Stakeholder management as a driver of corporate performance in the insurance industry International Insurance Society, 41s...
<ul><li>Defining stakeholder management </li></ul><ul><li>Stakeholder management in insurance </li></ul><ul><li>Stakeholde...
<ul><li>Managing the relationships of a corporation with relevant constituencies in its industry, political, social, econo...
<ul><li>Defining stakeholder management </li></ul><ul><li>Stakeholder management in insurance </li></ul><ul><li>Stakeholde...
<ul><li>As from the 1990s: Increasing relevance of the concept in insurance </li></ul><ul><li>Deregulation of terms and co...
The insurance industry ’ s key stakeholders Insurance Company Policyholders  Investors Source:  Schanz Brokers Investors E...
<ul><li>More recent drivers of stakeholder management in insurance: </li></ul><ul><li>Low investment yields </li></ul><ul>...
<ul><li>Defining stakeholder management </li></ul><ul><li>Stakeholder management in insurance </li></ul><ul><li>Stakeholde...
<ul><li>Our main proposition: </li></ul><ul><li>A corporation’s ability to establish favourable interactions with a multit...
Main corporate value drivers Business  Environment Corporate Value Corporate Strategic Positioning Reputation Reputation R...
Shaping the business environment   <ul><li>Political Environment </li></ul><ul><li>Changes in regulation/ </li></ul><ul><l...
<ul><li>The “Balanced Scorecard” offers an attractive approach for measuring the </li></ul><ul><li>effectiveness of stakeh...
A typical Insurer’s Balanced Scorecard Strategy Map Shareholder Value Customer Value Internal Processes  Human Resources P...
<ul><li>The capability of a firm to create and sustain competitive advantage depends on the competitive effectiveness of i...
Competitive advantage is determined by the corporate value chain Claims & Liability Manage- ment Product Design & Develop-...
<ul><li>Main sources of competitive advantage (according to Michael Porter) </li></ul><ul><li>Cost leadership </li></ul><u...
<ul><li>Stakeholder management can support both competitive strategies  (cost leadership and differentiation)  by “lubrica...
<ul><li>Defining stakeholder management </li></ul><ul><li>Stakeholder management in insurance </li></ul><ul><li>Stakeholde...
<ul><li>In order to maximize the benefits from stakeholder management an  integrated stakeholder communication approach  s...
Integrated messaging for an insurance company <ul><li>Industry Context </li></ul><ul><li>Competition </li></ul><ul><li>Reg...
<ul><li>Benefits from aligning strategy development and stakeholder management </li></ul><ul><li>Effectively influencing k...
<ul><li>Stakeholder management in insurance has rapidly gained in importance due to seismic changes to the sector’s busine...
Dr. Kai-Uwe Schanz Chief Communication &  Corporate Development Officer [email_address] Phone: +41 (0) 44 639 90 35 Fax: +...
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  1. 1. Stakeholder management as a driver of corporate performance in the insurance industry International Insurance Society, 41st Annual Seminar, Hong Kong, July 10-13, 2005
  2. 2. <ul><li>Defining stakeholder management </li></ul><ul><li>Stakeholder management in insurance </li></ul><ul><li>Stakeholder management as a driver of corporate performance </li></ul><ul><li>Conclusions from a practitioner’s point of view </li></ul>Agenda
  3. 3. <ul><li>Managing the relationships of a corporation with relevant constituencies in its industry, political, social, economic and legal environment </li></ul><ul><li>Roots of the concept go back to the 1950s: </li></ul><ul><li>“ Customers, employees, the community, and stockholders are the four parties to any business. (…) If the other three parties are properly taken care of, the stockholder will benefit in the long pull” </li></ul><ul><li>General Robert E. Wood, 1950, then CEO of Sears </li></ul><ul><li>Stakeholders contribute to the wealth-creating capacity of a corporation and are, therefore, its potential beneficiaries and/or risk bearers </li></ul>Defining stakeholder management
  4. 4. <ul><li>Defining stakeholder management </li></ul><ul><li>Stakeholder management in insurance </li></ul><ul><li>Stakeholder management as a driver of corporate performance </li></ul><ul><li>Conclusions from a practitioner’s point of view </li></ul>Agenda
  5. 5. <ul><li>As from the 1990s: Increasing relevance of the concept in insurance </li></ul><ul><li>Deregulation of terms and conditions </li></ul><ul><li>Liberalization of market access </li></ul><ul><li>Privatization of state-owned insurers </li></ul>Stakeholder management in insurance
  6. 6. The insurance industry ’ s key stakeholders Insurance Company Policyholders Investors Source: Schanz Brokers Investors Employees Governments Alliance Partners Rating Agencies Supervisory Authorities
  7. 7. <ul><li>More recent drivers of stakeholder management in insurance: </li></ul><ul><li>Low investment yields </li></ul><ul><li>Surging insured catastrophe losses </li></ul><ul><li>Liability claims inflation </li></ul><ul><li>Regulatory reforms and investigative pressures </li></ul>Stakeholder management in insurance (cont’d)
  8. 8. <ul><li>Defining stakeholder management </li></ul><ul><li>Stakeholder management in insurance </li></ul><ul><li>Stakeholder management as a driver of corporate performance </li></ul><ul><li>Conclusions from a practitioner’s point of view </li></ul>Agenda
  9. 9. <ul><li>Our main proposition: </li></ul><ul><li>A corporation’s ability to establish favourable interactions with a multitude of stakeholders enhances corporate value drivers and is a necessary condition for maximizing shareholder value. </li></ul>Stakeholder management as a driver of corporate performance
  10. 10. Main corporate value drivers Business Environment Corporate Value Corporate Strategic Positioning Reputation Reputation Reputation Reputation
  11. 11. Shaping the business environment <ul><li>Political Environment </li></ul><ul><li>Changes in regulation/ </li></ul><ul><li>legislation </li></ul><ul><li>Changing role of governments </li></ul><ul><li>Antitrust regulations </li></ul><ul><li>Social Environment </li></ul><ul><li>Demographic changes </li></ul><ul><li>Shifting attitudes towards </li></ul><ul><li>risk </li></ul><ul><li>Economic Environment </li></ul><ul><li>GDP, inflation, interest rates, </li></ul><ul><li>stock markets </li></ul><ul><li>Growing complexity/inter- dependence of economic </li></ul><ul><li>environment </li></ul><ul><li>Technological Environment </li></ul><ul><li>New technologies, e.g. </li></ul><ul><li>nanotechnology </li></ul><ul><li>Declining cost of </li></ul><ul><li>communication/information </li></ul><ul><li>technology </li></ul>Industry Environment <ul><li>Suppliers/Intermediaries </li></ul><ul><li>Consolidation </li></ul><ul><li>Disintermediation </li></ul><ul><li>Vertical integration </li></ul><ul><li>Customers </li></ul><ul><li>New distribution channels </li></ul><ul><li>Changing insurance needs </li></ul><ul><li>Emergence of substitutes </li></ul><ul><li>Competitors </li></ul><ul><li>Consolidation </li></ul><ul><li>New entrants (banks, capital markets) </li></ul><ul><li>Internationalization/Globalization </li></ul>Insurance Corporation
  12. 12. <ul><li>The “Balanced Scorecard” offers an attractive approach for measuring the </li></ul><ul><li>effectiveness of stakeholder management: </li></ul><ul><li>Financial perspective </li></ul><ul><li>Customer’s perspective </li></ul><ul><li>Internal perspective </li></ul><ul><li>Learning perspective </li></ul>Enhancing the firm’s strategic positioning
  13. 13. A typical Insurer’s Balanced Scorecard Strategy Map Shareholder Value Customer Value Internal Processes Human Resources Premium Growth Underwriting Profitability Cost Efficiency Price Capital Efficiency Investment Returns Terms & Conditions Services Quality of Relationships Brand Reputation Client Relationship Management Process Innovation Capability Underwriting Process Business Process Underwriting Skills Marketing Skills Financial Skills Claims Manage- ment Skills Financial Perspective Customer Perspective Internal Perspective Learning & Growth Perspective Source: Kaplan/Norton (2001), amended by Schanz
  14. 14. <ul><li>The capability of a firm to create and sustain competitive advantage depends on the competitive effectiveness of its value chain </li></ul><ul><li>The competitiveness of the value chain, in turn, is heavily influenced by the firm’s relationships with clients, shareholders, employees and other stakeholders </li></ul>Stakeholder management helps create and sustain competitive advantage
  15. 15. Competitive advantage is determined by the corporate value chain Claims & Liability Manage- ment Product Design & Develop- ment Marketing Under- writing Distri- bution Policy Admini- stration Asset & Liability Manage- ment Source: Schanz
  16. 16. <ul><li>Main sources of competitive advantage (according to Michael Porter) </li></ul><ul><li>Cost leadership </li></ul><ul><li>Controlling cost drivers </li></ul><ul><li>Reconfiguring the value chain </li></ul>Two fundamental strategies for competitive advantage or <ul><li>Differentiation </li></ul><ul><li>Supplier linkages </li></ul><ul><li>Channel linkages </li></ul><ul><li>Institutional factors </li></ul>
  17. 17. <ul><li>Stakeholder management can support both competitive strategies (cost leadership and differentiation) by “lubricating” the value chain! </li></ul>Stakeholder management as a source of competitive advantage (cont’d)
  18. 18. <ul><li>Defining stakeholder management </li></ul><ul><li>Stakeholder management in insurance </li></ul><ul><li>Stakeholder management as a driver of corporate performance </li></ul><ul><li>Conclusions from a practitioner’s point of view </li></ul>Agenda
  19. 19. <ul><li>In order to maximize the benefits from stakeholder management an integrated stakeholder communication approach should be adopted by the insurance industry </li></ul><ul><li>Stakeholder management activities should be fully aligned with strategic corporate goals </li></ul>Conclusions
  20. 20. Integrated messaging for an insurance company <ul><li>Industry Context </li></ul><ul><li>Competition </li></ul><ul><li>Regulation </li></ul><ul><li>Legislation </li></ul><ul><li>Economic Development </li></ul><ul><li>Social Trends </li></ul><ul><li>Technological Trends </li></ul><ul><li> </li></ul><ul><li>Corporate Strategy </li></ul><ul><li>Vision </li></ul><ul><li>Mission </li></ul><ul><li>Strategic Objectives </li></ul><ul><li>Financial Performance </li></ul><ul><li>Operating/Net income </li></ul><ul><li>Premium growth </li></ul><ul><li>Combined ratio/operating margin </li></ul><ul><li>Investment income yield </li></ul><ul><li>Shareholder’s equity </li></ul><ul><li>Return on equity </li></ul><ul><li>Cash flows </li></ul>Source: Schanz
  21. 21. <ul><li>Benefits from aligning strategy development and stakeholder management </li></ul><ul><li>Effectively influencing key parameters of corporate strategizing </li></ul><ul><ul><li>Resource base </li></ul></ul><ul><ul><li>Industry structure </li></ul></ul><ul><ul><li>Socio-political environment </li></ul></ul><ul><li>Enhancing strategy development by stakeholder feedback (“outside-in perspective”) </li></ul>Aligning corporate strategy and stakeholder management
  22. 22. <ul><li>Stakeholder management in insurance has rapidly gained in importance due to seismic changes to the sector’s business environment </li></ul><ul><li>Effective stakeholder management can enhance corporate value drivers </li></ul><ul><li>Stakeholder management and the corporate strategy should be fully aligned </li></ul>Summary
  23. 23. Dr. Kai-Uwe Schanz Chief Communication & Corporate Development Officer [email_address] Phone: +41 (0) 44 639 90 35 Fax: +41 (0) 44 639 70 35

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