Rita and Roger Stanton have been married for fifteen years. They have two childr

ID: 408368 • Letter: R

Question

Rita and Roger Stanton have been married for fifteen years. They have two children, Ronald, 12, and Rhonda, 8. They have a four-year-old Labrador mix dog named Ruff.

Rita is an administrative assistant for a large law office in the city. She attends law school three nights a week and hopes to become an attorney and practice contract law.

Roger is the principal at the local high school. He is also a full partner in a seasonal white water rafting business (Rowdy Rafters) with his brother Eddie.

Eddie’s wife, Betty works for a regional insurance company, Magnificent Mutual, in their marketing division. Magnificent Mutual Insurance Company has experienced poor sales results for its policies designed for small business owners. They have been unable to determine why the product is not successfully competing against similar products offered by other insurers. Currently the company utilizes the independent agency system of distribution as their sole method of reaching consumers. Betty is concerned that if results do not turn around soon, the financial stability of Magnificent Mutual may be impacted and she may lose her job.

Case Scenario:

Betty has asked you for advice as she leads her team in brainstorming solutions and prepares her final report for management.

1) Help Betty determine what factors an insurer must evaluate relating to its profile when selecting distribution systems and channels .

2) Explain to Betty how an assessment of its internal strengths and weaknesses can help Magnificent Mutual in the selection of distribution systems and channels.

3) Describe to Betty what considerations relating to existing markets might insurers, such as Magnificent Mutual, evaluate during the process of selecting distribution systems and channels.

4) Betty is aware of several trade associations which she feels could be of benefit to the company and is putting together a presentation for her manager on this topic. Aid Betty in identifying the purpose of trade associations advertising.

5) Although right now Magnificent Mutual uses the independent agency distribution system, Betty is considering recommending that Magnificent Mutual consider direct response distribution channels as well. Help Betty identify one advantage and one disadvantage of the direct response distribution channel.

6) Betty has also seen the success of many large direct writer insurance companies and is considering that model for Magnificent Mutual as well. Discuss with Betty two ways in which direct writer insurers can encourage their sales agents to develop new business.

7) Explain to Betty what qualities of financial institutions make them beneficial strategic partners for insurers.

Explanation / Answer

1) Help Betty determine what factors an insurer must evaluate relating to its profile when selecting distribution systems and channels

An insurer must evaluate these factors relating to its profile when selecting distribution systems and channels:

The following factors needs to be evaluated by the insurer while selecting distribution systems and channels

2) Explain to Betty how an assessment of its internal strengths and weaknesses can help Magnificent Mutual in the selection of distribution systems and channels.

Only when an insurer understands and does a satisfactory assessment of the strengths and weaknesses he can select the distribution system and channels. This is to ensure the opportunities to capture the market share are maximized by minimizing on the weaknesses.

3) Describe to Betty what considerations relating to existing markets might insurers, such as Magnificent Mutual, evaluate during the process of selecting distribution systems and channels.

Under any given circumstance an insurer must take into the considerations those characteristics that are defined and described in the business manuals. In case current account expiration are owned by either broker or the agent, then the insurer should exit that business and start over again. Or else the option is there to go for the expiration by purchasing it from the producers. Now both the options may end up being expensive basis quality of existing business.

The insurer must also take into consideration that communication channels are readily affected with a subsequent change in the distribution systems. This in turn cause changes in pattern of communication finally leading to dissatisfaction of the policy holder.

Trade association advertising are a set of programs which are intends in creating a favorable image of all the members in the association. Also these sort of advertising are ensured to familiarize the general public with all the logos and symbols pertaining to the association groups.

Advantage

The commission costs are very much reduced

Disadvantage

The advertising costs are generally on the higher end

Direct writer insurers can encourage their sales agents to develop new business by relieving producers of non-selling activities and subsequently compensating them at a lower renewal rate.

7) Explain to Betty what qualities of financial institutions make them beneficial strategic partners for insurers.

Insurers take financial institutions as one of the beneficial partners as they have a very strong base of the customers a predisposition to cross-selling, and strength at processing transactions.

Moreover technologies are efficiently implied while carrying out data mining for specific products & services.

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