Term Paper on "Reputation of Insurers in the UK"

Term Paper 21 pages (5779 words) Sources: 1+

[EXCERPT] . . . .

Reputation of Insurers in the UK and China

This dissertation examines the how the problem has arisen in the UK industry, what are the damages, the lessons to be learnt, and the extent to which the emerging Chinese insurance market might be exposed to a similar problem in the future. The industry of insurance in the country has been aligning itself for the market changes that have culminated due to the many shifts in China's business structure in recent years. China is one among the Asian economies, the other being India that are touted to be "superpowers in the beckoning." (Kundu, 2001) China has a purchasing prowess of 1.3 billion people, leapfrogging economic growth and slow-but-steadfast economic reforms" (Kundu, 2001) Foreign consumers are attracted by the potential of the Chinese insurance market and are waiting for admission to the market. The UK Insurance Industry is the largest in Europe and third largest in the world. Approximately 348,000 people are employed in the UK insurance industry. The UK insurance industry accounts for 17% of investment in the stock market; and pays out almost 222 million pounds per working day in pension and life insurance benefits and 74 million pounds per working day in general insurance claims. China's insurance industry is newly emerging while the insurance industry in the UK is experiencing problems with consumer confidence and reputation damage and destruction.

The Elements and Factoring Influencing and Characterizing the Reputation of Insurers in the UK and China

Dissertation Proposal

Chapter One

Statement of the Problem

Methodology



Importance of the Research

Introduction

I. The Reputational Risk

II. Insurer Vulnerabilities

III. Damage and/or Destruction to Reputation of Insurers

Chapter Two

I. UK insurers

II. Problems and Difficulties in the UK Insurance Industry

III. Efforts and Initiatives in the Insurance Industry

IV. What lessons should China learn from UK?

Chapter Three

Chapter Four

V. General conclusion

Bibliography

The Elements and Factoring Influencing and Characterizing the Reputation of Insurers in the UK and China

Chapter One

Statement of problem

In the UK, insurance lies at the bottom of the league table of public trust. Also, insurance companies frequently complain about receiving negative media coverage, Therefore, reputation is becoming a major issue in the UK insurance industry today; it is a key concern of insurance company managers and the industry's reputation has sunk to an all time low over the last decade. Loss of reputation arises from a failure to meet stakeholder expectations in respect of performance or behaviors and it is highly infectious. Moreover, it is spreading in two ways, one is that a company upsetting one of its stakeholder groups, i.e. customer, can see the problem affect to other groups very quickly; another way is problem in one company can soon loss the reputation of the whole market, and can even jump by association between Life and General insurance. This dissertation examines the how the problem has arisen in the UK industry, what are the damages, the lessons to be learnt, and the extent to which the emerging Chinese insurance market might be exposed to a similar problem in the future.

Methodology

The methodology of the research will be through study and review of Information sources: business libraries, CII library, Internet, interviews (or questionnaires) with companies operation in both UK and China, questionnaires from consumers in UK and China

Importance of the Research

The results would be of interest to the Chinese Regulator and companies operating in the Chinese insurance market in the measure of effectiveness of methods of monitoring the industry in the area of ethical business principles.

Introduction

The work of Kristensen and Zhuang (2005) relates that the People's Republic of China (PRC) is located in Eastern Asia and is the 3rd largest country in the region "by area, after Russia" (Kristensen & Zhuang, 2005) and by measure of population after Canada. Bordered on the North by the Mongolian Republic and Russian, has on the Northeast border the countries of Russia and Korea, on the East border is The Yellow Sea and East China and on the Southern border of the country is The South China Sea, Vietnam, Laos, Myanmar (Burma), India, Bhutan, and Nepal, with the West bordered by Pakistan, Afghanistan and Tajikistan. Finally, the Northwest is bordered by Kyrgyzstan and Kazakhstan.

This is the regional location of the focus of this work. The first thing one will note when scanning article lists related to insurance is the fact that the landscape of the world's economy reveals many shifts and changes on the immediate horizon. No longer can a business and most particularly that of the insurance sector be too rigid in their structure, if sustainability is hoped for in today's turbulent times. China has been in the process of entering the world market and thereby gaining experiential wisdom to combine with the much regaled older wisdom of the country.

The industry of insurance in the country has been aligning itself for the market changes that have culminated due to the many shifts in China's business structure in recent years. China is one among the Asian economies, the other being India that are touted to be "superpowers in the beckoning." (Kundu, 2001) China has a purchasing prowess of 1.3 billion people, leapfrogging economic growth and a slow-but-steadfast economic reforms'" (Kundu, 2001) China's average growth rate is a stated 10% over the past ten ears and as well it is stated that China is "Posed to become the economic superpower in the near future, second only to the United States of America."(Kundu, 2001 However, according to Kundu (2001)

The State Council divided the People's Insurance Company of China Group (PICC) from the People's Bank of China (PBOC) and began offering insurance products of the standard type such as property and life insurance and reinsurance services. More than 10 China domestic companies that were smaller were permitted to establish insurance businesses between the years of 1984 and 1990. However by the middle of the nineties decade PICC was still in control of approximately 70% of the Chinese insurance market. Further stimulation was provided to the domestic insurance market through PICC's division into three separate and independent companies, China Life Insurance, China Property Insurance and China Reinsurance Company. PICC was abolished in 1998 which left the operation of Chinese companies to independence. The insurance industry grew so rapidly that it was a required that a legal framework be established. The formal insurance law was promulgated by the National People's Congress in 1995 and as well The China Insurance Regulatory Commission (CIRC) was established in the month of November, 1998. (Kundu, 2001)

There are problems that exist in the Chinese insurance system characterized by the failings for example in the insurance for the aged in the country. The government of China has, since the People's Republic of China was founded adopted a "mixed old age insurance system in that the traditional extended family insurance is supported by the legislation." (Li, 1999)The Constitution of 1954 holds that "parents have the duty to rear and educate their minor children; and the adult children have the duty to support and assist their parents." (Li, 1999) The family insurance is further protected through a "tight control of out-migration form rural areas." Pension benefits range between 75 to 100% of the last basic salary before retirement with the government taking the sole financial responsibility of the finance of the old age insurance expense. (Li and Xu, 1997) Stated is that:

In order to build a new old age insurance system to adapt to the market economy, China has initiated various reform plans for old age insurance on an experimental basis since 1984. On June 26, 1991, the government published "Decisions Regarding Old Age Insurance System for Urban Employees." The Decision stated that China's new old age insurance system would be consisting of three components - a basic old age insurance, the employer-based supplementary old age insurance, and the individual old age savings accounts. The basic old age insurance is based on the social pooled funds. The size of the pool would gradually increase from the current city-wide or county-wide to province-wide pool (Li and Xu, 1997) (Li, 1999)

The functions and responsibilities of The China Insurance Regulatory Commission (CIRC) are as follows:

Formulation and enforcement of related laws and regulations;

Overseeing of insurance business operations;

Protection of the interests of policy holders;

Development of the insurance market, maintains order in it and ensures fair competition;

Facilitation of the insurance industry reform and restructuring; and,

Setup of a risk evaluation and advance warning system to minimize insurance risk.

The state of the current insurance market according to Standard & Poors ratings states that "china's industry needs to improve management" (Beijing Review, 2005) Further stated is that China's insurance industry has grown significantly since its open in the early 1990s." (Beijing Review, 2005) Standard & Poors calls the outlook "encouraging" but states that China's insurance market is "characterized by relative weak capital strength, inefficient business practices" and lacks a "sound legal… READ MORE

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