Topic: - Study on identifying the measures adopted by industries to

retain high performance teams in insurance sectors

TERM PAPER

OF

HRM

SUBMITED TO:- SUBMITED BY:-

Ms. Gurneet Kaur Nipun Vij

MBA – 1906

ROLL NO: - RR1906A02

REGD. NO.:- 10903611

INTRODUCTION:

The insurance industry is undergoing unprecedented change. Coming from all directions and at
an ever accelerating pace, these changes are quickly reshaping the entire industry

Most of these paradigm shifts originated in other industries. For years, while other industries
were finding ways to address each market change in order to remain competitive, the insurance
industry, with its heavy regulations, had the luxury of being insulated from true competition. As
those regulations have been lifted, the unrelenting pace of change has produced much confusion
and chaos-as well as many opportunities.

What follows are some of the key paradigm shifts that now are occurring in the insurance
industry.

1. The industry is changing from primarily offering products and services to offering advice. It
now more closely resembles the legal and accounting fields where attorneys and accountants are
trusted advisors. The advantage to this is that people infrequently change their attorneys and
accountants.

2. In the same vein as the above shift, transactions used to be the lifeblood of insurance. Now
relationships have replaced them. A relationship consists of more than a series of transactions. It
has a long-term focus with mutual benefit and a sense of caring. The goal no longer is simply to
sell, or to provide advice. It is to create a relationship with a customer that will last a lifetime.

3. Reacting to and meeting customers' needs used to define customer service. Today, customers
expect their agency to be proactive and to anticipate their needs. This change primarily stems
from other industries that have become proactive and thus have raised the level of all customers'
expectations.

For example, GE, GM, AMEX and Polaroid proactively call thousands of their customers each
week to ask, They have turned complaint centers into profit centers with a 15% to 401% return
on investment (ROI). If these companies-that do not directly interact with their customers-are
calling them, this creates an expectation that their insurance agency, which wants to establish a
long-term relationship, must be proactive also.

4. Cold calling used to be an adequate marketing technique. When customer acquisition costs
were lower, the low sales-hit ratio that accompanies cold calling didn't have as great an impact as
it does today. Capital and acquisition costs have risen, but the sales-hit ratios have stayed about
the same. Consequently, profits have taken a nosedive. A proven sales technique that produces
higher saleshit ratios is needed to remain profitable.
Referrals, a common sales technique in the life insurance business, have become a key to
successfully growing a commercial lines insurance agency. Referrals produce two distinct
benefits: (1) they have the lowest acquisition costs, and (2) they roughly double a salesperson's
sales-hit ratios. This also relates to the changing role of insurance agency-moving from selling
products to offering advice. Attorneys and accountants obtain new business almost exclusively
through referrals. Welcome to the world of advice providers and its source of new business:
referrals.

5. Insurance and banking are the only two industries that still refer to their computer systems as
automation. All other industries refer to them as information technology. This involves more
than semantics. The word selection defines purpose. Insurance agencies have rich databases of
customer information that could be mined to produce exquisitely customized services, but the
opportunity is not even recognized because automation refers to a process, not people.

6. The insurance industry has not been known for seeking the best and the brightest people and
eagerly investing in their education to keep them up to date. What's more, the industry
traditionally has favored people who have worked in insurance their entire career. If they could
learn the basics with on-the job-training and do those tasks adequately, that was the basis for a
career in insurance. With the rapid pace of change that has descended on the insurance industry,
the need for hiring quality people and investing in them has become a necessity.

All employees must be computer literate. Period. Nothing less is an option. The most valuable
employees are those who have worked in other industries and thus can bring fresh ideas, options
and perspectives. An eagerness to embrace and work well with change is a vital ingredient to
thriving in this evolving insurance industry.
Literature Review
Example

Allied World Grows Its Environmental Team

Abstract (Summary)

Prior to joining Allied World, he was Executive Vice President for JCH Environmental
Insurance Brokers (JCH), a division of Crump Insurance Services Inc. Prior to JCH, Mr. Cornell
was Executive Vice President for AIG Environmental. Cautionary Statement Regarding
Forward-Looking Statements Any forward-looking statements made in this press release reflect
our current views with respect to future events and financial performance and are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Global takaful market forecast to surpass US$8.8 billion this year:

Ernst & Young
Abstract (Summary)

The report also draws attention to the governance system. The role of Boards will become
increasingly decisive in steering companies towards recovery. As a result, many operators have
initiated a rigorous review of their strategies and financial plans. Capital generated internally
through profitable operating performance will be critical to maintaining financial stability and
funding growth. "We are entering a new and changing world, where quality of strategy execution
and stronger capital planning are at the top of the management agenda. The industry has certainly
shown resilience during the global financial crises. It's about time that the industry lobbies for
deeper local Islamic capital markets and diversifies its business mix in favor of areas with
sustainable growth potential," adds [Sameer Abdi]. Ernst & Young's Islamic Financial Services
team are deeply involved in assisting many takaful businesses in GCC and international markets
in building a stronger takaful franchise.

Family and medical takaful continues to growCompulsory medical insurance requirements in

Saudi Arabia have contributed to growth in family and medical takaful which, together, are
estimated to bring in 49% of gross contributions in the MENA region. Family takaful is
estimated to provide only 5% of these total contributions. SE Asia is the most highly penetrated
family and medical takaful market bringing in 73% of net contributions in 2008. Contributions
from family takaful in this market are much higher and accounted for 73% of net contributions in
Malaysia in 2008. Both family and medical continue to grow strongly, with the MENA region
following the growth trends witnessed in SE Asia.
Fitch Affirms The Doctors Company Group's Ratings; Outlook Stable

Abstract (Summary)

TDC's ratings are based on above-average underwriting performance and profitability relative to
medical professional liablilty insurer peers, favorable loss reserve levels, strong statutory capital
position, and a highly experienced management team that employs a conservative operating
strategy that is focused on long-term underwriting profitability. Doctors is a California domiciled
reciprocal insurer with operating subsidiaries engaged in medical malpractice insurance.

INB chief sees return to black ink

Abstract (Summary)

Even though its FDIC insurance premiums have risen by another $250,000 in 2010, the
management team believes it can cut noninterest expense this year through strict controls and
continued benefits from cuts last year, when the bank trimmed its employment rolls by nine full-
time equivalent employees.

Fitch Affirms Lincoln National Corp.'s Ratings; Outlook Remains

Negative

Abstract (Summary)

Management's actions include the negotiation of a 10-year $550 million letter of credit (LOC)
that resulted in $400 million of XXX reserve relief, $690 million common stock issuance, $800
million senior note issuances ($300 million of which was raised to pre-fund a $250 million
maturity coming due in the first quarter of 2010), $950 million preferred stock issuance under the
U.S. Treasury's Capital Purchase Program (CPP), sale of Lincoln UK and Delaware, a reduction
of its common stock dividend and other cost savings initiatives. Fitch's ratings on LNC are
supported by the company's longstanding strong competitive position in the life insurance and
annuity market, strong and diverse distribution network, strong management team and
historically solid operating performance.

Sun Life Financial: Planning for the Future

Abstract (Summary)

The Sun Life Financial cases allow students to take a cross-enterprise leadership approach in
examining Sun Life's effort to re-enter the Indian insurance market. Set in March 1999, a vice-
president in Sun Life's international team is looking at international expansion options. In its
domestic market, Sun Life, relative to its peers, has had below average financial performance.
With the domestic insurers demutualizing (i.e. converting from a policy holder-held mutual
company to a public company), Sun Life needs to find avenues of growth. In addition, there are
rumours that the domestic insurance industry will be opened up to competition from the
Canadian banks, whose market capitalization dwarfs that of the insurance industry. The (A) case,
Sun Life Financial: Planning for the Future, product #9B07M045 lays out the macro issues and
describes in general the various insurance markets around the world. The (B) case, Sun Life
Financial: A Potential Indian Life Insurance Joint Venture, product #9B07M046, hones in on
Sun Life's decision to re-enter the Indian insurance market.

Management Matters

Abstract (Summary)

The past 18 months have presented business challenges not seen by the insurance industry in
decades. Yet, operations managers continue to be asked not only to do more with less, but to
sustain and even elevate customer service levels to the point where service differentiates their
companies in the marketplace. The defining elements often are displayed in a model. Good call-
center leadership recognizes the importance of these elements and communicates to staff the
expectations for them. Consider this eight-step process: 1. Share the underlying characteristics. 2.
Summarize each team's current performance and perceptions. 3. Define year-end and ultimate
goals in terms of key measures. 4. Establish achievable interim performance milestones. 5.
Mandate weekly performance reviews. 6. Speak with agents, corporate working partners and
stakeholders in the field. 7. Counsel the performers who've fallen short of the goal. 8. Clearly
communicate any actions taken and the reasons for them to all frontline managers.

A. M. Best Withdraws Ratings of Island Capital Ltd. and Island

Capital (Europe) Ltd.

Abstract (Summary)

The ratings reflect both companies' sufficient risk-adjusted capitalization, proven performance
through market cycles and an orderly transfer of both companies' underwriting and risk
management teams and business platforms to QBE Insurance Corporation (headquartered in
New York, NY) during fourth quarter 2008. [...] both companies have been placed in run off and
are not expected to write any new business.

Headquarters' Overhead Cost Allocation at Korea Auto Insurance Co.

Inc.

Abstract (Summary)

Korea Auto Insurance Co. Inc. (Korea Auto Insurance) incurred both direct and indirect costs.
Direct costs were incurred at branches as they performed sales and operating activities, while
indirect costs were incurred at headquarters as it supported branches through the activities of the
information technology, operating support, investment, marketing and general administrative
teams. Indirect costs accounted for a significant part (41 per cent) of the total costs incurred.
However, they could be neither directly traceable nor logically related to specific sales activities.
Korea Auto Insurance currently allocated indirect costs incurred by headquarters to branches
based on sales revenue. Using the amount of sales revenue as an allocation base for overhead
was not regarded as a reasonable method by the Taejon City branch manager. Branch managers
had complained that the current allocation base was not related to the level of actual benefits they
received from the headquarters. They argued that the allocation process distorted the operating
performances of branches as reflected in the books. The manager of the Taejon branch suggested
that the ABC (activity-based cost) method be applied to solve the problems related to the current
overhead allocation process.

Health Care M&A Feels Feverish, In a Good Way( Allven Davis)

Abstract (Summary)

The odd truth, however, is that dealmakers aren't waiting for clarity on health care reform.
Comforted by the steady performance currently dressing health care balance sheets, acquirers in
the sector are in a relative frenzy compared to other industries. In the first week of October,
alone, The Cortec Group acquired ophthalmic instrument maker Katena Products; Warburg
Pincus's Bausch & Lomb acquired Italy's Tubilux, and the Riverside Co. notched two deals in the
sector, buyouts of FairPay Solutions and Portugal's Crioestaminal. Meanwhile, McGladrey
Capital Markets added Paul Kacik to its managing director ranks, while Jefferies augmented its
health care team with multiple hires in London, Mumbai and Hong Kong.

Riverside's two transactions underscore how wide-ranging the activity has been in the sector.
FairPay is a cost-containment company that helps determine the fair price of health care. Its
services include workers' compensation specialty bill review and auditing and advisory work for
insurance carriers and managed care organizations. Crioestaminal, meanwhile, is a provider of
cryopreservation and isolation of umbilical cord stem cells. The upside for each deal seems
obvious. Cost containment is a core focus of the reform bill, while stem cell preservation, even if
it's in Europe, can only benefit from the [Obama] administration's decision earlier this year to lift
the ban on federal funding for stem cell research.

METHODOLOGY

HIGH PERFORMANCE TEAM IN INSURACE SECTOR

Under constant pressure to improve results and stay competitive, contemporary companies must
seek ways to become more efficient, productive, flexible and innovative. To achieve this, leaner
organizational structures are needed which means that, each employee carries more
responsibility than in the past and is therefore of greater value to the employing organization.
The ways of gaining competitive advantage through focusing on company’s financial, strategic,
and technological capabilities have to be supplemented with organizational capability i.e. the
firm’s ability to manage people to gain competitive advantage. Organizational capability relates
to hiring and retaining competent employees and developing competencies through effective
human resource management practices. High performance work practices provide a number of
important sources of enhanced organizational performance. HR systems have important,
practical impacts on the survival and financial performance of firms, and on the productivity and
quality of work life of the people in them. In an effort to enhance their competitiveness, some
firms have instituted high performance work practices. A substantial amount of research has
been conducted on the relationship between productivity and high performance work practices,
such as the use of valid staffing procedures, organizational cultures that emphasize team
orientation and respect for people, employee involvement in decision making, compensation
linked to firm or worker performance, and training.
Measuring Team Performance

Performance is defined as the record of outcomes produced on a specified job function or

activity during a specified time period. However, appraisals are done once a year and are based
on stereotype, perceptual, and subjective judgments of supervisors which make people believe
performance appraisal process is unsuccessful. Therefore, effective managers need to incorporate
performance review and feedback as part of their day-to-day communications with employees,
not just a once-a-year assessment . Employee performance appraisal has been practiced by
numerous organizations since centuries. Though performance appraisal system has been debated
by many, however, overall, it is viewed that performance appraisal is an inseparable part of
organizational life mentions performance management as a complex problem and it involves
various kinds of judgments about which performance measure to use. Evaluation scores depend
upon these criteria heavily.
Compensation is all forms of financial returns and tangible services and benefits employees
receive as part of an employment relationship. An effective set of choices about compensation
systems plays a major role in determining firm performance. A fringe benefit is an indirect
reward given to an employee or group of employees as a part of organizational membership
which affect performance and retention of employees.
On account of their enormous costs and the financial commitment which is made for the future,
benefits planning has become a critical component of HR planning processes. The application of
skill or competence leads to performance and performance is the criterion for evaluating
effectiveness. Therefore, a pay-for competence program enhances productivity and product
quality, reduces absenteeism, turnover, and accident rates

Measures adopted by industries to retain high performance teams in

insurance sectors.

Strategy 1 - Deploy a High Performance Leadership Strategy

During this session importance of having structures and systems for decision-making; selection
and development of leaders and managers, and reinforcement of values, directions, and
performance expectations will be taught.

Strategy 2 - Common Purpose and Vision Toward the Future

The strategy shows how to align the vision, mission, and values to insure everyone in the
organization is heading in the same direction.

Strategy 3 - Provide Direction and Lead

Leadership is the driving force behind profitability and excellent organizational performance.
Leaders in the organization serve as role models through their ethical behavior and personal
involvement in planning, communications, coaching, and development of future leaders,
organizational performance, and employee recognition.

Strategy 4 - Customer and Market Focus

One of the most important priorities is meeting and exceeding the needs and expectations of
customers. Employees are enabled to satisfy customers on first contact, improve processes, and
raise productivity, leading to improved business results.

Strategy 5 - Create a Charged Environment that Engages the Workforce

This strategy focuses on creating incentives to reward and recognize the workforce and insure
they consistently deliver excellent results. Success depends on valuing each employee's
satisfaction, motivation, well-being, and development. People have a basic human need to feel
appreciated. Recognition programs help meet that need as well as generate behavior in alignment
with organizational goals and standards.

Strategy 6 - Talent Management

Money brings employees through the front door, but bad work environments drive them out the
back. Build a high retention workforce that reduces employee turnover, helps people reach high
levels of productivity, greater employee motivation, and increased sales.

Strategy 7 - Comfortable with Creating Change

The high performance organization is unafraid of change and embraces new innovations and
trends in order to remain competitive. The organization does not maintain status quo; but is
enabled to make meaningful change to improve their programs, services, products, and
processes, and to create new value for the organization's stakeholders.

Strategy 8 - Tear Down Walls and Barriers

To remove barriers that inhibit customer service and cause customers to leave for the
competition. The organization spends time pinpointing and removing barriers, obstacles, and
non-valued work obstructing workflow, communication, and productivity. Individuals are free to
go to anyone in the organization for advice and assistance.

Strategy 9 - Manage Ideas and Innovation

High performing organizations have a system to capture, nurture, and implement the ideas of
their workforce from the bottom to the top. They learn and apply new knowledge, trends, and
create work environments focusing on continuous improvement.

Strategy 10 - Manage Performance and Measure Productivity

High performance organizations manage individual performance and help others reach their
potential. Additionally, they effectively measure, analyze, and review performance data to drive
improvement and organizational competitiveness.

Managing Attrition in Insurance Sector

Hiring from each other is a common practice amongst insurance companies. Employees,
especially in middle and junior levels of the sales function, tend to move amongst insurance
companies. Availability of quality talent is still scarce. The huge demand for talent, and since not
all of this requirement can be met by fresher, companies tend to poach from competitors.

1. The private Insurance Companies aim to syndicate norms for employee movements for the
industry, the way BPO sector has done.

If they would syndicate good management practice, employee movements would

be reduced.
2. The sales staff usually just walks out of the company without following the basic decorum.

Perhaps some sales staffs are mismanaged.

3. They want to create a basic norm which will ensure that when an employee quits, he follows
all the formalities and then only he can join the next company. This way they may be able to
effectively manage attrition and regulate indiscriminate employee movement
Employees move for reasons that are related to how they are managed.

CONCLUSION:-

The insurance industry with its heavy regulations, had the luxury of being insulated
from true competition. A relationship consists of more than a series of transactions.
It has a long-term focus with mutual benefit and a sense of caring. When customer
acquisition costs were lower, the low sales-hit ratio that accompanies cold calling
didn't have as great an impact as it does today. . An eagerness to embrace and work
well with change is a vital ingredient to thriving in this evolving insurance
industry. To achieve this, leaner organizational structures are needed which means
that, each employee carries more responsibility than in the past and is therefore of
greater value to the employing organization. . A substantial amount of research has
been conducted on the relationship between productivity and high performance
work practices. , effective managers need to incorporate performance review and
feedback as part of their day-to-day communications with employees, not just a
once-a-year assessment . Employee performance appraisal has been practiced by
numerous organizations since centuries. . During this session importance of having
structures and systems for decision-making; selection and development of leaders
and managers, and reinforcement of values, directions, and performance
expectations will be taught. Recognition programs help meet that need as well as
generate behavior in alignment with organizational goals and standards. They learn
and apply new knowledge, trends, and create work environments focusing on
continuous improvement. The huge demand for talent, and since not all of this
requirement can be met by fresher, companies tend to poach from competitors.

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