SPECIMEN COURSEWORK ASSIGNMENT AND ANSWER

Transcription

1 SPECIMEN COURSEWORK ASSIGNMENT AND ANSWER 990 (Insurance Corporate Management) The following is a specimen coursework assignment question and answer. It provides a guide as to the style and format of coursework questions that will be asked and indicates the depth and breadth of answers sought by examiners. The answer given is not intended to be the definitive answer; well reasoned alternative views will also gain good marks. Before commencing work on an actual coursework assignment, you need to fully familiarise yourself with the following documents: Coursework assessment guidelines and instructions; How to approach coursework assignments; Explaining your results notification. Coursework assignments involve the application of knowledge to work related questions. They require you to explore issues in the workplace relevant to the unit for which you have enrolled. 990 Exemplar 1

2 CONTENTS Specimen Assignment... 3 Specimen Template and Answer Exemplar 2

3 Coursework assignment Submission Rules Before commencing work you need to fully familiarise yourself with the instructions, including: Maximum word limit for assignments (3,200 words) Font type and size to be used in your assignments (Arial size 11pt) Rules relating to referencing third party work Penalties for contravention of the rules relating to plagiarism and collaboration Deadline for submission of coursework assignments Outline of the marking criteria applied by assessors to submitted assignments Important notes Ensure that you have: Answered all parts of the question in sufficient depth Answered the precise question as worded marks will not be awarded for irrelevant material Correctly referenced all sources shown on the reference list in your answer Checked your word count to ensure it is not too low as this might indicate that you are not answering in sufficient depth and will affect the marks allocated for components in the mark grid. A word count that is too high may lead to lack of focus Reread your answer to ensure your description of the context is not too long as marks are only allocated for answering the question Reread your answer to ensure it is logically structured and that you have added value by making sufficient conclusions and recommendations Failure to follow the guidance and instructions could result in you failing this unit Assignment Provide a brief context for either an insurance organisation or a division of an insurance organisation with which you are familiar. For this organisation or division: Explain the strategic planning process. Conduct a political, economic, social and technological analysis (PEST). Based on this, identify and justify three major challenges. Make recommendations to respond to these challenges. 990 Exemplar 3

4 Before commencing work you need to fully familiarise yourself with the 'Candidate coursework assessment guidelines and instructions', which include: Maximum word limit for assignments (3,200 words) Font type and size to be used in your assignments (Arial size 11pt) Rules relating to referencing third party work Penalties for contravention of the rules relating to plagiarism and collaboration Deadline for submission of coursework assignments Outline of the marking criteria applied by assessors to submitted assignments Important notes: Ensure that you have: Answered all parts of the question in sufficient depth Answered the precise question as worded marks will not be awarded for irrelevant material Correctly referenced all sources shown on the reference list in your answer Checked your word count to ensure it is not too low as this might indicate that you are not answering in sufficient depth and will affect the marks allocated for components in the mark grid. A word count that is too high may lead to lack of focus Reread your answer to ensure your description of the context is not too long as marks are only allocated for answering the question Reread your answer to ensure it is logically structured and that you have added value by making sufficient conclusions and recommendations Failure to follow the guidance and instructions could result in you failing this unit Note: You are recommended to discuss your own organisation, or one that is familiar to you. Your answer is confidential to the CII and will not be shared. For this exemplar answer, which is widely publicised, a fictitious company has been chosen so as not to highlight any particular company. To be completed before submission: Word count: 3,185 Start typing your answer here: Context This answer is based on my employer, a UK-based, regional insurance broker engaged in marketing, selling and servicing life and non life products for customers in the small and medium enterprises (SME) and personal lines markets. 990 Exemplar 4

5 The brokerage was formed in 1985, initially trading from a single office, and has expanded both organically and by acquisition to its current size of four offices, each located in a major town, with 55 staff in total. Over the next five years, the brokerage has strategic objectives of increasing revenue by 50%. It intends to open further offices, and make selected acquisitions. The Strategic Planning Process for Our Organisation Our strategic planning process addresses three themes: What is it that we do? Who are our stakeholders? How can we achieve excellence? The key components of the strategic planning process are the establishment of our vision (often a long term aspiration), our mission (a more precise statement of how we can achieve the vision), our values (what is really important to us) and the strategies we can adopt to achieve our goals and objectives. The company has a strategic plan, formulated and agreed at Executive (Board) level, which is based on an annual cycle of review and evaluation to strategically position the business for the next five years. The strategic plan draws on the previous plan and adjusts it by taking into account changes in the external environment, changes in internal capabilities and progress in delivering the current strategic plan. Cole G.A. (2003) defines strategic management as. a process directed by top management, to determine the fundamental aims or goals of the organisation and ensure a range of decisions. The strategic planning process follows a prescribed format which, given the relatively small size of the business and the absence of a dedicated strategic team, is led by the Finance Director. The aim of strategic planning is to ensure that finite resources of the organisation are applied efficiently to maximum effect. After evaluating the various strategic options as provided by the management, with regard to their risks and potential financial returns, the Board approves the company s strategic objectives and then monitors the progress made to achieve these objectives using a balanced scorecard approach. 990 Exemplar 5

6 An essential element of strategic planning is the concurrent analysis of the company s internal and external environments, for example by using a Political/Economic/Social/Technological (PEST) analysis, a strategic planning tool, to assess the external (macro) environment. PEST Analysis Rationale The points under each heading in the analysis have been chosen either because of their importance to the business or because there is evidence to suggest that they will become significant during the next few years. Johnson, Scholes and Whittington (2008) state Key drivers for change are the high impact factors likely to affect significantly the success or failure of strategy. PEST Analysis There are several variants of this strategic planning tool, including PESTLE (a PEST analysis plus legal and environmental issues), but as instructed only a PEST analysis is being provided. 1. Political (i) Government and regulatory issues There is Government and regulatory involvement in insurance products, e.g. compulsory insurances (Employers Liability and motor insurance) and there is particular regulatory involvement given the importance of some products to the lives of individuals, e.g. investment related and long term insurances for individuals (pensions and life assurance). In both instances the aim is to ensure the protection of insureds, consumers and in the case of motor insurance, potential third party claimants. The government also intervenes directly in the UK Insurance Market through schemes, such as Pool Re (a high level compensation fund in respect of terrorism) and Flood Re (a fund in respect of flood risks). Until January 2004, the general insurance broking market was a self regulating industry. However, through key legislation, the government imposed a new regulatory regime initially through the Financial Services Authority and now, through the Financial Conduct Authority (FCA). In addition the Motor Insurers Bureau and other bodies also exert an influence on the insurance market. All of the above means that our operations are subject to widespread and increasing regulatory controls and legislation that must be understood and adhered to. There are 990 Exemplar 6

7 significant costs involved in achieving this, and also potential costs and penalties if we fail to do so. (ii) Coalition government At time of writing (late 2014), the UK Government is a coalition of two political parties. Coalition governments tend to bring a more centralist approach to policy. One party majority government in the UK, by contrast has tended to produce polarised, alternating, policies. Such majority governments have resulted in appreciable changes in direction and policy. Nick Clegg, Deputy Prime Minister, in an interview (Channel ) stressed the need to move away from the here and now and move towards what he describes as...a further horizon the horizon shift... For our organisation, the implication of a coalition government, in particular in longterm policy matters, such as pensions provision and the role of the National Health Service (NHS), are that greater consistency will be achieved allowing our organisation to set longer term strategic objectives and resource allocation. This is because the polarisation of single party policies is often avoided and a centralist policy adopted. (iii) Influencing Government and Business Western Democracies have seen the rise in importance of various pressure groups, consumer power, shareholders, think tanks and single issue campaigners all seeking to influence both governments and businesses. For example the environmentalist lobby on big business energy consumption, climate change campaigners, executive pay activists and protesters against genetically modified crops. 2. Economic The implication for our organisation is that we need to respond where appropriate to the issues that are important to pressure groups and others. This is of particular importance where the issues impact on our clients, for example pharmaceutical companies and energy companies. There may be times when we have to review our client base to determine if it is sensible to retain certain organisations as any financial gain may be out weighed by potential reputational loss. (i) Job growth and unemployment As at October 2014, there is a certain amount of optimism about the Economic recovery. HM Treasury, in Forecast for the UK Economy: A Comparison of Independent Forecasts (March 2014) suggested a significant improvement in UK employment figures and in July 2014 the average UK employment rate was 6% (down 990 Exemplar 7

8 from 7.6% in November 2013). Economic output in the UK, in the first two quarters of 2014, exceeded that of the first two quarters of This means that the UK Economy will have fully recovered from the most prolonged recession in modern times. There are also positive signs regarding Gross Domestic Product (GDP) growth and inflation figures are also lower than expected. Despite this positive outlook in terms of unemployment and GDP, there is still downward pressure on wage and salary levels, and a reduction in overall living standards. Given the reduction in overall living standards and a continuingly uncertain economic climate our personal lines customers are experiencing continuing difficulties with many of them carrying high levels of personal debt. There is still some uncertainty in the economic outlook, as levels of business investment and exports are still weak. Therefore, our business will continue to experience challenges due to the following: Increased claims frequency Particular hardship in some business sectors, for example, construction Greater demand for certain types of insurance Reduced public service provision Skills shortages in some business sectors. (ii) Consumer confidence Due to worry about levels of personal debt, British consumer confidence is still very low at the end of According to the Money Advice Service, 8.8 million people in the UK live with severe financial difficulties. Of that group, 1.5 million (17%) are currently accessing debt advice. If people do not feel confident in the future of the economy they are less likely to make major purchases, such as houses and cars. The effect on our business is that, when individual customers delay investment and purchasing decisions, less insurance coverage will be required due to lower overall 990 Exemplar 8

9 asset values which in turn reduces our commission based income. The Financial Conduct Authority (FCA) has adopted the former Financial Services Authority s (FSA) Client Money and Asset Report, which drew attention to a number of matters in 2010 which still apply. Investment income for all businesses has been reduced, following a sustained period of low interest rates. This may increase the temptation to take greater risks with company assets (potentially including client monies). In addition, the availability of loan capital to purchase business assets is restricted following the banking crisis and the loss of confidence in the banking sector. 3. Social This has two implications for our business. Firstly, we need to be aware of the risks involved in looking after and not risking our own assets that are needed to operate our business and also to ensure that client money is properly protected. Secondly, our strategic planning needs to take account of the fact that finance may be harder to obtain. Servicing the debt will also be harder should we make acquisitions. (i) Demographics The UK workforce is dynamic and constantly evolving. According to a report by Poverty.org.uk, in their Work and Gender section (2013), the UK workforce is now more diverse with a greater percentage of women in work, people working more flexible hours, home working becoming more common and people changing jobs more frequently. There is an increase in the proportion of part time and temporary jobs as a percentage of the total workforce. In addition there is an increase in the number of older workers both as a result of the population ageing and the State Pension age being raised. For example in a recent article it was noted that the spending power of the over 50's is decreasing and their need for advice is increasing. (Pension calculator. 2013). The changes identified above mean an increased likelihood of gaps in employment when people will need to fund their lifestyle through savings. The implication for our business is that we need to look at the provision of life and pension products to fill this potential gap in the market. (ii) UK savings ratio In a blog entitled UK Savings Ratio Economics Help (2013) Tejvan Pettinger defines Household Savings Ratio as The percentage of disposable income that is saved. 990 Exemplar 9

10 The blog is illustrated by a graph showing how the ratio declined from the mid 1990 s up to 2008, as householders spent and borrowed more. However, following the credit crunch, consumers have been more risk averse and are looking to pay off debt and save rather than spend. This has slowed the economic recovery and affects our business in the same way as a reduction in consumer confidence. (iii) Corporate Social Responsibility (CSR) This can be defined as: Whereby business organisations are asked to consider and assume responsibility for the impact of their activities on their stakeholders, for example customers, suppliers, employees, shareholders, communities and the environment in all aspects of their operations. Atkins and Bates (2013). The Oxford Leadership Academy (2012) has stated that CSR should be fully pursued even in these difficult times and their view is that CSR is likely to become mandatory. The implications for our business are that we should design appropriate products and services that will meet the needs of a wide stakeholder base, and encouraging our staff to take part in the wider community through initiatives such as involvement in charitable enterprises, the provision of free advice to schools for example and taking an active participation in community enterprises. 4. Technological (i) Information Technology (IT) Insurance brokers are dependent on IT to ensure their businesses are efficient. They utilise IT in their interaction with clients and insurers. Many systems are fully automated and the business of insurance is data heavy and reliant on accurate information. As per Insurance Age (2010) brokers have to be serious about the use of technology. These IT systems, both hardware and software, are expensive to set up, subject to obsolescence and require specialist skills to maintain. These costs can be prohibitive to small businesses that do not have a large client base over which to spread their costs. 990 Exemplar 10

11 The implications for our business are that we will need to understand the financial costs in the short and medium-term. Any unplanned costs following a major issue with IT could be catastrophic. (ii) Business Communications Although letters, telephone conversations and face-to-face meetings still play an essential role in the conduct of our business, increasing numbers of clients use social media, e mail and telephone to communicate. Financial service organisations therefore need to be available outside normal office hours. We need to ensure that we fully embrace these emerging communications trends and technological developments to ensure we are not left behind by our competitors. (iii) Availability of information Information is becoming increasingly available, often at little or no cost to consumers, suggesting that the traditional role of an intermediary will change as envisaged in the British Insurance Brokers Association manifesto BIBA (2011) which identifies the added value services which an insurance broker will bring to the relationship over and above those that the client can access for themselves. Major Challenges The overall PEST analysis shows that the external environment is complex and a number of further PEST items could have been chosen. Three major challenges which have significant long term implications for our company and are not a business as usual approach are now identified and justified below. They are challenges which will fundamentally alter the business environment and require our strategic thinking and planning to respond accordingly. These major challenges are now discussed: 1. Government influence and provision of services It is clear that, given the cost of some services, the State will cease to provide them. This means individuals will have to take a greater personal responsibility for service provision. 990 Exemplar 11

12 This has important implications, as the respective roles of Government, private organisations and individuals will change across key areas such as education, health and medical services and the provision of income in retirement. Private enterprise, charities, social enterprises and others will provide more and the State less. This provides our company with both a huge challenge and a huge opportunity. We have to work with the Government and other appropriate bodies to increase savings and protection provision for individuals and ensure private sector solutions are available. 2. Corporate Social Responsibility (CSR) CSR has been defined above. The justification as to why it is felt that this is a major challenge for our business is that it is essential that the competing requirements of our diverse stakeholders are reconciled. There is a danger that CSR is narrowly focused by a response to regulatory pressure rather than operating to meet the needs of all stakeholders, including the expectations of both shareholders and our customers. If CSR is not addressed, we are in danger of pursuing a short-term strategy without due regard for long-term growth and prosperity. 3. Information Technology (IT) As identified above, IT is an essential part of our operation. The costs of implementation and operation are high, as would be the implications of an unexpected failure. The challenge facing our business is to balance the need for a system which achieves all we need it to achieve whilst being non prohibitive in terms of its start up and running costs. Recommendations to Address These Challenges Government influence and provision of services We should seek to attain competitive advantage by means of early research of experiences in other relevant countries. The aim is to identify the responses that financial services industries have developed in such countries. We would then, drawing on such overseas experiences, implement appropriate UK solutions having made relevant modifications to suit the local circumstances. This will enable us to keep ahead of inevitable changes in government provision, providing us with an advantage over our competitors. In addition, there appears to be a shift in service provision from central and local government to charities, welfare groups and social enterprises. Our task is to ensure we are engaging with these potential new service providers and ensuring we respond to their specific insurance and 990 Exemplar 12

13 risk needs and requirements. CSR The challenge for us is to place business ethics at the core of our company culture and this may require substantial changes. Ideally such an approach has to be hard wired into the company through values, staff selection and training, culture, process and business relationships. Although there is an overlap with regulatory requirements concerning customers, we need to take a customer focused approach to ensure that we maintain at least as good a CSR performance as our competitors. The key benefits of CSR for businesses have been identified as: Improved financial performance Enhanced image and reputation Increased sales and customer loyalty Increased ability to attract and retain employees Reduced regulatory oversight Easier access to capital. This approach must include improving customer awareness, education and accessibility, whilst ensuring our business dealings and products are transparent. We should exceed regulatory requirements in relation to professional qualifications. IT It is recommended that, in the strategic planning phase, we must clearly identify what we need our systems to do across their whole life time. This involves careful projections and some assumptions, but also an intimate understanding of the operation of our business. If we are wrong at the planning stage, software re writes and new hardware purchases are subsequently more expensive than if they were included in the original specification. It is also tempting to allow IT systems to run the business, rather than choosing an IT system that meets the needs of the business. The key question we need to answer is whether we need a specially designed bespoke system, or if can we find a proven IT system that substantially fits all our present and potential needs. If we choose the latter, we may eliminate a large proportion of the costs associated with development, maintenance and initial teething problems. 990 Exemplar 13

14 A key recommendation for our business is to ensure that IT business continuity and disaster management plans are in place to minimise losses in the event of catastrophic failure. Conclusion The analysis above illustrates the importance of strategic planning and the use of strategic planning tools, to analyse the external environment, determine the key business challenges and make appropriate recommendations to address the challenges. In doing so, this will ensure that we take a long-term view, rather than responding to the immediate, short-term challenges that may affect the day-to-day operation of our business. The external environment is constantly changing. It is therefore important that we keep testing our business strategy against the existing business conditions and are flexible enough to make improvements. A formal PEST review, such as the one illustrated above, is normally conducted on an annual basis. Aligning our strategic objectives with the external environment ensures any competitive advantage can be sustained over the long term. In addition, mistakes can be avoided by doing the right thing and focusing on business activities which are aligned with the external environment. 990 Exemplar 14

15 Reference list Books Atkins, D. and Bates, I. (2011) Advanced Diploma in Insurance: 990 Insurance corporate management, The Chartered Insurance Institute, London, UK. Bensoussan,Babette E. and Fleisher, Craig S. ( 2008) Analysis Without Paralysis, FT Press, New Jersey, USA Cole,G.A.(2003) Strategic Management, Thomson Learning, London, UK Johnson, G. Scholes, K. and Whittington, R. (2008) Exploring Corporate Strategy, Prentice Hall and Financial Times, Harlow, UK. Internet Sites British Insurance Brokers Association [accessed 28 Oct 2014] Channel 4 [28 Oct 2014] Economics Help ratio uk [accessed 28 Oct 2014] Insurance Age the rise broker platform [accessed 28 Oct 2014] Office for National Statistics (ONS) data tables [accessed 28 October 2014] Oxford Leadership and events/articles/csr_article/ [accessed 28 Oct 2014] Pensioncalculator 50s spending powerdecreases need for advice rises/ [accessed 28 Oct 2014] focus%2bon%2baposlongtermapos/ html [accessed 28 Oct 2014] Trading Economics kingdom/consumer confidence [accessed 28 Oct 2014] [accessed 28 Oct 2014] 990 Exemplar 15