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  • 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.
    • Defining stakeholder management
    • Stakeholder management in insurance
    • Stakeholder management as a driver of corporate performance
    • Conclusions from a practitioner’s point of view
    Agenda
  • 3.
    • Managing the relationships of a corporation with relevant constituencies in its industry, political, social, economic and legal environment
    • Roots of the concept go back to the 1950s:
    • “ 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”
    • General Robert E. Wood, 1950, then CEO of Sears
    • Stakeholders contribute to the wealth-creating capacity of a corporation and are, therefore, its potential beneficiaries and/or risk bearers
    Defining stakeholder management
  • 4.
    • Defining stakeholder management
    • Stakeholder management in insurance
    • Stakeholder management as a driver of corporate performance
    • Conclusions from a practitioner’s point of view
    Agenda
  • 5.
    • As from the 1990s: Increasing relevance of the concept in insurance
    • Deregulation of terms and conditions
    • Liberalization of market access
    • Privatization of state-owned insurers
    Stakeholder management in insurance
  • 6. The insurance industry ’ s key stakeholders Insurance Company Policyholders Investors Source: Schanz Brokers Investors Employees Governments Alliance Partners Rating Agencies Supervisory Authorities
  • 7.
    • More recent drivers of stakeholder management in insurance:
    • Low investment yields
    • Surging insured catastrophe losses
    • Liability claims inflation
    • Regulatory reforms and investigative pressures
    Stakeholder management in insurance (cont’d)
  • 8.
    • Defining stakeholder management
    • Stakeholder management in insurance
    • Stakeholder management as a driver of corporate performance
    • Conclusions from a practitioner’s point of view
    Agenda
  • 9.
    • Our main proposition:
    • 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.
    Stakeholder management as a driver of corporate performance
  • 10. Main corporate value drivers Business Environment Corporate Value Corporate Strategic Positioning Reputation Reputation Reputation Reputation
  • 11. Shaping the business environment
    • Political Environment
    • Changes in regulation/
    • legislation
    • Changing role of governments
    • Antitrust regulations
    • Social Environment
    • Demographic changes
    • Shifting attitudes towards
    • risk
    • Economic Environment
    • GDP, inflation, interest rates,
    • stock markets
    • Growing complexity/inter- dependence of economic
    • environment
    • Technological Environment
    • New technologies, e.g.
    • nanotechnology
    • Declining cost of
    • communication/information
    • technology
    Industry Environment
    • Suppliers/Intermediaries
    • Consolidation
    • Disintermediation
    • Vertical integration
    • Customers
    • New distribution channels
    • Changing insurance needs
    • Emergence of substitutes
    • Competitors
    • Consolidation
    • New entrants (banks, capital markets)
    • Internationalization/Globalization
    Insurance Corporation
  • 12.
    • The “Balanced Scorecard” offers an attractive approach for measuring the
    • effectiveness of stakeholder management:
    • Financial perspective
    • Customer’s perspective
    • Internal perspective
    • Learning perspective
    Enhancing the firm’s strategic positioning
  • 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.
    • The capability of a firm to create and sustain competitive advantage depends on the competitive effectiveness of its value chain
    • The competitiveness of the value chain, in turn, is heavily influenced by the firm’s relationships with clients, shareholders, employees and other stakeholders
    Stakeholder management helps create and sustain competitive advantage
  • 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.
    • Main sources of competitive advantage (according to Michael Porter)
    • Cost leadership
    • Controlling cost drivers
    • Reconfiguring the value chain
    Two fundamental strategies for competitive advantage or
    • Differentiation
    • Supplier linkages
    • Channel linkages
    • Institutional factors
  • 17.
    • Stakeholder management can support both competitive strategies (cost leadership and differentiation) by “lubricating” the value chain!
    Stakeholder management as a source of competitive advantage (cont’d)
  • 18.
    • Defining stakeholder management
    • Stakeholder management in insurance
    • Stakeholder management as a driver of corporate performance
    • Conclusions from a practitioner’s point of view
    Agenda
  • 19.
    • In order to maximize the benefits from stakeholder management an integrated stakeholder communication approach should be adopted by the insurance industry
    • Stakeholder management activities should be fully aligned with strategic corporate goals
    Conclusions
  • 20. Integrated messaging for an insurance company
    • Industry Context
    • Competition
    • Regulation
    • Legislation
    • Economic Development
    • Social Trends
    • Technological Trends
    • Corporate Strategy
    • Vision
    • Mission
    • Strategic Objectives
    • Financial Performance
    • Operating/Net income
    • Premium growth
    • Combined ratio/operating margin
    • Investment income yield
    • Shareholder’s equity
    • Return on equity
    • Cash flows
    Source: Schanz
  • 21.
    • Benefits from aligning strategy development and stakeholder management
    • Effectively influencing key parameters of corporate strategizing
      • Resource base
      • Industry structure
      • Socio-political environment
    • Enhancing strategy development by stakeholder feedback (“outside-in perspective”)
    Aligning corporate strategy and stakeholder management
  • 22.
    • Stakeholder management in insurance has rapidly gained in importance due to seismic changes to the sector’s business environment
    • Effective stakeholder management can enhance corporate value drivers
    • Stakeholder management and the corporate strategy should be fully aligned
    Summary
  • 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