provided without any financial constraint.
Organizational Culture and Vision of Insurance Australia Group
Ecological examination alludes to the key apparatus that is utilized to process distinguish all the outside and inward components that influence the execution of the association. The investigation covers the appraisal of the business activities that favours fitting basic leadership with respect to the ecological impacts. These ecological impacts can be investigated utilizing numerous devices, PESTEL being the significant apparatus.
PESTEL Analysis
PESTEL is an abbreviation of political factors, economic factors, social factors, technological factors, legal factors and environmental factors (Balasopoulou et al.2016). According to the PESTEL analysis, the environmental factors such as the climatic changes affect the operations of the business and IAG is not an exception; however, the adverse condition affects the business more positively than negatively.
Adverse Weather
Adverse weather conditions tend to increase the pay-outs of the company, as the heavy rain, floods, earthquakes, and storms affect subscriber’s properties, which in turn increase the percentage of their subscriptions. At the end of such adverse periods, the company tends to depart with a considerable amount of compensation that eventually leads to a higher subscription from more people and increased engagement. The adverse weather conditions also at times affect the revenue collection of the IAG since the insured properties are always destroyed reducing the abilities of the members to look for money for the monthly fee payments, resulting into default action of the members(Ellinas, Allan & Johansson 2017,p.13).
Compensation
The insurance company always tend to compensate a large number of people who have been affected by the adverse weather change, hence reducing the net profit of the company. Consequently, the company to has also insured itself against whether damages caused by weather conditioned as the changes directly affect the operations of the business through creating inaccessibility to customers due to bad roads.
Main opportunities and threats of IAG
The opportunities’ and the threats of organizations are determined through a method known as SWOT analysis, an abbreviation of strengths, weakness, opportunities and threats, a strategic process that takes into account the internal and external factors influencing the operations of the business(Ahmadi, Dileepan & Wheatley 2016). The swot analysis of the opportunities and threats determine the possible chances for the business to expand and succeed and the impending or available negative forces that affect the success of the business.
Opportunities
The available opportunities include: the company has a better opportunity of improving the financial capability after the positive economic uptick by capturing new clients. The recession’s years in Australia affected the customer spending rate that translated to slow growth rate of the IAG Company.
Products and Services Offered by Insurance Australia Group
New Technologies
The new technologies such as the e-signature provide the IAG with a better opportunity of improving the customer experience since the technology reduces time, paperwork and fraud cases caused by criminals forging signatures to claim other clients insurance cover(Terech 2018).Through internationalization, the IAG is capable of diluting the competitor’s effect hence increasing their competitive advantage.
Green Drive from the Government
The move by the Australian government to have the green drive provides IAG with procurement opportunity, and finally, the decreasing transportation cost as a result of the shipping prices tends to lower down the insurance cost charged by the IAG hence profitability is passed to the customer leading to larger market share.
Stable Cash Flow
The availability of the stable free cash provides an investment opportunity in adjacent products segment, new technologies and development thus opening more windows for the insurance Australia group to invest or to provide cover.
Threats
The possible threats include-the seasonal demands of profitable products that are always uncertain in the peak seasons affect the revenue collection of the company. The liability law and the shortage of skilled employees in the global nations affect the steady growth of the company as many unnecessary expenses are incurred. The growing threats from the upcoming competitors in Australia, New Zealand, and any other investment area tend to reduce the amount of revenue collection of IAG. Another possible threat is the rising pay level such as on the movement of $ 15 per hour tends to increase the prices in China that might lead to higher pressure on the profitability of insurance Australia Group limited.
Organizational culture Organizational culture refers to the unified behaviour, values that determine psychological, social and environmental relationship in organizations. These unwritten and written rules always determine the organization determined it activities and treats employees, shareholders and the entire community. Organization culture in most cases is always affected by the community or the employee’s culture (Puppatz, Burmeister & Deller 2017, p.46)). IAG has a well-built culture that has facilitated the success of the business over the years; The Company has a common spirit of working together to provide maximum customer experience. The strong togetherness spirit is built on the closeness, braveness, and activeness to all the stakeholders by showing care and love to everyone around. The braveness ensures that all the employees are capable of thinking big and stand what is right irrespective of the position of the majority. This motivation always makes each employee foresee world as an inspiration where to play a role and the world shaper. The activeness builds each employee to be striving for perfection and doing what is possible in the shoe time possible. This makes the group attend to every urgent need of the customers.
Conclusion
Every successful organization today made tremendous steps applying various strategies and practices that either boosted or led to numerous challenges. IAG developed from a single entity that only offered insurance cover to the motor in Australia, and has developed into being a diversified international organization in countries such as China, New Zealand and Malaysia. The company used different strategies and practices that were criticised by the public. However, that did not deter them from growing an organization with a strong culture, of helping out every stakeholder.
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