1.
Introduction
AIG
is an acronym for the American International Group, a leading international
insurer operating in over 130 countries (AIG, 2014). It serves commercial,
institutional and individual customers for a wide variety of risks to property
and self. The company has grown since its inception in 1919 embracing a variety
of strategies culminating into its rebranding in 2012 where its latest logo was
launched.
In
this report, the company’s operation processes have been assessed and
recommendations given for any issues identified. The main reason for choosing
this company is the fact that the company has been accused on many occasions
over its tendency to delay the settlement of claims. This prompts the
assessment of its internal processes with a view to identifying the cause for
the delays. This is in addition to my personal interest in the insurance
practice and the fact that I have interacted extensively with the company to be
able to grasp their internal processes.
2.
Mission,
target market, and strategy.
2.1
Mission
The
company’s mission is to help see, build and secure a better future for everyone
(AIG, 2014). It does this by enabling its customers to mitigate their risks by
exploiting their insurance products.
2.2
Target market
The
company targets multiple customer segments including institutions, commercial
enterprises, and individual customers. The main services offered are property
insurance, life insurance, mortgage services, retirement services and aircraft
leasing. The company currently serves over 88 million customers around the
world and has prospects to attract more customers in the future.
2.3
Strategy
The
current strategies of the company can be summed up as follows:
i.
To enhance growth by
engaging in strategic partnerships and other growth opportunities
ii.
To embrace quality risk
management policies and streamline operational costs to enhance profitability
iii.
To embrace innovation
and introduce products that better serve the market
iv.
To invest in human
resources to attract and retain the top talent in the market
v.
To exploit the latest
data technology exploiting its global presence to serve its customers uniquely
Sources:
AIG, 2013; Tata AIG, 2013; AIG, 2014
3.
Main
business processes
Three
business processes have been identified for analysis. These are the processes
believed to be most central to the operations of the organisation. They
include: the underwriting process, the claims process, and the procurement
process.
3.1:
Underwriting
Underwriting
is a term that is used to describe admission of clients as policy holders
within the organisation. Typically, there are two avenues through which clients
become policy holders: through direct underwriting, and through brokers (Tata
AIG, 2013; AIG, 2014). In either case, the prospective customer completes a
policy document which is then forwarded to the insurer. Once the prospective
client’s application is filed with the insurer, the underwriting clerk issues a
policy certificate which is proof of an insurance cover. Once the process is
completed, the client is officially a policy holder entitled to compensation if
the risk insured against arises. The brokers are then paid their commission for
successfully delivering clients to the company.
3.2
Claims process
Claims
process occurs once a risk that was insured against arises. In this process,
the customer notifies the insurer of the incident by filling in a claims form
(Tata AIG, 2013The claims clerks then verify the process by assigning property
adjusters and investigators to not only verify the incident but advise on the
credibility of the claims. After the verification, the claim is paid and the
investigators/adjusters paid their fees.
3.3
Procurement
The
procurement process in this regard refers to the use of suppliers to provide
goods and services to the company. In the context of the underwriting and the
claims processes, the suppliers in focus are the risk assessment consultants,
investigators, property adjusters and others (AIG, 2013; Tata AIG, 2013; AIG,
2014). The suppliers are enlisted through a prequalification process where a
list of eligible suppliers is picked. It is from this list that employees
select suppliers randomly to conduct various tasks. Once the assigned tasks are
completed, the suppliers provide invoices which are then processed.
4.
Relationship
and cross-functional maps
4.1
Relationship maps
The
relationship maps below concentrate on the flow of work among the main actors
in the designated processes. These are as outlined below:
Figure 1:
The Underwriting Process Presentation Relationship Map
Figure 2:
The Claims Process Presentation Relationship Map
Figure 3:
The Procurement Process Presentation Relationship Map
4.2
Cross functional maps
The
cross functional maps shown below focus on the specific roles of the different
actors. These are as shown below:
Figure 4:
Cross functional map for the underwriting process
Figure 5:
Cross functional map for the claims process
Figure 6:
Cross functional map for the procurement process
5.
Analysis
In
addition to the consideration of the overall organisational strategies,
analysis of the operations process concentrates on identifying elements of
tightness and dependability as well as the identification of bottlenecks
capable of derailing service delivery.
5.1
Disconnect/information sharing
One
of the main strategies of the organisation is to invest in data management as
an avenue for improving efficiency and introducing new products and product
features (Biege, Lay and Buschak, 2012). This strategy would at least require
that a central information centre is established where the experiences of
different divisions can be shared to improve the products and internal
operations. A review of the main processes indicate that there is no framework
for information sharing with the main processes (claims and underwriting)
having very little in common. This lack of an interface between the departments
needs to be fixed and a role established where continual claims experiences can
be used to inform future policy recommendations in underwriting.
5.2
Tightness and dependencies
The
level of tightness and dependency is determined by the existence of processes
which could delay the entire operation in case of a delay. This tightness is
often recommended for removal to ensure that operations are insulated from
hiccups that could negatively affect service delivery (Leschke, 2013). Each of
the three processes outlined above have a high level of dependency as it
requires each stage to be completed before the next stage can be initiated. For
instance, in the claims process, the claims clerk must be in receipt of the
complaints and initiate an investigation of the incident alleged before
subsequent actions can be taken on the claim. The same tightness is evident in
the underwriting processes. This imposes on the organisation the need to always
ensure that none of the processes is delayed at any point.
5.3
Bottlenecks
The
impact of bottlenecks is highest where the level of dependency is very high
(Ojasalo, 2012). This is because the entire process has to stall awaiting the
completion of the processes whose execution is delayed. A bottleneck can be
described as a stage in the production process where activity is stalled
probably due to overload or other reasons (Jacka, 2002). In the AIG functional
maps above, overload is likely to occur in the activities vested in the office
of the claims manager, underwriting manager, and the accounts departments. Even
though the main activities are conducted by the underwriting and claims clerks,
these clerks tend to be many and often able to exchange responsibilities. But
the duties of the managers have to be executed by only one manager in an entire
department. This creates a bottleneck which could result in serious delays in
operations.
6.
Discussion
Evaluation
of the production process is central to effective organisational management.
The main weakness of the operational processes is the vulnerability to delays
and the existence of obvious bottlenecks. The fact that departmental managers
need to consent too many aspects of the processes expose them to the risk of
delays. This weakness would need to be fixed for the speed of settlement of
claims to be enhanced. The other weakness that needs to be fixed is the lack of
a formalised mechanism through which experiences are translated into data that
can be used to improve the products and operational processes. This is
especially with regards to interdepartmental dimensions. For instance, claims
clerks can be important sources of information for the underwriting department
when they are deciding on the kind of conditions to include in designing
insurance covers for their customers.
7.
Conclusion
AIG is a leading insurer around the
world and it specialises in providing insurance products in more than 130 countries.
One of its notable strategies is to invest in data technology and use its vast
experience around the world to be innovative in providing solutions that
conform to changing market needs. The main processes in the organisation can be
summarised as the claims process, the underwriting process and the procurement
process where the respective duties are to pay customers for losses incurred,
to enlist new customers, and to manage suppliers that help in ensuring that the
organisation runs smoothly.
In line with the issues identified in
the production processes, the following recommendations would suffice:
- Review
responsibilities to ensure that all potential bottlenecks are eliminated
- Create an
interface for information sharing between departments to sharpen
collective organisational intelligence
- Reduce the
level of tightness and dependency so that the processes could still go on
even when some stages are incomplete
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