A Strategy Paper for UCPB General Insurance Company, Inc. - Jonimar T. Golisao

A Strategy Paper for UCPB General Insurance Company, Inc.

San Beda College Graduate School of Business San Beda College Graduate School of Business

A Strategy Paper for UCPB GENERAL INSURANCE COMPANY, INC.

Jonimar T. Golisao December 19, 2015

Prof. Roberto Manaois Strategic Management

“That In All Things, God May Be Glorified”

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San Beda College

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Graduate School of Business

I.

BACKGROUND OF THE COMPANY

UCPB GEN is one of the largest and strongest non-life insurance companies in the country today. Established as Allied Guarantee Insurance Company, Inc. on January 1963, it has been wholly owned by United Coconut Planters Life Assurance Corporation (Cocolife) since 1989, was then known as UCPB General Insurance Co., Inc. Its well-built financial position allows the company to take advantage of every opportunity that further boosts up its place in the industry. It constantly ranks among the Top 10 in an industry of more than 100 players. As a reliable insurance company, UCPB GEN has earned the trust and loyalty of its clients, the raster of which includes prominent multinationals and leaders in the manufacturing, service, wholesale, retail, and merchandising industries. Backed by over 52 years of experience in risk management, UCPB GEN hopes to maintain its lead in the industry by timely satisfying customers’ requirements with innovative coverage and excellent service. Currently, UCPB GEN is Top 7 among hundreds of players in the industry. Last 2014, UCPB Market share was 1.4Billion in premiums earned based on the statistical report of Insurance Commission.

UCPB

GEN

continuously

expands

its

operating network to key cities nationwide in order to serve its rapidly expanding customer base and ensure the delivery of fast yet quality services through online operations.



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Current Mission Statement Evaluation (UCPB GENERAL INSURANCE COMPANY, INC.)

PARAMETERS

YES/NO

CUSTOMERS

YES

PRODUCTS OR SERVICES

YES

MARKETS

NO

NO

WHY? It doesn’t specify who the customers are as it could be in different type such as individuals, business or corporations or whoever in need security against loss by unforeseen events. It clearly states the products and services in the mission statement. Geographical market is not mentioned in the mission statement. Impliedly, through its vision statement, it aims to take lead and compete in the non life insurance industry in the country. However, I would suggest to best specific the vision locally and globally. To be a leader in non-life insurance industry in the Philippines and be the top local non-life insurance provider in the Asia Pacific Region could be added to the Mission-Vision Statement. It more caters the competent and



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Graduate School of Business TECHNOLOGY

professional human resource as it is the core of the service-oriented business. However, it could include the company system (GENIISYS) in the mission as part of producing quality and innovative products and services.

CONCERN FOR SURVIVAL, GROWTH & PROFITABILITY

YES

It is clearly stated. It is clearly stated. All core values are well coined to the mission statement but importantly it asks guidance of Divine providence in its entire mission. It is clearly stated but more focused on the comprehensiveness of product lines, competitive rates and compensation, promptness of claims settlement.

PHILOSOPHY

YES

SELF-CONCEPT

YES

CONCERN FOR PUBLIC IMAGE

YES

It is clearly stated.

CONCERN FOR EMPLOYEES

YES

It is clearly stated.

Current Vision Statement Evaluation (UCPB GENERAL INSURANCE COMPANY, INC.)

PARAMETERS Does it clearly answer the question: What do we want to become?

Is it concise enough yet inspirational?

Does it give indication as to when it should be attained?

YES/NO

WHY? It clearly states that it aims to be a leader in non-life insurance industry.

YES

YES

NO

It brings inflection of motivation and urge to seek excellence through innovative solutions and services. It doesn’t state when it should be attained but there is a clear indication that it is a long-term vision as it aims to lead the non-life industry in the country. Manifestly, it is more than 50 years period.



San Beda College Graduate School of Business Currently, UCPB GEN maintains its 7th spot and consistently one of the top 10 non-life insurance provider in the country.

Currently, UCPB GEN steps in cascading its mission-vision statement is by employee orientation. All newly hired employees are required to attend it company orientation called Step ONE. It is a 3-day orientation program for new employees that aim to cascade the Mission, Vision, Core Values, Company Profile, Products and Services, Employee Benefits and Code of Ethics before they official start their work. Also, posters of Mission-Vision Statement were all attached in the walls of the office to serve as daily reminder for employees. Moreover, mission-vision statements form part of our Annual Report being disclosed to the public. In addition to current steps of UCPB GEN in cascading its mission-vision to all members of the organization, bulletin boards in the office will also be one tool to add consciousness and familiarity of the mission-vision statement of the company. Another way is through wallpapers of the desktop computers of the company. By designing customized company wallpapers that include the mission-vision statement of the company will help as employees will be reminded time to time about the company mission and vision. Company giveaways should also include the mission-vision statement like in notebooks, umbrella, pillow, bags and others. Lastly, Mission-Vision awareness month may be conducted annually where activities regarding company profile, mission, vision and core values are the subjects.

II. EXTERNAL ANALYSIS “That In All Things, God May Be Glorified”

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San Beda College Graduate School of Business A. GENERAL ENVIRONMENT (PESTEL ANALYSIS) 1.

Socio-cultural, demographic and environmental forces.

Culture/Cultural Philippine society is a unique blend of diversity and homogeneity. The country is culturally strongly Euro-American. Western Rule have left an indelible imprint on the Philippines, serving as a means for the introduction of Western culture and as the catalyst for the emergence of a sense of Philippine political and cultural unity. The country has experienced some cultural trends such as; health food/diet craze, working women, children as consumers early in life and youth as young investors which has paved a way to the integration of more people to the financial industry including insurance and banking industries. These eventually result to the affection of cultural enterprise, industry development, household behaviour, poverty reduction, voice and participation and other globalizing forces that drive one’s own identity.

Population: size and growth The population density of the Philippines is high, but the distribution of the population is uneven. Parts of Metro Manila have a population density that is more than 100 times that of some outlying areas such as the mountainous area of northern Luzon. The country’s birth rate remains significantly higher than the world average although there were efforts to slow the overall growth rate in mid-20’s. It had limited success in part because reductions in the birth rate have been offset to some degree by reductions in the death rate. The problem that the insurance sector faces due to this over population lies in the fact that almost 6.5% of the 102Million population was unemployed. This meant that an estimated 6.6Million Filipinos were


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San Beda College Graduate School of Business not producing any income. But compared to previous years, unemployment shown reduction by an average of 1% but still not material decrease due to increase in population.

Population: gender and ethnic mix As for non-life insurance and gender, we have seen a great increase in men and women approaching non-life insurance for their services such as motor and home insurance due to the growing stability of our economy and the fact that more and more people, not just women, are being driven to work and more business-minded.

Entry of UBER embraced by Filipinos (lifestyle changes and educational levels) In addition, increase in public awareness and needs of insurance is up by 14% in terms of premiums earned in 2014 compared to 2% and 9% in 2013 and 2012 respectively reported by Insurance Commission. Therefore, it indicates a positive outlook for the non-life insurance industry as more individuals are gaining constant and emerging needs and demands for insurance products. Filipinos today are more business-oriented in terms of obtaining additional household income. Recently, the entry of UBER, a private car-taxi business, has begun operating in the country and patronized by the public especially the medium to high earner individuals. As the rise of the said new business model grows, the demand for car or motor insurance also rises given that Compulsory Third Party Liability (CTPL) coverage in car insurance is mandated by the law. Also, the continuous demand of individual in getting automobile car is an opportunity for non-life insurance as well.


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San Beda College Graduate School of Business Natural disasters and Social Responsibility On the environmental aspect, it is indeed obvious that Philippines is one of the most prone to natural disasters such as earthquake, flooding and typhoons. Last 2014 and 2013, the remarks and aftermath of Super Typhoons, like Yolanda, Ondoy, Glenda and others, had a great impact on insurance industry net income as they have shouldered the losses of properties and assets of the insured including the establishments and businesses. As part of increasing awareness and unity to the community, Corporations are now more lean-forward in doing Corporate Social Responsibility projects. 2.

Technology

The developments in information collection, storage, processing and transmission and distribution technology have influenced all aspects of non-life insurance activity. And was regard as the one of the driving forces for the changes in insurance industry. It has been influencing the competition and the degree of contestability.

E-commerce has become the continuous trend in all industry. Due to the development of technology, E-commerce has become the continuous trend in all industry. It has also impacted on the way insurance companies and financial services are delivered. A wide range of alternative delivery mechanism becomes available, Internet and other means of computerizations and these reduces the dependence on the branch network as a core delivery mechanism. With the development of technology, the insurance companies are substantially affected but still delivery system remained dependent through a duplication of network, there are few changes in delivery strategy and rationalization of branch network strategy. Insurance service could not provide the level of service it does without the support of


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San Beda College Graduate School of Business advanced information processing and telecommunication technologies. The creation of a new supply channel has substantially reduced the cost of financial transactions. Investment in operational management database system has been transparent to ease hassle and improve efficiency among insurance companies. Also, as to collections, online payment facilities has became clients’ concern to contribute to convenience of their premiums which resulted to additional cost for network tie-ups and availing of payment facilities with other financial or payment service providers. In addition, accessibility to information by customers has been a big factor now resulting corporations to invest and improve their company website and applications.

3.

Economic Environment

Economic Growth In 2014, in spite of declining from the highs of 2013, Philippines’ economy showed marked resilience as it battled back from the impact of a devastating typhoon to give a strong overall performance. Economic growth was driven by strong foreign direct investment (FDI), which surpassed government targets well before the end of 2014, alongside remittances and expansion in the real estate, business process outsourcing (BPO) and mining sectors.

Gross Domestic Product performs well. Although the Philippines continued to outperform regional neighbors its economic expansion eased in 2014. Currently, the Philippine economy grew 5.6% in the second quarter of 2015, fighting a regional slowdown with the help of strong performance of industry and services


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San Beda College Graduate School of Business sectors and robust government spending. Although the second quarter growth is higher than the first quarter gross domestic product (GDP) performance of 5%, it still lags behind the government's and economists' forecasts on the general consensus by 5.7%. The previous quarter's growth is also lower than the 6.7% reported in the same period last year. Although below expectations, the growth is respectable and still makes the Philippines an attractive market as conferred by Chief Arsenio M. Balisacan of NEDA.

Agriculture sector pulled down the GDP growth. The latest GDP figure also caused the Philippines to slip as the third highest among Asia's major economies, behind China and Vietnam. According to the Philippine Statistics Authority, the 5.6% growth was mainly driven by the services sector, which accelerated to 6.2% from 5.9%. The agriculture sector pulled down the GDP growth with -0.4%.

0.6% inflation rate is at the lowest level recorded.

While, Inflation rate (monthly) as of August 2015 is at 0.6% and Core Inflation rate is 1.6% year-on-year in August cited as lowest on record since 1987. Obviously, it is a good indication for services sector as the growth is relatively huge and been supporting the country’s economy and that includes the non-life insurance industry through the continuous growth in premiums earned and more individuals will be able to avail the goods and services.

Positive outlook on Philippine Economy from Fitch ratings.


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San Beda College Graduate School of Business Last September 24, 2015, Fitch Ratings improved its outlook on the Philippines’ credit rating, which went from “stable” to “positive.” The country’s current rating of BBB-, which is the minimum investment grade, is very likely to be upgraded soon. According to the credit rating firm, the country’s young population, with a median age of 23.5 years, boosts the economy’s chances of supporting higher productivity in the coming years. General government debt stands at 36.3 percent of gross domestic product, better than the median of 42.4 percent among economies with a higher credit rating of BBB. The general government debt has fallen consistently from 44.3 percent in 2009. The country has posted surpluses in its current account for the past 12 consecutive years, fueled by a steady stream of foreign exchange led by remittances and investments in the business process outsourcing industry. While a positive credit rating action seems abstract to most, its benefits are felt in the most concrete terms. Businesses are able to borrow more easily, and everyday Filipinos find better home and car loans, for example. Standing on ever firmer fiscal positions allows us to better withstand economic turbulence, an outcome not many of our neighbors can say they are enjoying at the moment. This is a layer of protection have been worked hard to maintain for our most vulnerable, as well as the middle class want to keep growing, cited by Purisima.

4.

Political, legal and governmental aspects.

Over a period of time, the insurance industry of the Philippines has seen a transformation with the reforms being carried out by both the Insurance Commission and the government. The reform process has resulted in improved insurance industry, with industry income touching new heights in 2015. Moreover, the Philippine insurance industry has been undergoing consolidation that will further strengthen its position as new entities will increase the


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San Beda College Graduate School of Business competition level. Moreover, insurance companies will be geared up in facing the ASEAN Economic Integration, which increases the likelihood of a sharp competition in the industry.

The importance and benefits of a strong regulatory system with an open and well-regulated insurance and the rest of the financial sector fuels economic growth and a strong sector offers stability, making the economy more resilient in the face of external and domestic shocks. In the Philippines, the Insurance Commission considers the sound supervisory and regulatory environment, as well as the implementation of a broad set of reforms, as factors that have helped to foster sustainability and growth in the insurance industry. Year-end 2014 figures revealed a big growth in premium insurances, the resumption of investment activities, capitalization and bottom line figures. In recent forum hosted by Philippine Insurers and Reinsurers Association (PIRA), Insurance Commissioner Emmanuel Dooc that 2015 premium income outlook is bullish and the industry mostly likely surpass or meet its target.

The important relationship between insurance companies and political, legal and governmental welfare has led researchers and government institutions to develop policy recommendations concerning insurance regulation and supervision. Last August 2013, an act strengthening the insurance industry, further amending presidential decree no. 612, otherwise known as “the insurance code” has been signed known as the Republic Act No. 10607. Pursuant to the amended Insurance Code, Insurance Commission circulated a memo to all the domestic life and non-life insurance companies regarding the paid-up capital requirements for new corporations wish to engage in insurance business which is at least 1Billion Pesos and shall be unimpaired at all times. The Commissioner may, as a pre-licensing requirement


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San Beda College Graduate School of Business of the new insurance company, in addition to the required capital or assets, require the stockholders or parent company to pay in cash to the company in proportion to their subscription or interests, a contributed surplus fund of not less than 100Million Pesos. As to net worth requirements, all domestic life or non-life insurance duly licensed by the Insurance Commission must have a net worth of at least 250Million Pesos. The minimum net worth shall remain unimpaired at all times and shall increase to PHP 550Million on December 2016, PHP 900Million on December 2019 and PHP 1.3Billion by December 2022. Companies are subject to government imposed taxes such as income tax, donor’s tax, estate tax, withholding tax and other percentage taxes which at its normal tax rate is 35 % from July 1, 2005 to December 31, 2008. The amendment started from 2009 applicable to Domestic Corporation together with the resident and non-resident foreign corporation limited to the sources within the Philippines still remained at the 30% normal tax rate.

B. COMPETITOR ANALYSIS 

Profile of Competitors

Collectively, the Philippine non-life industry posted a Growth Rate hike of 13.65% in gross premium earned in 2014 of which, Industry premiums earned in the country grew by 26.71% from 2011 to 2014. The premium mobilization is concentrated with non-life and reinsurer companies which some of its key players are Malayan Insurance Co., Inc., Prudential Gtee. & Assce. Inc., BPI/MS Insurance Corporation, Charter Ping An, Federal Phoenix Assurance Co., Inc., MAPFRE Insular Insurance Corporation, Pioneer Insurance & Surety Corporation, Standard Insurance Company, Inc. and UCPB General Insurance Co., Inc. which account for


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San Beda College Graduate School of Business the majority of the Philippine non-life insurance industry premiums. Premiums Earned in 2014 is 31Billion Pesos and Net Income is 2.4Billion Pesos while 27.3Billion Pesos and 912Million Pesos, respectively.

MAPFRE Insular Insurance Corporation

MAPFRE Insular is a non-life insurance company offering general insurance for optimum financial protection and risk management. The Company provides insurance services on fire and allied lines, motor vehicle, personal accident, casualty, liability, engineering, marine cargo, surety and micro insurance.

Founded in 1934, MAPFRE Insular today, ranks among the top five in the non-life insurance industry in terms of earned premiums, investment income, and net income. The company is also among the highest capitalized and most solvent in the non-life insurance business in the country.

MAPFRE Insular is 75 % owned by MAPFRE of Spain and 25 % by Insular Life Assurance Co. Ltd., of the Philippines.


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San Beda College Graduate School of Business

Date Established

1934 75 % owned by MAPFRE of Spain; 25%

Ownership Structure

by Insular Life Assurance Co. Ltd., of the Philippines

Industry Ranking No. 6 In Premiums Earned (2014)

Charter Ping An Insurance Corporation

Charter Ping An Insurance Corporation is a leading non life insurance company in the Philippines that provides Fire, Motor Car, Marine Cargo, Personal Accident, Bonds, Casualty and Engineering insurance products. Owned by GT Capital Holdings, Inc., the services of the Company are spread to the strong financial conglomerate of the Metrobank Group, accredited brokers, agents, car dealers, partners and 19 branches strategically located nationwide.

In the recent 2014 Insurance Industry Ranking, Charter Ping An ranks number 4 both in Net Premiums Written and Premiums Earned, while number 5 in Gross Premiums Written, among the 69 non life insurance companies in the Philippines.

The Company is committed to deliver best insurance services for the interest and protection of the insuring public. “That In All Things, God May Be Glorified”

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Date Established

June 12, 1960

Ownership Structure

100% owned by GT Capital Holdings, Inc.

Industry Ranking No. 4 In Premiums Earned (2014)


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In non-life insurance industry, the determined critical success factors are customer service, customer loyalty, price competitiveness, product innovation/insurance coverage, technology, size of operations, marketing capability and network, human capital, management and years of operation, financial condition and market share. The highest weight is given to customer service simply because the customers are the bread and butter of any service institution especially for non-life insurance. Being a service-oriented industry, customer service plays an important role in sales or premium writing that is why non-life insurances pay attention in exerting full effort in the said area. However, it effect goes with customer loyalty as there other factors that may influence the preference of a client and they can easy transfer to other nonlife insurance company. The second major factor is market share. Being the market leader in an industry is a certain advantage. Comparing the 2014 premiums earned of the three in the non-life insurance industry, Charter Ping An shadows over the rest with 1.72Billion followed by MAPFRE with 1.49Billion and UCPB GEN with 1.45 Billion. The next factor with a given weight of 12% is financial position. The major three players in the industry are Charter Ping


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San Beda College Graduate School of Business An, MAPFRE and UCPB GEN having a net assets of P7,476,785,910, P4,020,498,877 and P5,476,541,102 respectively.

Considering the extent of competition in the non-life insurance industry, one should not only put a branch in any location but in a strategic location. That’s why marketing capability and network is given 10% weight. Putting up branches in strategic locations like mall and urban areas will give an advantage over its competitors. Charter Ping An and MAPFRE were given the highest rating for their branches were located strategically and their online website are updated and in good calibre that made convenience better than others. Next factor is human capital along with management and years of operation. All three were given a rating of 4, with such a huge manpower; they provide training and development programs. Also, management played an important factor that will result to the years of operations which indicates strength and stability in adequately supporting the changes in structure, systems, and services. Everyone was given a rating of 4 in management due to their sheer expertise in managing their own respective organizations.

Having the same weight at 8%, the next factors are technology and innovation. Being in an industry that adheres in servicing the customers with utmost importance, innovation is needed. With new age at hand, industries should adhere and cater to time-conscious consumers with fast and state of the art technology. Early preparation for business growth and capacity required to put the necessary adjustments in place and move towards a smooth implementation. The last factors are pricing and organizational size. With regards to the size of operations, MAPFRE and Charting Ping An has bigger size than UCPB GEN while as


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San Beda College Graduate School of Business pricing UCPB GEN set its quotations prices on insurance products more competitive than the two.

C. INDUSTRY AND COMPETITOR ANALYSIS

1.

Threat of New Entrants

New potential competitors are always a threat to any industry, other possible threats include; changing demographics/shifting demands, emergence of cheaper technologies and regulatory requirements. In keeping with the aspect of Economies of scale, threat of new entries would be low since minimum size of operations for non-life insurance companies to keep it profitable is quite high. The threat of new entrants according to Capital and Asset Requirements is low since setting up a new business such as a non-life insurance needs a lot of capital investment not to mention the technology required to compete with rivals and access to distribution channels can be monopolized by other competitors. As to capital requirement, 1Billion Pesos is the required to put up an insurance company. Obviously, it is very high that could result to low impact on threat for new entrants. Brand loyalty of customers also shows a low threat to


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San Beda College Graduate School of Business existing non-life insurance companies due to the fact that most institutions prioritize customer service among other things. As for Government Policy the threat of a new entrant is also low since there are several legal aspects that cannot be attained easily by new businesses especially in the insurance sector. With regards to Scarcity of important resources such as qualified and expert staffing, the playing field is tilted to known insurance operations rather than to new insurance operations due also to the fact that they control distribution channels and have a higher brand loyalty making them the preferred choice of would be job-seekers. Also, High switching costs for customers such as long term contracts hinders the threat of any new non-life institution since it poses great inconvenience for customers.

2.

Rivalry among competitors

UCPB GEN has been aggressive and competitive in its field as it offers its best quality service to its insured, bringing in customers who patronize their products, as it also expands to its quest to explore and strengthen through vision, innovation and value. It has always been a challenge to different companies, what their rival competing firms has to offer. These factors such as to enhance quality, add features, provide services, extending warranties, and increasing advertisements and promotions, are one of the primary reasons why UCPB GEN has been aggressive, a threat to other firms:

List of Some Participants from 70 players in non-life industry


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San Beda College Graduate School of Business 

Prudential Gtee. & Assce., Inc.



Malayan Insurance Co., Inc.



BPI/MS Insurance Corporation



Charter Ping An



Federal Phoenix Assurance Co., Inc.



MAPFRE Insular Insurance Corporation



Pioneer Insurance & Surety Corporation



Standard Insurance Co., Inc.



Blue Cross Insurance, Inc.



Oriental Assurance Corporation



Commonwealth Insurance Company



MAA General Assurance Phils., Inc.



QBE Seaboard Insurance Phils., Inc.



Alpha Insurance Surety Company, Inc.



Philippine British Assurance Company, Inc.

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PNB General Insurers Company, Inc.



Paramount Life & Gen. Ins. Corp.



Stronghold Insurance Company, Inc.



AIG Phil. Ins. Company



Pacific Union Insurance Company



Corporate Guarantee & Insurance Co., Inc.



Fortune General Insurance Corporation



Mercantile Insurance Company, Inc.


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Graduate School of Business 

Western Guaranty Corporation

As for rivalry among competitors especially to differentiation of product, the threat is intense since all non-life insurance institutions offer the same product. With respect to strategies, threat is also intense due to the fact that almost all non-life institutions have their own perks and advantages that lure customers in their own way. Whether it’s MAPFRE’s 24 hours customer service, Malayan’s wide online payment facility availability and pool of agents or UCPB GEN’s convenient credit policy. There is also a high market growth rates in the industry meaning that a non-life insurance industry can truly grow with increase in premiums earned and gross premium written by insurance companies.

3. In

Threat of substitutes non-life

insurance

institutions,

competitive

pressures

arising

from

substitute

products/services increase as the relative price of substitute/services declines and as consumers’ switch cost decrease. The scale of competitive pressure derived from development of substitute products from competitors is generally evidenced by rivals’ plans for expanding production capacity, as well as their sales and profit growth numbers. UCPB GEN, with its keen reading of financial trends, it enable themselves to access unique opportunities for increased value for their customers. The threat of substitutes as far as customer brand loyalty is concerned is medium since brand changing in insurance is rare. Only poor account management and bad customer relations lead to shifting in banks since insurance institutions in our country operate primarily in similar standards set by the government. Every non-life insurance establishment keeps a close relationship with their customers so I believe that in



San Beda College Graduate School of Business this aspect, the threat for substitute is low. As for relative pricing of performance of substitutes, the threat is low since insurance institutions’ rates have only slight discrepancies. It is only a matter of which insurance rate you can afford. Current trends also show that there is a low threat of substitution since it will be unwise to move your insurance to another institution provided that it is able to stay afloat during this economic growth.

4.

Bargaining of power of Suppliers

With UCPB GEN adding branch offices, they have expanded their networks through squeeze out important cost savings for themselves. With these they have managed themselves very well, making them agile in their means, with its quick ability to apply power of information to respond to their customers’ needs amid shifting market conditions. They have made corporate culture enhancement programs to ensure that the company faces the client with the set of servicing philosophies. Other than that, the speed availability of services of next generation components have widely denomination of initiatives focused on the harmonization of the benefits and compensation packages of officers and staffs, and the required training and development programs to adequately support the changes in structure, system, and services.

5.

Bargaining Power of Buyers

Bargaining power represents a major force affecting the intensity of competition in an industry. With UCPB GEN’s inventive mindset, they view insurance servicing as a continuous creative process, challenging them to always find ways to better serve their customers. They have special services that gains customer loyalty compared to its rivals, in which they have offered a variety of products and services to their customers. In consideration with our economy


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San Beda College Graduate School of Business facing a volatile global financial environment, UCPB GEN focused on the success full integration of the head office, branch and subsidiary operations of the entity. However, the bargaining power of buyers is moderate as they have options to negotiate with insurance companies the coverage they want to avail with respect to their target monthly premiums. It has been proved that insurance companies practice flexibility on its credit policy to respond to the clients’ purchasing power which is one way to avoid tapping of clients by other insurance companies.

6.

Summary of Porter’s Five Forces of Competition

To sum it up, the threat of new entrants in the insurance industry can be considered low since there are many steep requirements that are needed to be meant such as a high capital investment, a share in distribution channels, government policies and of course the presumption of an economy of scale. For the rivalry between competitors, we can clearly see that there are intense threats present since insurance institutions use similar strategies, there is fair growth rate for companies and not much differentiation between services leaving the choice up to the consumers. Low was the level of threat given to the threat of substitutes since there is only a slight conformity between the prices of the services rendered by non-life insurance companies and this business usually centers itself in customer care and relationship. The threat of substitution is possible but seldom happens. I believe that a clear explanation of why the bargaining power of suppliers is low is the word service. This is why there are plenty of substitutes so firms can accommodate anyone from any social class. As for


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San Beda College Graduate School of Business the bargaining power of buyers it can be classified as medium since insurance operations have been always aimed to serve people.


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III. INTERNAL ANALYSIS A.

7S McKinsey Framework

Strategy – the plan devised to maintain and build competitive advantage over the competition UCPB GEN has a high rate of repeat/existing clients from brokers, agents and individuals that indicate customer satisfaction on the service quality. However, there is a low rate capture on potential / new clients where first impression or experience of service is essential. The company maintains its strategy on continuously setting its gross premium annually to maintain market share in the industry. Through promotional and marketing strategies such as continuous engagement in televised and non-televised forum about insurance products, promotional activities like sponsorship, expo, and golf tournament. In addition, maintaining and expanding its network through active participation in industry professional organizations like Philippine Insurers and Reinsurers Association, Philippine Insurers Club, People Management Association of the Philippines, Financial Management Association of the Philippines, Financial Executives of the Philippines and others. It aims to lessen its operating expenses, continuously increase in investment income, insurance and reinsurance premiums through aggressive collection of premium receivables. In terms of sales force capabilities, it is focus on leveraging on push and pull marketing and investing on product knowledge and well-experience agents and professionals. As to product range or service range, it has a wide a variety of insurance products and keeping up with the trend on innovation of insurance products through external studying. However, as to cost structure, it has a limited exposure or investment in e-commerce tools such as not updated


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San Beda College Graduate School of Business company online website, not properly cascaded mobile application and online facility. Though early this year, the company launched its online payment facilities with UCPB and BDO account holders and all credit card holders. And the company is continuously working on different projects particularly in terms of expanding the online payment facility and market network. As to branding, UCPB GEN brand is not well-known. It has a low brand distinction in the market because of the impression that it is solidary with UCPB “The Bank” and not with, the mother company, COCOLIFE. While distribution network wise, it has a limited network or pool of agents in Visayas and Mindanao compared to its Luzon operations. It has a low nationwide transparency due to limited number of branch offices/outlets though it is about to open a branch in Kalibo, Aklan in early 2016. Lastly and most important is the customer service. Customer concerns are well attended by respective departments by being customer service oriented and engaged in relationship management. However, there is no consistent call redirecting or diverting as calls are being taken over by other department instead of the concerned department.


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San Beda College Graduate School of Business Structure – the way the organization is structured and who reports to whom

UCPB GEN has a functional structure where departments are categorized on their functionalities. Currently, there are 3 division units consist of 25 departments/ business units in head office within the organization. While office address is at 5th and 6th floors of the UCPB Building in Makati with 22 branch offices nationwide. Particularly, the company has 15 branch offices in Luzon, 4 branch offices in Visayas and 3 branch offices in Mindanao.


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Systems – the daily activities and procedures that staff members engaged into to get the job done

As the advanced technology becoming non-stop on its spread, UCPB GEN chose GENIISYS as the core insurance solution for their Integrated General Insurance System Project. Through the partnership with Exakt Inc., CPI has started to implement the latest standard version of GENIISYS in UCPB GEN’s Head Office. This latest standard version currently includes the web versions of the policy issuance and cashiering modules, which being used by UCPB GEN’s branches nationwide.

GENIISYS is the leading integrated insurance software solution in the Philippines. It has a total of 21 installations since 1991 and is currently being used by some of the top non-life insurance companies in the country. It is complete with modules and features that can efficiently handle the operations of a non-life insurance company, and it can be linked to any type of business intelligence. With its new web version, GENIISYS is even more flexible, secure, and operationally cost effective for its users.

In addition to this, internal quality auditing is a system adopted by the company to continuously improve its internal quality process based on set guidelines and procedures accepted by International Organization for Standardization. It implemented a policy system of continuous improvement in the entire quality management system under ISO 9001:2008 International Standards. In addition to this, UCPB GEN is the first non-life insurance company certified by Internal Organization for Standardization.


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San Beda College Graduate School of Business However, it has been observable among the employees and clients that the Company online website is not regularly updated and low caliber compared to its competitors. It could be one of the effective tools to reach the customers and provide kiosk for easier transactions and convenient data access. It is should be put into consideration and invest on a good online website where interacting with clients could be done at their home or anywhere and anytime such as product inquiries, claim status inquiries and others. On the other hand, the Company invested in mobile game application name “Coco’s Quest” where basic insurance products and details are used in the game. It became available and downloadable in Google Playstore and Appstore. However, the game app is not properly promoted to the clients thus limiting the ability to reach the whole target market.

Style – the style of leadership adopted According to Robert Tannembaum and Warren H. Schmidt (1958, 1973), who argued that the style of leadership is dependent upon the prevailing circumstances; therefore leaders should exercise a range of management styles and should deploy them as appropriate. UCPB GEN, being 100% locally owned corporation, has still its traditional way of leadership. Based on my observation, the management style is a combination of participative among section heads while repressive in the level of top-management. Seniority is still observed in the organization where years of tenure bear a lot in the career ladder. Top-management is more of authoritarian in such way where all decisions are laid down and made by at the highest position as possible. Though, it has been influenced by the modern type of leadership where millennials are now being valued in the organization, especially those who are potential


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San Beda College Graduate School of Business successors of the organization, has given voice to be heard, opportunity to share and become part of team decisions but still subject to some limitations. It is participative in the sense that section head/manager encourages the employees to develop and input their decision making skills. Each team and division has their team leaders that stand in time the manager is around or out of the office and needs to decide on certain circumstances.

Staff – the employees and heir general capabilities As of October 2015, the company size is composed of 320 employees in which 213 employees in head office and 107 in branch offices. Regular employment is the major type of employment of the country and low numbers on contractual employment provided by Jobs Network and Ad Com. Job street, job fair and online job searching sites are the alternative tools in recruitment aside from walk-in applicants and employee referrals. While training is designed based on job level by providing seminar and trainings either internal or external resulting to enhancement of employee’s competencies. Ateneo Graduate School of Business, Learning Curve, Ariva Training, iAcademy and Insurance Institute of the Asia and the Pacific are some of the external partners of the organization in providing excellent trainings and shortcourse programs. Moreover, it recently launched the Leadership Acceleration Program where it is a fast track for potential employees in advancing in their desired career path in the organization while Career Playbook for those who will not quality for the leap program. Both programs will be consists of series of trainings assigned for skill and career development. However, retention rate has been low for the past years thus affecting the flow of some


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San Beda College Graduate School of Business department functions. One reason could be is the non-updated basic pay rate of the company compared to its competitors and industry.

Skills – the actual skills and competencies of the employees working for the company The general qualifications of the staff are the following: (1) Graduate of a 4-year course (2) with at least 1 year experience in non-life insurance industry or related, fresh graduate can also apply for the position in some department (3) has good communication skills (4) computer literate (5) flexibility and team work. The employees in the company are friendly, accommodating and flexible in the needs of the customers. They have the ability to work professionally and knowledgeable with the products of the company. All employees also undergo with the mandatory trainings and seminar for them to be updated in each improvement and development of the products or industry. Moreover, job titles are designed with its respective competencies, educational and skill requirements. Just like any other corporations, it follows job matching through the use of job designing. However, the company’s employee generation is now being penetrated by the millennials. As response to the calling of modernization, it caters a career development programs by sending them in various trainings and seminar that will sharpen their skills and competencies that will add value to the organization. The company has an annual budget for each employees ranging from 15 thousand to 20 thousand though it can go beyond depending on the career matrix or individual development programs designed to them.


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San Beda College Graduate School of Business Shared values –these are the core values of the company that are evidenced in the corporate culture and the general work ethic The company has a strong influence of a service-focused work environment and a qualitydriven culture. The idealism that constitutes the system at UCPB GEN is guided by seven core elements: Sincerity, Ethics, Responsiveness, Vision, Integrity, Commitment and Excellence. Those integral values that the Company upholds, and being shared with the employees as part of the team. It is driven to take hold of the Company’s vision to attain accessibility, product superiority and service excellence, outdoing its own good record of distinction being one of the top ten non-life insurance companies in the country. The company can meet the social needs of the customers and at the same time extending the quality of service in the act of doing extra mile with existing customers. In addition to this, the company is also looking for accessing new customers in the market.


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Graduate School of Business B.

Financial Analysis

SUMMARY OF FINANCIAL RATIOS FINANCIAL RATIOS

2014

2013

Difference

% Inc (Dec)

Liquidity Ratio Current Ratio

1.12

0.99

0.13

13.43%

83.76% 515.79% 8.68%

88.91% 801.65% 8.76%

-5.15% -285.87% -0.08%

-5.79% -35.66% -0.89%

Leverage Ratios Debt to Total Assets Ratio Debt to Equity Ratio Long term Debt to Equity Ratio Times Interest Earned Activity Ratios Insurance Receivables Turnover Average Collection Period Total Assets Turnover

139.34

5.04

134.30

2663.35%

3.55 180.03 days

2.77 131.55 days

0.78 48.48 days

27.96% 36.85%

0.42

0.29

0.13

45.79%

Profitability Ratios Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Total Assets Return on Equity

22.29% 3.42% 3.00% 1.27% 7.84%

20.03% 0.77% 0.34% 0.10% 0.89%

2.26% 2.65% 2.66% 1.17% 6.95%

11.29% 343.78% 784.49% 1189.50% 780.67%

Investors and analysts have developed various analytical tools, concepts and techniques to compare the relative strengths and weaknesses of companies. And such tools, concepts and techniques form the basis of fundamental analysis. Ratio analysis is a tool that was developed



San Beda College Graduate School of Business to perform quantitative analysis on numbers found on financial statements. Primarily, it helps link the financial statements together and offer figures that are comparable within the company performances or between companies and across industries and sectors. However, financial ratios vary across different industries and sectors and comparisons between completely different types of companies are often not valid. To measure the growth and overall performance of UCPB GEN and for the purpose of this paper, financial ratios such as liquidity ratios, leverage ratios, activity ratios and profitability ratios were used on its 2014 and 2013 audited financial statements.

I.

Liquidity ratio

Liquidity ratios simply measure a firm’s ability to meet its short-term obligations. The Company has shown 13.43% increase on its current ratio from 0.99 to 1.12. It simply indicates that company has properly managed its current assets through good level cash and equivalents so that it could fund the short-term obligations specifically those resulting from insurance claims and liabilities.

II.

Leverage ratios “That In All Things, God May Be Glorified”

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San Beda College Graduate School of Business In terms of company’s ability to meet its longer-term obligations, leverage or solvency ratios were used. Debt to asset ratio has slightly improved from 88.91% to 83.76% which stands for percentage of a company’s total assets that is financed by debt. The 5.79% decrease in the said ratio also lessens its financial risk in the form of fixed interest payments while debt to equity ratio was down by 35.66% from 801.65% to 515.79%. The reduction of ratio also means lessening financial leverage and risk. Generally, although financial leverage creates additional financial risk by increased fixed interest payments, the main benefit to using debt is that it does not dilute ownership in which the company have displayed good debt ratio. However, long term debt to equity ratio slightly declined by 0.89%. While times interest earned increased by 2663.35% from 5.04 to 139.34, it shows excellent cash flows generated over to its interest payments. In general, the company shown a good financial leverage ratio in its 2014 compared to 2013.

III.

Activity ratios

When it comes to how efficient the company utilizes its assets, activity ratios such as receivables turnover, assets turnover and average collection period were used for evaluation. The increase of 27.96% and 45.79% in receivables turnover and assets turnover respectively means that credit policy became strict and cash is collected more quickly for use in the company compared last year. There is an improvement in the credit and collection policy implemented by the broker servicing and marketing department. However, average collection period changed to 131 days to 180 days. It is a signal that customers are struggling to pay their premiums or there is a slow collection payment by clients. Generally, it is a satisfactory


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San Beda College Graduate School of Business rating in the company’s activity ratio though receivables and assets turnover has improved but average collection period increased by 36.85%.

IV.

Profitability ratios

In general, the company had a good fiscal year. It improved its ability to generate profit. All five of the main profitability’s ratio, such as gross profit margin, operating profit margin, net profit margin, return on assets, return on equity, have increased from the previous year. It means that the company shown great ability to earn an adequate return and it is using its resources more efficiently. Compared to other non-life insurance companies, the company holds a competitive advantage in quality service and comprehensive insurance coverage enabling the firm to charge more for its products. Recently, the company has added the professional indemnity as part of its insurance offering. In addition, the firm also holds a competitive advantage in product costs compared to other players in the industry due to efficient production techniques. While operating margin has increased by 343.78% from 0.77% to 3.42% that corresponds to the relationship between sales and managementcontrolled costs. Increasing operating margin is generally seen as a good sign. Net profit margin is also up by 784.49% from 0.34% to 3.00%. It is simply a good sign because the increase in bottom line is high. While return on assets and equity is up by 1189.50% and 780.67% respectively. The high improvement on its return on assets means that the company is able to efficiently generate earnings using its assets. The increased in return on equity is excellent because it is the level of income attributed to shareholders against the investment that shareholders put into the firm.


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San Beda College

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Graduate School of Business Over-all, 2014 has been a good fiscal year for UCPB GEN. By ranking at the 7 th spot in terms of premiums earned in the industry, it is a great sign that the company have fully recovered from the challenges of last year. 2013 have been a trial for the insurance industry because of the natural disasters and unforeseen events that hit the country. Being one of the strongest in the industry, UCPB GEN is not precluded on impact such tests but it still managed to reflect positive income last year while others show great losses and downfalls. From net income of PHP 8.2Million in 2013 to PHP 75.5Million in 2014, the company has shown an increase of 820% on its net income in a year. Indeed, UCPB GEN is determined to achieve its mission and reach its goals through an effective risk management, quality service and continuous improvement to beat its competitors and be the leader in the industry.

C.

Value Chain Analysis

MARKETING

Marketing Analysis; Determining the product mix; Determining the pricing strategies; Determining sales projections

RISK MODELLING

Statistical Analysis of risk related to insurance products based on actuarial data related to the target markets.

SALES

Quotations; Proposals; Channel Management and Commission Calculation

POLICY ADMIN

Policy Administration and Risk Assessment

FINANCE / BILLING

Invoices; Credit Notes; Premium refunds

CLAIMS

Claim registration, Assessment, Investigation, Approval, Claim Payments and Recoveries

CUSTOMER SERVICE

After sales support for customers

A value chain is modeled in terms of primary and support activities. Primary activities are those that feature in the value chain itself. They are the processes responsible for engaging with the market and directly transforming inputs into outputs. Support activities support the primary activities.



San Beda College Graduate School of Business The value chain depicts an end-to-end process that executes left to right. First, marketing sits at the beginning of the value chain because the company must determine what product it is going to offer before doing anything else. After determining the product mix and pricing strategy, risk modeling , usually performed by actuarial team, must occur to determine the means by which premium will be calculated for each insurance product. Armed with this information, actual pricing (rate charts) can be determined for each product. There are study and benchmarking using the industry and competition conducted in setting the rates/pricing. Note that this occurs in the marketing activity. So the process has transitioned back from risk modeling to marketing. Feedback loops are always going to occur within value chains. The point is that the first process that had to occur lay within the marketing activity, and thus marketing sits before risk modeling in the value chain. Now the business is in a position to start selling its insurance products to customers. This is the sales activity that involves quotations, proposals, risk assessment and commission calculation. Commission are paid to all parties (brokers and agents) involves in the distribution channel. Once a policy has been sold, it must be written. This is the main function of policy administration department. Once policy has been written, the customer must then be billed. Once premium has been paid by the customer, the customer may at some point register a claim. The customer service function is then responsible for serving the needs of the customer until his or her policy expires.


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San Beda College Graduate School of Business The internal factor evaluation analysis simply shows that UCPB GEN’s major strengths are its service-focused work environment and quality-driven culture, quality management system and ISO Certification, regular skills training program and its financial stability and positioning as it posted ratings of 4. The major weaknesses are low brand identification/distinction, advertising effort including its online website, long average collection period reflected on financial ratio analysis which as posted at rating of 1. The total weighted score of 3.006 points out that in some considerations UCPB GEN has an average to strong internal organization.

IV. STRATEGY MATCHING A.

Internal-External (IE) Matrix


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San Beda College Graduate School of Business After determining critical success factors internally and externally, IE matrix was used as part of the matching stage in strategy formulation. Plotting the EFE at 2.360 and IFE at 3.095, IE matrix shows that it falls under the Growth and Build region. Growth and Build region means intensive and aggressive tactical strategies. The strategies should focus on market penetration, market development, and product development. From the operational perspective, a backward integration, forward integration, and horizontal integration should also be considered.

B.

The Strategic Position and Action Evaluation (SPACE) Matrix


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Financial Position (FP) Leverage Liquidity Average Collection Period Receivable Turnover Return on Investment

Ratings +3 +4 +1 +4 +6

Stability Position (SP) Technology Changes Rate of Inflation Barriers to entry into Market Competitive Pressure Risk involved in the Business

Ratings -3 -3 -2 -3 -4

Competitive Position (CP) Market Share Product Quality Customer Service /Loyalty Marketing Capability and Network Human Capital & Management

Ratings -2 -3 -2 -5 -4

Industry Position (IP) Growth Potential Profit Potential Financial Stability Substitute Products Price Sensitivity

Ratings +6 +5 +4 +2 +3

CONCLUSION “That In All Things, God May Be Glorified”


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Graduate School of Business FP Average is SP Average is CP Average is IP Average is

+18 / 5 -15 / 5 -16 / 5 +20 /5

= = = =

+3.6 -3.0 -3.2 +4.0

Directional Vector Coordinates x-axis = 4.0 - 3.2 = 0.80 y-axis = 3.6 - 3.0 = 0.60 UCPB GEN should pursue Aggressive Strategy.

According to Fred David’s, strategy choices under aggressive approach are backward integration,

forward

integration,

horizontal

integration,

market

penetration,

market

development, product development and diversification. SPACE Matrix of UCPB GEN indicates that the firm must implement an aggressive strategy. The firm has a tough competitive position in the market with rapid growth. UCPB General Insurance Company, Inc. should capitalize on its internal strengths to form a market penetration and market development strategy.

C.

Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

SWOT analysis, method, or model is a way to analyze the competitive position of a company. SWOT analysis uses SWOT matrix to assess both internal and external aspects of a business. SWOT is the first stage of planning and helps decision makers to focus on key issues.



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Graduate School of Business The concept of determining strengths, weaknesses, threats and opportunities is the fundamental idea behind the SWOT model. Strengths and weaknesses in the SWOT matrix are internal factors. Opportunities and threats are external factors. SWOT can be used in conjunction with other tools for strategic planning, such as the Porter’s Five Forces analysis or the Balanced Scorecard Framework. To present the model in a more understandable way, scholars came up with the so-called SWOT matrix. SWOT matrix is only a graphical representation of the SWOT framework.

SWOT

S – STRENGTHS


W – WEAKNESSES


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Graduate School of Business 1. Market Penetration - Strengthen the company branding by relating to characteristics of being service-focused and client-oriented local firm. (O8, S1) 2. Market Penetration - Tap the market of automobile dealers especially the independent dealers to be their quality insurance provider by offering competitive product rates. (O1, S1/S3) 3. Maximize the investment on GENIISYS as the core insurance solution for their Integrated General Insurance System Project by full implementation and wide orientation to all employees/branches as part of efficiency improvement. (O6,S2)

O - OPPORTUNITIES

4. Additional investment on technology such as well-designed telephone call system and redesigning of company website. (O8, O6, S2) 5. Regular training update for Internal Quality Auditors to maintain the quality management system compliance of the company to any changes by Internal Organization for Standardization (ISO). (O2/O4, S3/S4) 6. Continuous investment on human capital through excellent training programs for employees. (O3, S4) 7. Additional investment on real estate and aggressive investment plans/strategies. (O3/O10, S8)

1. Invest on Advertising and different product campaigns to increase visibility of the firm to the increasing potential markets and take advantage of the growing economy. (WO2, W10,W8, O2, O3, O10)

2. Improve the communication tools/system of the company, together with increased involvement of the departments with customer service/assistance towards improvement of business units' synergy and call redirecting. (W7, O6)

3. Devote time on assessment of industry's employee pay to update the company's comprehensive pay and benefits package for employees. (W5,W6,W9, O9, O2)

4. Properly launch the company mobile app to increase the visibility of the Company with the use of modernized tools. (W8, O9)

5. Invest on the leadership trainings/seminars necessary for the improvement of the Management style of the company especially for those management trainees and successors of the organization. (O3,O4, W5, W6)



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Graduate School of Business 8. Maintain the soundness of cash operations particularly the liquidity from short-term investments such as commercial papers, time deposits and others. (O2/O3, S5)

6. Additional payment facilities, like partnering with top banks and payment services provider in the country, to improve the collection of premium payments. (O8, W10)

9. Additional online payment options (Global payments, Megalink and Bancnet payments) and payment outlets (such as Bayad Center/Western Union/Cebuana Lhuiller, etc.) for faster collection of receivables. (O8/O6, S6) 10. Market Penetration - Make aggressive promotions and ads in any forms such social media, visual (billboards/posters), auditory (radio ads) and others. Also, transparent participation on industry events and company expo. (O9, S9) 11. With the continuous growth of country's population, continuous improve the market coverage to sustain or surpass the current total premiums earned. (O7, S10) 12. Regular update on effective modern tools for risk management and quality management through difference seminars, trainings and forums. (O6, S10)

1. Improve the company branding and marketing using the Core Values of the organization. (T1, S1, S3) 2. Focus on maintaining the existing clients and do push and pull marketing for potential clients. (T1, S9, S10)

T – THREATS

3. Continue excellent training programs for employees that will attract quality job seekers to be part of the organization. ( T3, S4) 4. Execute more corporate social responsibility activities. (T4, S1) 5. Integrate all the systems down to the branch offices. And have an effective segmentation of clients. (T5, S2, S3)

1. Invest in advertising to create UCPB GEN brand and products to the market. Provide trainings to branches, or orientation of agents on new insurance products and updates so that products will be perfectly presented to clients that will maximize the UCPB GEN's profit. (T1, T5, T6, W1, W2, W8) 2. Be active in the social media environment. (T5, W2, W8, W10) 3. Conduct more corporate social responsibility activities as part of promoting the company core values. (T4, W1) 4. Open additional branches in key cities and provinces in Visayas and Mindanao



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Graduate School of Business 6. Redesign and update the company online website and infuse application that will help the clients to easier interact and access the information with the company. (T6, S1, S2, S3) 7. Tap the Agriculture sector as their insurance provider especially for those who do import-export goods by offering competitive rates. (T7, S9)

especially to areas where insurance needs and demand is high but access is limited. (T5, T6, W3) 5. Invest in modern system and technology to be at par with the industry competition and improvement of internal operation/rocess. (T1,T5, T6, W4, W10)

8. Invest on assets that are compliance to Insurance Commissions rules and regulations on admitted assets. (T8, S8) 9. Expand the loan programs of the company as one of the sources of income generating operation. (T10, S10) 10. Implement stricter policies with regards to Insurance Commission regulations. (T8, S3)

Summary of Strategies

Strategic Options Market Penetration Market Development Product Development Concentric Diversification Conglomerate Diversification

IE Matrix

SPACE Matrix

SWOT Matrix

1 1 1

1 1 1

1 1 1


Total 3 3 3 0 0


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Graduate School of Business Horizontal Diversification Joint Venture / Strategic Alliance Retrenchment Divestiture Liquidation Forward Integration Backward Integration Horizontal Integration

0 1 1 1 1 1

1 1 1

1 0 1 0 2 2 2

With several Strategic Management Matrices that were used to determine strategies for UCPB GEN, the researcher came up with Market Penetration, Market Development and Product Development as strategies that must be capitalized in order to have a more productive and profitable operations.





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San Beda College Graduate School of Business The alternative strategies are being considered by UCPB GEN - market penetration, market development and product development. The sum total attractiveness score of 5.805 signifies that market penetration is a more attractive strategy when evaluated against market development and product development with total attractiveness scores of 4.687 and 3.457 respectively.

V. STRATEGY FORMULATION 1.

PROPOSED STRATEGIES

A.

Primary Strategy

The results of the Quantitative Strategic Planning Matrix signify that UCPB GEN should focus on Market Penetration Strategy. The strategy will actually seeks to increase the market share of the company for its insurance products and services in the non-life insurance industry through greater marketing efforts and promotions. In essence, this will involve various marketing activities and executions of the company and its insurance products such as motor insurance, marine/cargo insurance, fire insurance, bond and casualty insurance. The strategy is widely used alone and in combination with other strategies. This mainly includes increasing the number of insurance agents, increasing the advertising expenditures, offering extensive sales promotion items and increasing publicity efforts. In this regard, the strategy also will


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San Beda College Graduate School of Business pave way for the company to fully set its brand distinction in the market along with its comprehensive insurance products. Some moves for UCPB GEN to take should mainly focus on market visibility activities that will push the sales high and increase the market share which is equals to increase in the net income of the company. Aside from the aggressive engagement in advertising and promotions, one activity that might contribute to the success of this strategy is the Sales Rally or Sales Blitz. It is an activity that gathers all the sales people of the industry. Thus, it helps promoting network mobility and expansions among agents of different insurance companies. Another is by actively sponsoring and participating to the industry-wide organizational activities like Annual Golf Tournament – Market Networking and Campus Tour of the Philippine Insurers and Reinsurers Association and others.

B.

Proposed Secondary Strategies Market Development Strategy – The strategy involves introducing insurance

products and services into new geographic areas. UCPB GEN is more visible in Metro Manila and other key cities. Currently, UCPB GEN has 22 branch offices nationwide. For Luzon area, there are 15 branch offices. While in Visayas and Mindanao area, there are 4 branch networks and 3 branch networks respectively. The Company is known for its service, dedication and reliability in terms of risk management “That In All Things, God May Be Glorified”

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San Beda College Graduate School of Business insurance industry. But in some parts of the country, in the rural areas and some provinces especially in Visayas and Mindanao, people have limited access with insurance companies resulting to low insurance awareness and growth. One move should UCPB GEN consider is to establish a market in those specific areas to have an increase in transaction which equals an increase in income. Hence, it will also contribute to expansion of insurance industry in the countryside.

Product Development Strategy – The strategy seeks to increase sales by improving or modifying insurance products or services. However, the strategy usually entails large research and development expenditures. UCPB GEN may be investing and inventing new ideas and programs but that’s also what their competitors are doing. To differentiate their intermediation programs form the rest of the group, the firm should think of a unique program that the competitor’s program has not. Since there is a record of increasing demand and continuous growth of non-life insurance products, the firm my take the idea of packaging or developing new insurance product bundle that will tap other industries such as agriculture and others.

C.

Other Options “That In All Things, God May Be Glorified”

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San Beda College Graduate School of Business 1.

Aggressiveness in Selling and Promotion: UCPB GEN should be aware that

the technique in the market in selling similar products is based on the attitude and way of promoting the non-life insurance products in the market. Having qualified sales agents, brokers and bancassurance will help the company to be well-known in the industry. Since quality of service is the major way to connect with the existing client, and to have new clients. Technology is the vital part of the changes in style of selling thus remains the old fashioned style technique is still an advantage to move forward and to reach the goal of the company to be leading in market share. 2.

Expand the Claims Department force: UCPB GEN is known to be more

efficient in terms of claims and because of unexpected calamities that the company encountered in 2013, therefore the Company should have additional headcount for claims force not only directly in Metro Manila but also in Provinces. To have a faster track in procedures, the company should have Claims Evaluation Center in North and South Part of the Philippines especially in Motor Insurance and another force in Fire Insurance that is also having a hard time to look into right away the losses that is everything always depends in the Head Office. If the company has satellites, this will definitely help out in the faster transactions. 3.

E-Policy: This will help the company minimize the costs especially in paper

usage. In line with the nature and environmental issues, the company should consider an electronic policy. This is applicable to those clients who are almost adapted to changes in their transactions that is already online base. Printing policies should be “That In All Things, God May Be Glorified”

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San Beda College Graduate School of Business minimized and this is applicable also as a soft copy of the clients. For other transactions especially on the mortgaged copies, hard copies are still advised to submit a hard copy. Eventually, this will help also the company in prioritizing release of electronic policies – hassle free. 4.

Authority limits: Acceptance and declination has been practiced by the specific

assigned people from staff, officers and directors. In the increase of authority limits and at the same time an advantage to practice authority limits, clients are eager to know right away what premium should he/she will be paying if he/she closes the deal. Because of tight authority, we still look into higher authority limit to ask approval. This is avoiding time constraints and also affects the turnaround time in transaction per line.

II. BUSINESS STRATEGIES Subsequent part of this paper defines the different functional areas that will have a significant contribution to the success or completion of the strategy. On a per functional area basis, I have incorporated the following: 

Analysis of the company’s capabilities to execute the strategy and conclude that

the company has the capability to implement the same. 

How each functional area will be handling the different strategies being executed.


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San Beda College Graduate School of Business 

At the end of the functional area, the Balance Score Card will tie together all the

different working groups as well as strategies that are being done, for performance evaluation and monitoring. As the firm has identified the overall direction on how to increase it market share, boost its sales and expand the network, it requires that UCPB GEN be able to identify strategies for each functional area.

A.

Marketing Strategy

Insurance companies are unique when it comes to marketing. Since this is a non-life insurance industry, with no tangible products to sell, everything must rely on strong relationships with loyal customers and word of mouth will help them to compete in the industry. In order to achieve its goal to be number one in all aspects of the competitive force in the industry, market penetration is the key strategy to be applied. The company since its foundation recognizes the intensity of competition. Since the industry’s dynamics will fall on the service organizations, the company still needs to thoroughly understand the needs and concerns of its customers. This can lead the customers to be motivated towards and deal with the company. Advertising and Promotion – UCPB GEN should be aware that in the intensity of competition, advertising and promotion are the key tools to be well-known in the industry. Knowing that the company has always been part of the top ten in premiums “That In All Things, God May Be Glorified”

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San Beda College Graduate School of Business earned and net income, a budget should be sufficiently allocated. Website design and improvement, pursuing aggressive sales drive for direct agents and brokers are also needed to sell more in the market. Moreover, it is important for UCPB GEN to be active in social media like Facebook, Twitter and Instagram. By regularly updating the page, it will be easier for clients to get updated about the promotions and changes of the company. Moreover, such tools can be used as platforms of promoting its products by creating media participation from the netizens.

Re-launching of the Mobile App – Recently, UCPB GEN developed a mobile game application named “Coco’s Quest”. The application be downloaded for free in Apple Store and Google Playstore. It aims to reach target markets and potential clients through the application where all product lines are imbedded in the adventure of “Coco” who is the character of the game. To put it blunty, it is a good investment for the firm because they are adapting to the external changes in the industry. However, promotion and cascading th said application is not properly executed. It has not achieved its objectives yet so through re-launching and promotion of the app, the firm can pursue the objective of the application which is to reach its target market and potential clients and let them know more about the company and what does it offer.


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San Beda College Graduate School of Business Teamwork and Coordination – Product Development should regularly advise the Sales and Marketing Group in presenting any or all improvements in the product through meetings, training and seminars to all employees. This will help the employees to familiarize with the products and add enhance their productivity on the job. Insurance is a continuous learning and not specifically discussed inside the classroom alone. This is a further hands-on learning process. This will help the employees to be more informed and also grow in terms of product knowledge.

Hire additional staff, agents and tie-up with brokers for Sales and Marketing – Providing additional headcount with those who have experience and networks from the Insurance field will contribute positively in the company’s success. In line with marketing trends towards online services and transactions, it may be helpful for the company to undergo technical courses in web design and advanced insurance courses. This will promote increased interaction by prospective customers through the company website and external trainings/networking. A 24/7 Helpline – The company should also be aware that there are customer who are also expecting a beyond Mondays to Fridays assistance. This is specifically customers who have a loss experiences o property damages during the weekends or


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San Beda College Graduate School of Business holidays. This will definitely help them to advise right away the company regarding their concerns, prolonging the agony make them unimportant and disappointed.

Setting up Two (2) Branch Offices Annually – Since the company has only 22 existing branch networks in the Philippines, this will help in reaching the target market especially those existing clients outside Metro Manila. Compared to other competitors, their business are expanding and at the same time increase in their profit.

B.

Finance Strategy

Improve and maintain daily liquidity to support daily operations – Overall, UCPB GEN has a good fiscal year. However, though it can support the daily operations but consistency wise, it needs to be improved to avoid delay of issuance of checks for claims. To maintain the liquidity of the company in a desired level, it is better for the firm to have a regular placement in commercial papers especially when there are a lot of cash in bank. In this way, the funds of the firm will earn interest better than any deposit products of the bank. In addition, it is easy to pre-terminate the commercial paper without penalty and charges.


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San Beda College Graduate School of Business Reduce the Accounts Receivables by pursuing aggressive collection and expanding payment options/facilities – Based on the premiums earned for the year, UCPB GEN has definitely aced among the competitors. However, collection seems to be slow as reflected in the figures of accounts receivables. Thus, it missed the opportunities to earn more in the interest of time value of money. By expanding the payment facilities, clients will have more convenience in paying their premiums. They will be able to pay their premiums at home through online banking, visiting accredited payment outlets aside from the company branches.

Invest in assets that are allowed by Insurance Commission as admitted assets – Insurance Commission is the government agency that oversees the operation of the insurance companies. In relation, capitalization and assets of the firms are being monitored from the asset accounts that is considered admitted assets which will form the official value of the company. Moreover, the company should engage in buy and sell of real estate properties as an additional source of income because of the boom of the sector.

Receivables Management – Receivables turnover of the bank is very weak. Management must enforce this as a key performance indicator to collection team in


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San Beda College Graduate School of Business order to lessen those days. Receivable management is achievable thru periodic review of credit terms provided to clients.

C.

Operations Strategy

Customer Service/Support – The Company must provide a wide range of customer service or helpline especially during weekends and holidays. This will meet the expectations of customers especially in the time of their advance renewal and claim processes. This will be a hassle-free to them to wait the first reporting day of the week to process everything. UCPB GEN main office is in Makati, mainly the center of business is located there. Though the expansion of the company already has branches in the provinces, support is not enough to extend or provide to the target market. Customer service hotlines should always and cuing of complaints or inquiries should be attended immediately.

Process improvement – UCPB GEN is known to be the first ISO certified company, providing that all standard operating procedures are met by the company. But through the process as the company is still adapting to the ISO changes, there are parts of the process that should be eliminated to avoid redundancy. To adapt the fast pacing deal with the client and outright selling and closing a product, the company should be fast and reliable. Practicing authority, risk acceptance and declining should also extend to “That In All Things, God May Be Glorified”

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San Beda College Graduate School of Business officers and staffs for them to give decisions outright. Quality System Enhancement should also be present and will be the ace player in contributing in the success of the company. Product Innovation and Quality Operations Strategy – The Company should innovate existing products through new packages (coverage and premiums) that will attract more on customers. Revising the design of brochures and website can actually gain more clients and motivate them to join and insured their property in UCPB GEN. Facilities for enhancement of new products and design should be present and this is provided by IT department since these will supposedly a system generated. Technology is another factor to completely connect and build a relationship with customers. It is important to note that in the recently affected areas hit by calamities such as earthquake, typhoon and flood, the company is able to provide help apart from by donating foods, clothes and medicines to the victims. The company still maintains its ability to pay on the claims of clients whose properties were affected. The company also encourages all departments in implementing paperless transactions as this helps to minimize cost and at the same time help the customers in arranging their fast-paced deal with the company.


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San Beda College Graduate School of Business Lastly, it is strongly recommended to give priority on the proposed additional branches. There are only 4 branches in Visayas and 3 branches in Mindanao. Comparatively, the top two competitors have more branches. D.

Human Resources Strategy

Human Resources Department have to keep on getting the right people to stay with the business condition and to bring in new talents as part of the succession planning. With the shifting business conditions, regulatory setting, and the challenge of sustaining unmatched service levels across the entire network, it is critical to concentrate on the need for regular skills development for officers and staff. UCPB GEN has to continue offering a satisfying and inspiring work experience for its employees. UCPB GEN should be given the necessary tools, training, and ability to be successful in their careers and supply to the company’s success. E.

Information Technology Strategy

Insurance is a technology-driven business and it must have the required investments for revolutionary technology to advance operational competence, efficiently handle risk, regulatory compliance, and more significantly, to improve service quality and enhance customer experience. As the insurance company expected and geared up for the considerable increase in insurance providing. UCPB GEN acquired a new business solution database system in 2011 – the GENIISYS System. GENIISYS is the leading integrated insurance software solution in the Philippines. It has a total of 21 “That In All Things, God May Be Glorified”

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San Beda College Graduate School of Business installations since 1991 and is currently being used by some of the top non-life insurance companies in the country. It is complete with modules and features that can efficiently handle the operations of a non-life insurance company, and it can be linked to any type of Business Intelligence. With its new web version, GENIISYS will be even more flexible, secure, and operationally cost effective for its users. UCPB GEN must continuously invest in technologies that presents improved data analysis and reporting to convene the increasing safety, regulatory, and compliance.

F.

Corporate Governance Strategy

To be able to comply with good governance, UCPB GEN has to observe with the rules and policies issued by the Insurance Commission, Securities and Exchange Commission, Anti-Money Laundering Council and all other government regulatory organizations. Compliance must be observed throughout the organization. UCPB GEN is proud to say that its Corporate Mission states that the firm attempt to be accountable stewards of the environment and humanity.


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San Beda College

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VI.

BALANCE SCORECARD

OBJECTIVE M A R K E T I N G

F I N A N C I A L

O P E R A T I O N

- Aggressive Advertising and Promotion - Re-launching of the Mobile App - Solid Teamwork and Coordination - Hire additional staff, agents and tie-up with brokers for Sales and Marketing - 24/7 Helpline - Setting up Two (2) Branch Offices Annually -Improve and maintain daily liquidity to support daily operations - Reduce the Accounts Receivables by pursuing aggressive collection and expanding payment options/facilities - Invest in assets that are allowed by Insurance Commission as admitted assets - Receivables Management

-Customer Service/Support -Process improvement -Product Innovation and; -Quality Operations Strategy

MEASURE OF TARGET

PRIMARY RESPONSIBILITY

-Increase in premiums earned -Increase in accredited agents and brokers -No. of new clients -Increase in Market Share -No. of branch offices -No. of website visits and app downloads

Marketing and Accounts Management Team

-On time releasing of claim checks -No. of Check released -No. of Check cleared -Volume of OR issued -Level of Investment Portfolio -Level of Receivables

Finance and Accounting Finance and Investment Finance and Sales

-No. of callsattended -No. of transaction processed -Faster Turn-over time motion -Passing ISO Certifications and Accreditation

Operations Director and All Managers


UCPB GEN Management


San Beda College

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H U M A N

-Employee Ratention -Quality Employees -Well-skilled and Competitive Staff

-Employee Satisfaction -Years of Tenure of Employees -Job Level of Employees -Competitiveness, No. hours of OT rendered -Size of the firm

-Full implementation of GENIISYS -High caliber of computers and system

-Centralization of Head Office and Branches transaction -Faster generation of monthly reports

R E S

I T

Human Resource and Admin Department

Information Technology Dept and Branch Managers


A Strategy Paper for UCPB General Insurance Company, Inc. - Jonimar T. Golisao

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