Analysis of automobile insurance industry

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Insurance is mandatory in the United Kingdom is required. All vehicles must be insured, even if they are not trained and are kept on private land based on measures announced by the Minister of Road Safety. Automobile insurance is purchased for cars, trucks and other vehicles. Its main use is to provide protection against losses incurred as a result of traffic accidents and liability that may be involved in an accident. The insurance certificate or cover note issued by the insurance company constitutes legal evidence that the vehicle specified on the document is ensured. There are many private insurance companies around the United Kingdom that provide insurance services to their customers. Among them, C Direct, a company that is located in Newcastle, England, specializes in selling auto insurance directly to customers. All these companies provide the same services with different pricing policies and consumers to compare prices and prefer those companies that provide services with the correct price.

2: Background:

The C Direct insurance company selling automobile insurance policies direct to customers. This company is working from 6 years in Newcastle England. Fortunately, in the first 5 years, this company have high growth rate because competition was not very tough and the manager had no special performance targets or formal control mechanism. After 5 years, 15 more companies providing insurance services in the same market producing a wave of direct insurance start up. These companies targeted the same customers as C Direct Company. Customers are price sensitive and they compare different companies' offers with the competitors. As these new companies providing low prices to their customers. So in the last twelve months, C Direct company sales have only grown by 3% and the company is beginning to struggle with diminishing profits and also 17% offers are converted into policies. I will use the different tools to solve and highlight the main problems and in the end some recommendation will be provided regarding to the direct sell insurance company

3: Requirements and Problems:

Call centers have fast become one of the most important medium of channels for organizations and their customers to interact. The C Direct insurance company is also using call centre to provide insurance policies to their customers and service its market. 105 employees working in CD call centre in three different shifts during the day time under one manager. First step that attracts customers' interest is advertising and promotion which results in generating enquiries to the CD call centre. It leads to the provision of quotations for personnel car insurance. In order to provide quotation, customers call the CD call centre by a free phone number. CD operators collect the customer's personnel and vehicle information in 17 items and then input the data to the computer terminal during the call and provide quotation in 1 or 2 minutes. Customers pay by credit and receive insurance cover immediately. Customers then receive written confirmation by email about 2 or 3 days after initial contact.

C Direct insurance company faces some problems. The workstation for the staff is small less than one square meter. The boxes are very close together and do not have a proper noise protection. Customers mostly complain about the background noise of five or more colleagues. The numbers of data input errors are high due to proper concentration. Staff were not helpful and do not support upset and angry customers. New entrants enter into the market targeting the same customers with low prices. Company has poor anticipating of demands and market acknowledgment but there are large number of employees which cause the company to pay more salary and its effect on company profit. C Direct Company still has opportunities to make a proper strategy planning to solve these problems and set desire future goals in order to compete in the market.

4: Tools and techniques used to analyze the C Direct insurance company:

According to businessballs (2010 : online) Project management is the discipline of planning, organizing, securing and managing resources to bring about the successful completion of specific engineering project goals and objectives. These tools provide guideline how to solve different problems faced by CD. I have used different management tools and techniques to analyze all the internal and external factors which are listed below:

SWOT Analysis

PESTLE Analysis

BCG Matrix

Mc Kinsey 7's Model

Porter Generic's Strategy

4.1: SWOT Analysis:

SWOT Analysis is a strategic planning technique used to review the internal and external environment in which a company operates and compete. It is a logical tool that study the interaction between the company proposed change and the external Marketplace (QuickMBA, 2010 : Online).

This tool covers four key categorize into internal and external factors such as

Strengths: characteristics or expertise of the company that give it an advantage over others in the market.

Weaknesses: lack of characteristics that place the company at a disadvantage to their competitors.

Opportunities: external factor that give chances to company to make greater sales or profits in the marketplace.

Threats: external elements in the environment that could affect the company progress or business.

C Direct Company already exists in the market having 6 year experience and has high market shares, so it is easy for them to maintain their position. There are some weaknesses that CD needs to cover all these weaknesses so that they compete well in the market. This tool also analyzed the opportunities and threats that a CD company can have in the future. It has opportunities to become the star of the market by targeting new customers. The threats are the new entrants that providing the same service in the same market with low prices. I have applied this tool to determine the strength, weaknesses, opportunities and threats of CD Company shown in the diagram (Figure 1.1). Hence, this tool gives a clear image to the company to know their current market position and strategy require in making the situation better according the market position.

4.2: PESTLE Analysis:

PESTLE Analysis is used to find out the current status and position of an organization in relation to their external environment and current role. They can then be used as a source for future planning and strategic management. There are many factors in the macro environment such as tax changes, new laws, trade barriers, demographic change and government policy changes that will greatly effect the company progress. To analyze these factors company categorize them using PESTEL Analysis (Gillespie, 2007).

It covers seven factors given below.

Political: What are the key political drivers of importance?

Economic: What are the important economic factors?

Social: What are the main shared and cultural aspects?

Technological: What are current technology imperatives, changes and innovations?

Legal: Current and coming legislation affecting the role.

Environmental: What are the environmental considerations, locally and further field?

I have applied this tool on CD to analyze some important factors such as technological, economic and environmental. CD operates their services using call centre but having no web based application. Therefore, it needs to provide services using some web application. Insurance companies play an important role in UK economy and also have better environments for the companies.

4.3: BCG Matrix:

The BCG matrix or also called BCG model relates to marketing. The BCG model is a well known portfolio management tool used to determine what priority should be given to portfolio of business unit. It has two dimensions that are market share and the market growth. Market shares are the current customers and market growth means the attractiveness of company in the market. If company have higher market share or higher market growth, the better it is for the company. I have applied this tool to analyze the following about C Direct insurance company.

To know the current position of C Direct insurance company.

To know the position of the competitors.

How to become the star of the market.

Figure: 1.2

C Direct company have good market share and but low growth rate, therefore, from BCG matrix (shown in Figure: 1.2) I have placed the current position of the CD is in cow. As its competitor come in the market with low price and customers are price sensitive comparing prices offer by different companies. CD has more experience in the market and therefore, has better chance to become the star of the market. As their competitors need more efforts and resources to build their position in the market (Value based management, 2010 : online).

The BCG matrix can help to find a strategy that how to become the star of the market. As all the companies providing the same services to their customers, so CD need to lower their price to achieve the competitors advantage and also invest more in promotion and advertisement. It will improve the current growth rate of the CD and have a better chance to become the star of the market.

4.4: MC KINSEY 7-s Model:

The 7S model can be used in a wide variety of situations where an arrangement view is useful. The basic idea of this model is that there are seven internal aspects of a company that need to be united if it is to be successful. It can help to analyze the following.

Improve the performance of a company.

Check the likely effects of future changes within a company.

Support departments and processes during a joining or attainment.

Determine how best to implement a proposed strategy.

The McKinsey 7S model involves seven interdependent factors which are categorized as hard and soft elements (Value Base Management, 2010 : online).

Hard Elements

Soft Elements




Shared Values




Hard elements are easier to define or identify and management can directly influence them where as soft can be more difficult to describe, and are less tangible. Therefore soft element is as important as hard element for a company to be successful. I have applied this tool to analyze different internal aspects of CD as shown in the diagram.

Share values: What does the company stand for and what it believes in.

Structure: The way in which CD work. One manager and 105 employees.

Strategy: Plan or process to reach the identified goals.

System: The procedure and routine that characterized how the work should be done.

Staff: Number and type of people working with in the company.

Style: Behavior of the manager in achieving organization goals.

Skills: What is the uniqueness of the CD as compared to the competitors?

Using this tool, it is easy for the C Direct insurance company to analyze where are the problem are exist in the working environments and then have to make some strategy to achieve the company goals. For example the staff of the CD is not flexible with their customers. They are reactive and do not show sympathy with their customers. So the staff should be helpful and encourage the upset and angry customers.

4.5: Porter's Generic Strategy:

Porter's Generic strategy is commonly used by firms or organization in order to achieve the competitive advantages. Michel Porter argues that company's strength lies between leadership and differentiation of products or services. There are three basic strategies used in this tool but two strategies are related to C Direct Company. The general structure of the porter generic strategy is as below:

Differentiation Strategy: This strategy means providing products or services with some uniqueness in order to attract more customers even if the prices are high. As all the companies providing the same services to their customers, So Differentiation strategy is not applied on C Direct Company.

Cost leadership: Cost leadership strategy set the price of the products according to the market demand and situation. All other companies provided low price insurance services to their customers as compared to C Direct. Customers are price sensitive and they compare different companies offer. Companies with low price attract more customers. Using this strategy, C Direct Company has to change the price plan strategy in order to compete with other companies and also attract more customers in order to gain profit.

Segmentation strategy: This strategy means to target the specific customers or market either by using cost leadership or differentiation. Using this strategy, C Direct Company needs to target specific customers by keeping the prices low in order to attract large number of customers(Paper4u, 2010: Online).

5: Conclusion:

Automobile insurance is compulsory in the UK and customers are price sensitive because they are comparing company offers different and prefer low prices. So if the CD company provides low prices to gain a competitor. This CD will give a chance to increase their growth rate. Second, if the CD to provide their services 24 / 7 through the development of Web applications for online insurance quotes. This will give you the opportunity to undergo Company C Direct marketing as it has over 5 years experience in the treatment of other customers.

6: Recommendation:

The C Direct company has no future strategic planning and goals and also has some weaknesses that are associated with an organizational structure, personnel and system. I have used various tools and techniques to identify the key problems and how to solve these problems. After analyzing C Direct insurance with different management tools and procedures, I have recommended the following solution for the CD.

The staff should be flexible and show sympathy or understanding to frustrated and angry customer.

As their competitors are providing low price to customers. Therefore, CD Company also provides low price insurance to target new customers and also existing customers.

The current work station is small for 105 employees. So CD needs to provide better workspace with noise protection.

CD provides insurance services using call centre during the day time from 0800 to 2000. CD Company also needs to provide their insurance policies using online web based application 24/7. So customers can easily enter their required information with no input errors.

Need to invest more money on promotion and advertisement on different media because it is the first step to attract customers interest and then to generate enquiries to CD company.