3. DEFINITION
Insurance is an agreement where, for a
stipulated payment called the premium, one
party agrees to pay to the other a defined
amount upon the occurrence of a specific
loss.
Insurance is a risk management tool
People chose to buy insurance because they
are risk averse.
4. DIFFERENT RISK MANAGEMENT FORMS
• Insurance – Buy a policy
• Self Insurance – measures that reduce loss
• Self defense – reduce chance
• Avoidance – Avoid the risk such as driving fewer miles with
your car.
• Hedging – Take another risk to offset another risk. For
example an Israeli exporter who thinks the shekel currency
will strengthen will buy an option on the dollar so he will profit
from the increase of the shekel.
• Retention – Do nothing. Like companies that retain their
earnings in order to have the option of using their money in
the future without facing any present threats.
5. SEGMENTS OF THE INSURANCE MARKET
Life insurance
Property and casualty insurance
Reinsurance
7. INSURANCE PRICING
The pricing of insurance is based
on the probability of the occurrence
of the given event
The probability of occurrence is
expressed in the following equation
11. In order to lower the risk an insurance company must be
big. The bigger; the less risk
12. INSURANCE MARKET CASE STUDY
Problem statement: How does a small insurance
firm remain competitive in a market dominated by
international firms through mergers and
acquisitions.
13. PROPOSED FEASABLE SOLUTIONS
Solution 1) - Offer specialized
products
Solution 2) Merge
Solution 3) Sell your firm
Solution 4) Offer a higher
standard of service
14. PROPOSED SOLUTIONS:
Solution 1) - Offer specialized products that are not
offered by the big insurance firms
15. SWOT: 1- OFFER SPECIALIZED
PRODUCTS
Strength: Offer a product that does not exist by the
big competitors. For example offering personally
priced auto insurance.
Weakness: You don’t have a variety of products.
You got a very narrow range of products. Weaker
financial backbone
Opportunity: Develop specialized products for a
specific region/area of business
Threats: The big companies can overrun you with
special offers since they have deep pockets filled
with cash.
17. SWOT: 2- MERGE
Strength: Financial backing of a bigger company.
Wider range of products Wider geographic area.
Weakness: Lose the personal touch. Your name
may be associated with a not so sympathetic
company.
Opportunity: Offer to your current customers the
product that the merged company has in its
arsenal.
Threats: Lose customers due to an unwanted
associate.
19. SWOT: 3- SELL YOUR FIRM
Strength: Make a profit by selling your firm for a
high premium
Weakness: Big insurance firms may prefer to do
direct marketing to their costumers and will not buy
your firm just for your clients.
Opportunity: Get out of your sinking boat.
Threats: The big insurance firms can eliminate you
by dropping their prices dramatically driving your
firm to losses. The big firm can hold their breath;
your small firm on the other hand may run out of
cash.
20. Solution 4) Offer a higher standard of service
21. SWOT: 4- OFFER A HIGHER
STANDARD OF SERVICE
Strength: People will come for personalized
service since they know that a small broker will
advise them well.
Weakness: costumers may not be attracted to a
small firm since its prices are not competitive
Opportunity: Can attract people who want highly
personal service and have very specific needs that
are not well answered by the big firms
Threats: you are left with no leverage buying
policies from big firms since you have few
costumers and have no bargaining power.
22. CONCLUSION
Operate a butique specialty firm
Based on the assumption that an owner of an
insurance firm wants to remain in control of his
company and not be swept under the carpet by the
big firms, we chose solution one, which is,
specializing in a specific market niche
23. THE THREE FIRMS WE USED
FOR EVIDENCE
Maxassur Antwerp, Belgium. Which specializes in
diamond block policies.
NofBituchim Jerusalem, Israel. Offers client tailored
coverage for cases that are usually not covered by
big insurance firms.
AIM Jerusalem, Israel. Offers English speaking
medical services for Anglo’s in Israel.
