CHAPTER 1 – INTRODUCTION

A. COMPANY PROFILE

Standard Insurance Co., Inc. is a Philippine non-life insurance company with a license to

market all types of non-life insurance lines. Providing over 49 years of service, Standard

Insurance is the leader in motor car insurance in the Philippines and one of the strongest in

property insurance after its acquisition of Zurich General Insurance Philippines in late 2003. The

Company ranks 4th in terms of gross premiums, 3rd in terms of net income and 2nd in terms of

capitalization. Its retail operations, primarily motor car insurance, is the most extensive and the

most advanced in the industry with 43 computerized full service branches nationwide with

underwriting and claims servicing capabilities, more than 200 car-dealer tie-ups nationwide, and

its own technical personnel. These technical personnel are engineers and trained mechanics

who perform car repair estimates supported by the Company's own computerized parts

database for all major models of popular brand vehicles. In the industry, it has the quickest

turnaround time with repairs in the car dealership shops and the only one with its own call

center to support its retail operations. In the meantime, Standard Insurance has adopted the

Zurich practices in risk engineering, underwriting and industrial claims processing

complemented with an in-house adjusters team. The Company's property, marine and liability

insurance, as well as catastrophe (CAT) cover are supported by superior reinsurance facilities

procured from the London and Singapore markets from international reinsurers with the lead

rated by S&P at AAA and the rest of the panel at no less than A-. These facilities are under the

excess of loss reinsurance treaties with its property and CAT covers having the highest

capacities in the industry. Its risk engineering process includes the use of Geographical

Information System (GIS) where mapping of property risks linked to the online system is made

against pertinent CAT hazard maps such as fault lines, liquefaction, and ground shaking and

flooding. The Insure/90, the Company's real-time general insurance system complemented by

its own IT department, was carried over from Zurich General Philippines and is currently in use

by corporate marketing and some Metro Manila branches. The rollout and shifting to the I-90 for

the rest of the branches is projected to be completed towards the end of 2007. The Company is

accredited by most of the major banks and financial institutions. Its ISO certification for quality

management systems received in 1998 was upgraded to an ISO 9001:2000 in October, 2003

and has been maintained since then.

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The Company has a product mix of 61:39 on the average, with motorcar accounting for

the major part of its portfolio and the balance in non-motor insurance, primarily property

insurance. The retail motorcar insurance is basically generated by the branches and car dealer

tie-ups under the Retail Group while the large corporate motorcar fleet accounts such as the

San Miguel Group, Coca-Cola, Pepsi-Cola, McDonalds, Smart Telecommunications, Globe

Telecoms and Pfizer are generated by the Corporate Marketing Group. As a result of its efficient

systems in underwriting, claims, IT and accounting for its retail operations, the Company's loss

ratio in motor car insurance has been the lowest among the major players. In the meantime,

around 42% of the Company's property insurance is generated from the International Program

Business (IPB) which is reinsured with ZFS under its cooperative partnership with the latter,

such as those of the Philippine operations of Nestle, Holmic Cement, McDonalds and Merck.

The remaining property insurance portfolio is generated from the open market and is reinsured

under the Company's reinsurance treaties with its highly rated reinsurers. Some of these

property accounts where the Company is the lead insurer include those of; a leading telecom

company, a leading realty company with its shopping malls, and a leading international hotel

chain. A majority of the property insurance for both the IPB and the open market have been

coursed through the top insurance international brokers. The prudent underwriting and risk

engineering practices of the Company have resulted in a quality portfolio which could be

generally classified as semi-prime to prime risks.

In the latter part of 2004, the Company launched its insurance product for cellular phones under

the brand "TXT2PROTECT, eStandard Cell phone Insurance". This was after nearly two years

of product research and development with the design of a dedicated and highly computerized

system in underwriting, claims (including anti-fraud) and reporting. The system includes linkages

to the leading telecom companies. The product has also been added as a value service through

an automatic insurance cover for a high-end post-paid plan of one of the telecom companies.

Similar to the motor fleet accounts, wholesale cell phone insurance has been made available to

corporate clients such as the large drug companies. The latest innovation of the cell phone

insurance product was the "Txt2protect Pre-paid Card" which became a practical and

convenient solution for premium payments and registration by clients anytime, anywhere.

Similar to the telecoms pre-paid card where subscribers scratch the pre-paid card & pin

numbers and send an SMS message to the dedicated network or mobile phone number, the

"Txt2protect Pre-paid Card" works the same way. Since Text2protect pre-paid cards are

distributed through the business centers and the retail distributors of Smart Communications'

prepaid load, the "Txt2protect Pre-paid Card" is thus made available through a wider channel of

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distribution 24-hours a day. More importantly, evolving from servicing the low-risk corporate

clientele to a very retail and higher risk consumer clientele, its system remains to be effective in

maintaining comfortable loss ratios, vis-a-vis, efficient claims processing.

Standard Insurance has a manpower complement of more than 900 nationwide. Led by a highly

professional management team, whose expertise, discipline and technology come from both the

banking and insurance sectors, complemented by the global expertise from the Zurich Group,

the Company in the last decade has been very HRD centered. It has consistently instilled on its

personnel a quality culture of professionalism and integrity as integral to their career

development.

The Company is 60% owned by Lourdes T. Echauz Holdings, Inc. a holding firm with a

net worth amounting to Php825 million as of December 2006.The remaining 40% is owned by

CEU Holdings, Inc.1

CHAPTER 2 - RESEARCH DESIGN AND METHODOLOGY

1 http://www.standard-insurance.com/profile.shtml

3

The researcher was able to acquire data from the following sources:

Primary Data

Primary internal data was gathered through the website of the Standard Insurance Co.,

Inc. It includes the company background and product information. The Annual Report of 2006

and financial statements from SEC explicates the company’s financial performance for the last

three years. The news magazine of the company includes their press releases and updates in

Non-life insurance.

Primary external data was congregated from the website of the Insurance Commission.

This information includes external factors that affect the industry, market size, market growth

ranking positions of all non-life insurance company in the Philippine market.

Secondary Data

Secondary external and internal data was gathered through the readings from the

internet. The information includes economic trends in insurance business and its major

competitor’s information.

Limitations

The Strategic Management Paper is limited to study and analysis of motor insurance

which the Standard Insurance Co., Inc. biggest line of the business when it comes to non-life

insurance. This financial data gathered are limited to the financial statement of years 2004,

2005 and 2006. The motor insurance has no balance sheet because Standard Insurance Co.

Inc. has a consolidated Balance sheet for the operation of the company and its business.

CHAPTER 3 – VISION AND MISSION STATEMENT

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A. VISION AND MISSION STATEMENT

Standard Insurance Co., Inc. is committed to continuously improve the quality of service

to the insuring public by raising the standard of competency and professionalism, and through

integrity.2

Mission Statement

To instill a quality culture that promotes the values of professionalism,

integrity, discipline, teamwork and productivity.

To maintain profitability and other financial targets and sustain

competitiveness of the company in the non-life insurance business.

To consistently give our customers value for their money.

To recruit and retain competent people committed to perform at their best in

delivering quality service to our customers.

To promote employees' continuous professional and personal development.

Quality Management Principles

Customer Focus

Leadership

Involvement Of People

Process Approach

System Approach to Management

Continual Improvement

Factual Approach to Decision Making

Mutually Beneficial Supplier Relationship

Analysis:

2 http://www.standard-insurance.com/new_site2/quality_policy.html

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The company is still in the state of improving the quality of service after receiving the

ISO 9001:2000 that was received last October 09, 2006 until October 08, 2009. This vision

statement illustrates the long term goal of Standard Insurance Co. Inc. as to be recognized for

the commonality of interests in having the standard of competency and professionalism. This

formal statement is communicated to all levels of the organization through e-mails, posters,

business meetings, news magazines and company gatherings.

The mission statement portrays the philosophy, their purpose and its principles in doing

business. The researcher will add mission statements to address the dilemma.

Proposed Vision Statement:

Standard Insurance Co., Inc. is committed to continuously improve the quality of service

to the insuring public by raising the standard of competency and professionalism, and through

integrity.

Proposed Mission Statement:

To instill a quality culture that promotes the values of professionalism,

discipline, teamwork and productivity.

To maintain profitability and other financial targets and sustain

competitiveness of the company in the non-life insurance business.

To consistently give our customers value for their money

By providing customers with the highest quality products and services,

we will spread safety and security to all around us.

To recruit and retain competent people committed to perform at their best in

delivering quality service to our customers.

To promote employees' continuous professional and personal development

To encourage employees in obtaining highest insurance qualifications

to give us the leading edge in technical insurance expertise for the

benefit of our clients.

To provide professional Insurance and Risk Management services with

the highest sense of integrity to all our customers".

While demonstrating responsible management as a good corporate

citizen, we will make a positive contribute to society.

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Proposed Core Values:

Customer Focus

Leadership

Involvement Of People

Process Approach

System Approach to Management

Continual Improvement

Factual Approach to Decision Making

Mutually Beneficial Supplier Relationship

Respond to Social Sentiment

Analysis of the proposed vision and mission statement:

There is no change in the vision statement of the company because the idea of

improving quality service is needed in attaining as the leading provider in insurance industry. As

been discussed in the Strategic Management textbook of Fred R. David, a good mission

statement clearly states the important components which are customers, products, market,

technology, Self-concept, concern for growth and concern for employees. The additional

proposed mission statements above clearly states the majority on how to improve their product

line, services and values to the customers, practicing good citizenship and the need for

competent employees in order to achieve quality service for insuring public. The researcher

decided to include respond to social sentiment because it will help to build company’s public

image as being socially responsible through responsible management. The core values will be

the guiding principle for the employees support the organization.

CHAPTER 4 – ENVIRONMENTAL ANALYSIS

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I. GENERAL ENVIRONMENT

a. Social, Cultural and Demographic Environment

The Philippines is a member of the Association of South East Asian Nations (ASEAN), a

regional trading block with combined annual vehicle sales of 1.5 million units (1996, pre financial

crises.) Before the beginning of the current economic crisis, Thailand was the largest

automotive market within the ten-nation ASEAN, with Indonesia ranking second in the group,

followed by Malaysia, and then the Philippines. In 1998, Malaysia was the largest, followed by

Thailand, then the Philippines and Indonesia (vehicle sales for the entire ASEAN market were

down 73 percent compared to the pre crisis levels of 1996.) The other ASEAN nations include

Brunei Darussalam, Burma (Myanmar), Cambodia, Laos, Singapore and Vietnam.

The Philippines' 1995 unit vehicle sales reached just over 128,000 units (approx. 71,000

passenger vehicles and 57,000 commercial vehicles.) Sales in 1996 were 162,000. The

Philippines has been hard hit by the economic crises in South East Asia. In 1997 motor vehicle

sales in the Philippines were 144,435 units, down 11 percent from 1996. For 1998, vehicle sales

were down 44.5 percent, to 80,231 compared to 1997. Sales are not forecast to recover to 1997

levels until 2001.

The Philippines' vehicle market is approximately 55 percent passenger vehicles and 45

percent commercial vehicles. Japanese manufacturers dominate this market with over 80

percent market share, while Korean manufacturers hold 15 percent. All other manufacturers

hold the remainder.

According to International Trade Commission (ITC) data, for the full year 1998, U.S.

vehicle exports to the Philippines were down 55 percent, from $50 million to $23 million,

compared to 1997.3

Environment – Global Warming

Global temperatures are rising. Precipitation has increased percent across the world's

continents in the last century. Worldwide have risen by some 15-20 cm (6-8 inches) in the

Although there are still some scientific uncertainties around issue of global warming, recent

experiences of unusual catastrophes have put underwriters on the alert and suggest monitoring

and prudent underwriting is required.4

3www.internationaltradecommision.com4http://en.wikipedia.org/wiki/Global_warming

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Population

The Philippine population would continue to grow, increasing from 76.5 million, as of the

latest population census conducted in May 2000, to 141.7 million in 2040, according to the

Medium Series of the 2000 Census-based population projections. This means that 65 million

people would be added to the nation's population between 2000 and 2040, which is a span of

40 years, even if the average annual growth rate is projected to drastically decline from 2.34

percent during the 1990-2000 period to around 1.0 percent during the 2030-2040 period. The

population is projected to grow by 1.95 percent in the 2005-2010 periods, from 85.3 million in

2005 to 94.0 million in 2010.

The nation's population would also become older as it is projected that child-bearing rate

by women in the country will continue to decline and the survival rates of all age groups will

improve. In 2005, the age group 0-14 accounted for 35.0 percent of the nation's total population.

By 2010, this age group would comprise 33.0 percent and by 2040, 23.1 percent. Meanwhile,

4.3 percent of the Filipinos would be 65 and over by year 2010, and by year 2040, 9.7 percent

of them would be in the same age group.

Among the regions, CALABARZON is projected to have the largest population by 2010,

surpassing the NCR which currently has the largest population. In 2010, CALABARZON would

have 11.9 million people, while the NCR, 11.6 million. By 2040, CALABARZON would have 18.5

million, and Central Luzon, by then the second largest region, would have 15.0 million.

Cordillera Administrative Region would continue to have the smallest population with 2.7 million

by year 2040. Meanwhile, MIMAROPA would remain as the fastest growing region, as it is

expected to have an annual growth rate of 2.6 percent in 2005-2010 and 1.6 percent in 2035-

2040.5

Income

The total annual family income in 2006 was estimated at P 2.99 trillion indicating an

increase of 22.7 percent over the 2003 estimate of P2.44 trillion. The total family expenditure

5 http://www.census.gov.ph/data/pressrelease/2006/pr0620tx.html

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was approximately P2.56 trillion, an increase of 25.7 percent over the 2003 estimate of P2.04

trillion (Table 1).

In 2006, the average annual income of Filipino families was estimated at P172 thousand.

Across income deciles, this average ranged from P32 thousand for the first income docile (or

lowest income group) to P617 thousand for the tenth income deciles (highest income group)

(Table 2b). Income deciles are the distribution of families into ten groups in terms of annual

family income. The first deciles have the lowest income and tenth deciles have the highest

income.

The 2006 average annual income (P172 thousand) is 16.2 percent higher than the 2003

estimated average of P148 thousand. Meanwhile, the average annual expenditure of families

increased from P124 thousand in 2003 to P147 thousand in 2006, or by 18.5 percent over the

three-year period. These numbers translate into average savings in 2006 of some P25 thousand

per family; the 2003 estimate was P24 thousand per family. These savings came mainly from

the tenth income deciles with P156 thousand per family on the average in 2006 (Table 2a).

From 2003 to 2006, annual income in all deciles increased. The average annual income

of the bottom 30 percent of families (or the lowest three income deciles combined) increased by

around P8 thousand; that of the upper 70 percent of families, by some P31 thousand. For all

families, the increase was P24 thousand (Table 2a).

Adjusting for the inflation between 2003 and 2006, total family income in 2006 (P2.99

trillion) would be valued at P2.50 trillion at 2003 prices. Likewise, the total family expenditure in

2006 (P2.56 trillion) would be valued at P2.14 trillion at 2003 prices. In real terms, the total

income of families increased slightly by 2.6 percent while the total expenditure increased by 5.1

percent between 2003 and 2006. Also, the average family income decreased by 2.8 percent

while average family expenditure decreased by 0.4 percent. Thus, the 2006 real average

savings by families is equivalent to P21 thousand at 2003 prices, which is lower than the 2003

average savings of P24 thousand per family (Table 1).

The income distribution changed slightly from 2003 to 2006. The share to the total

income of families belonging to the tenth deciles exhibited a slight decrease, from 36.3 percent

in 2003 to 35.9 percent in 2006. The gap in family income between the families belonging to the

tenth deciles and those in the first deciles had narrowed slightly. In 2006, the total family income

of the tenth deciles was about 19 times that of the first deciles, while it was 20 times that of the

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first deciles in 2003 (Table 2a). The Gini coefficient was estimated at 0.4564 in 2006, slightly

lower than the 2003 ratio of 0.4605 (Table 1). The Gini coefficient provides a measure of income

inequality within a population. A Gini coefficient ranges from 0 to 1, with 0 indicating perfect

income equality among families, and 1 indicating absolute income inequality.

The spending pattern of Filipino families particularly among those in the bottom 30

percent income group continued to slide towards less spending on food. In 2006, 59 percent of

all expenditures by this group were on food, while it was 60 percent in 2003. This means that for

every P100 spent by this group in 2006, P59 went to food, compared to P60 in 2003.

Consequently, there was a decrease in the shares of other expenditure items like tobacco (2.0%

to 1.7%), clothing, footwear and other wear (2.5% to 2.0%) and house maintenance and minor

repair (0.5% to 0.2%) (Table 3).xxx6

Conclusion: Based on the analysis above. Registered car, population and import of cars in the Philippines are continuously growing so the demand for car insurance will be increasing

6 http://www.census.gov.ph/data/pressrelease/2007/ie06tx.html

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Table 1. Total Number of Families, Family Income and Family Expenditure

          and Gini Coefficient: 2006 and 2003

| |

Selected Indicators | 2006 | 2003

| |

-------------------------------------------------------------------------

Philippines

Number of families (in thousands) 17,403 16,480

Gini Coefficient 0.4564 0.4605

At 2006 Prices

Total family income ( in billion pesos) 2,992 2,437

Total family expenditure (in billion pesos) 2,563 2,038

Total family savings (in billion pesos) 428 399

Average family income (in thousand pesos) 172 148

Average family expenditure (in thousand pesos) 147 124

Average savings (in thousand pesos) 25 24

At 2003 Prices ( CPI: 2003=100; 2006=119.6)

Total family income (in billion pesos) 2,501 2,437

Total family expenditure (in billion pesos) 2,143 2,038

Total family savings (in billion pesos) 358 399

Average family income (in thousand pesos) 144 148

Average family expenditure (in thousand pesos) 123 124

Average savings (in thousand pesos) 21 24

-------------------------------------------------------------------------

Note: Details may not add up to total due to rounding.

Source: 2006 Family Income and Expenditure Survey (Preliminary Results),

          National Statistics Office

Page last updated: October 9, 2007

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Table 2a. Total Income, Expenditure and Savings of Families at Current Prices

           by Income Decile: 2006 and 2003

| 2006 (In billion pesos) | 2003 (In billion pesos)

Income Decile/ |------------------------------------------------------------------

Income Group | Income | Expenditure | Savings | Income | Expenditure | Savings

----------------------------------------------------------------------------------------

Philippines 2,992 2,563 428 2,437 2,038 399

First Decile 56 61 (5) 44 48 (4)

Second Decile 88 91 (3) 70 72 (2)

Third Decile 113 114 (1) 92 91 *

Fourth Decile 140 138 3 114 110 5

Fifth Decile 173 165 8 142 133 8

Sixth Decile 215 202 13 176 163 13

Seventh Decile 272 250 22 222 199 23

Eighth Decile 356 316 40 289 251 39

Ninth Decile 505 424 81 404 336 68

Tenth Decile 1,074 803 271 884 635 249

Bottom 30% 258 267 (9) 206 212 (6)

Upper 70% 2,734 2,297 437 2,231 1,827 404

-----------------------------------------------------------------------------------------

Note: * less than 500

         Details may not add to total due to roundingSource: 2006 Family Income and Expenditure Survey (Preliminary Results),

         National Statistics Office.

Page last updated: October 9, 2007

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Table 2b. Average Income, Expenditure and Savings of Families at Current Prices by

           Income Decile: 2006 and 2003

| 2006 (In thousand pesos) | 2003 (In thousand pesos)

Income Decile/ |------------------------------------------------------------------

Income Group | Income | Expenditure | Savings | Income | Expenditure | Savings

----------------------------------------------------------------------------------------

Philippines 172 14 25 148 124 24

First Decile 32 35 (3) 27 29 (2)

Second Decile 51 52 (2) 43 44 (1)

Third Decile 65 66 (*) 56 56 *

Fourth Decile 81 79 2 69 67 3

Fifth Decile 100 95 5 86 81 5

Sixth Decile 123 116 7 107 99 8

Seventh Decile 156 143 13 135 121 14

Eighth Decile 204 181 23 176 152 23

Ninth Decile 290 244 46 245 204 41

Tenth Decile 617 461 156 537 385 151

Bottom 30% 148 153 (5) 125 128 (3)

Upper 70% 1,571 1,320 251 1,354 1,109 245

-----------------------------------------------------------------------------------------

Note: * less than 500

         Details may not add to total due to rounding

Source: 2006 Family Income and Expenditure Survey Preliminary Results,

         National Statistics Office.

Page last updated: October 9, 2007

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Table 3. Percent Distribution of Family Expenditure by Expenditure Item for Bottom 30 Percent          and Upper 70 Percent Income Group: 2006 and 2003 | 2006 | 2003 |----------------------------------------------------------- Major Expenditure Items | All Income | Bottom | Upper | All Income | Bottom | Upper | Groups | 30% | 70% | Groups | 30% | 70%-------------------------------------------------------------------------------------------------- Philippines Total expenditure (in billion pesos) 2,561 266 2,295 2,038 212 1,827 Percent 100.0 100.0 100.0 100.0 100.0 100.0 Food expenditure 41.4 59.1 39.3 43.1 60.2 40.0Alcoholic beverages 0.7 1.2 0.6 0.7 1.2 0.6Tobacco 0.9 1.7 0.8 1.1 2.0 0.9Fuel, light and water 7.6 7.3 7.7 6.5 6.6 6.6Transportation and communication 8.2 3.8 8.7 7.3 3.2 8.2Household operation 2.3 1.8 2.4 2.2 1.7 2.1Personal care and effects 3.7 3.7 3.7 3.9 3.7 4.1Clothing, footwear and other wear 2.4 2.0 2.5 2.9 2.5 3.0Education 4.4 1.3 4.7 4.0 1.3 4.5Recreation 0.5 0.2 0.5 0.5 0.2 0.5Medical care 2.9 1.7 3.0 2.2 1.4 2.3Nondurable furnishings 0.2 0.2 0.2 0.2 0.2 0.2Durable furniture and equipment 2.7 0.8 2.9 2.6 0.8 2.8House rent/rental value 12.7 9.0 13.2 13.1 8.8 13.6House maintenance and minor repairs 0.6 0.2 1.8 0.7 0.5 0.8Taxes 1.6 0.5 0.6 2.1 0.2 2.3Special family occasions 2.8 1.7 2.9 2.6 1.6 2.8Gifts and contributions to others 1.4 0.7 1.4 1.2 0.6 1.3Other expenditure 3.0 3.3 3.0 2.9 3.2 3.3Note: Details may not add up to totals due to roundingSource: National Statistics Office, 2006 Family Income and Expenditure Survey Preliminary Results. Page last updated: February 19, 2008

b. Technological Environment

E-Commerce

Electronic commerce, commonly known as e-commerce or ecommerce, consists of the

buying and selling of products or services over electronic systems such as the Internet and

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other computer networks. The amount of trade conducted electronically has grown dramatically

since the spread of the Internet. A wide variety of commerce is conducted in this way, spurring

and drawing on innovations in electronic funds transfer, supply chain management, Internet

marketing, online transaction processing, electronic data interchange (EDI), automated

inventory management systems, and automated data collection systems. Modern electronic

commerce typically uses the World Wide Web at least at some point in the transaction's

lifecycle, although it can encompass a wider range of technologies such as e-mail as well.

A small percentage of electronic commerce is conducted entirely electronically for

"virtual" items such as access to premium content on a website, but most electronic commerce

involves the transportation of physical items in some way. Online retailers are sometimes known

as e-tailers and online retail is known as e-tail. E-commerce or electronic commerce is generally

considered to be the sales aspect of e-business.

Business-to-consumer (B2C, sometimes also called Business-to-Customer) describes

activities of E-businesses serving end consumers with products and/or services. It is often

associated with electronic commerce but also encompasses financial institutions and other

types of businesses. B2C relationships are often established and cultivated through some form

of Internet marketing.7

Conclusion: Based on the analysis above, the researcher concludes that new adopting e-

commerce will benefit the Standard Insurance Co. Inc. because Internet usage in the

Philippines is very rampant nowadays.

c. Economic Environment

The Philippines was less severely affected by the Asian financial crisis of 1998 than its

neighbors, aided in part by its high level of annual remittances from overseas workers, no

sustained run-up in asset prices, and more moderate debt, prior to the crisis. From a 0.6%

decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in 2000, but slowed to 3.2% in 2001

in the context of a global economic slowdown, an export slump, and political and security

concerns. Average GDP growth accelerated to about 5% between 2002 and 2006 reflecting the

continued resilience of the service sector, and improved exports and agricultural output.

Nonetheless, it will take a higher, sustained growth path to make appreciable progress in the 7 http://en.wikipedia.org/wiki/E-commerce

16

alleviation of poverty given the Philippines' high annual population growth rate and unequal

distribution of income. The Philippines also faces higher oil prices, higher interest rates on its

dollar borrowings, and higher inflation. Fiscal constraints limit Manila's ability to finance

infrastructure and social spending. The Philippines' consistently large budget deficit has

produced a high debt level, and this situation has forced Manila to spend a large portion of the

national government budget on debt service. Large unprofitable public enterprises, especially in

the energy sector, contribute to the government's debt because of slow progress on

privatization. Credit rating agencies have at times expressed concern about the Philippines'

ability to service the debt, though central bank reserves appear adequate and large remittance

inflows appear stable. The implementation of the expanded Value Added Tax (VAT) in

November 2005 boosted confidence in the government's fiscal capacity and helped to

strengthen the peso, making it East Asia's best performing currency in 2005-06. Investors and

credit rating institutions will continue to look for effective implementation of the new VAT and

continued improvement in the government's overall fiscal capacity in the coming year.8

GDP: purchasing power parity - $508.1 billion (2006 EST.)

GDP - real growth rate: 6.9 % (2007 EST.)

GDP - per capita: purchasing power parity - $5,700 (2006 EST.)

Inflation rate (consumer prices): 8.3(2003) 2.7 %( 2007)

Labor force: 35.79 million (2006), 41.93 million (2007)

Unemployment rate: 10.4% (2003), 7.9% (2007)

Currency: 1 Philippine peso (P) = 100 centavos

Exchange rates: Philippine pesos (P) per US$1 = 41.40 (2007), 49.28 (2006), 53.10 (2005), 56.052 (2004), 54.203 (2003), 40.427 (January 2000), 39.089 (1999), 40.893 (1998), 29.471 (1997), 26.216 (1996), 25.714 (1995)

Conclusion: Based on GDP, GNP and other economic indicators, the researcher concludes

that the general economic environment is positive for non-life insurance business.

d. Political / Government / Legal Environment

Government

8 https://www.cia.gov/library/publications/the-world-factbook/geos/rp.html

17

Insurance Commission

Insurance touches all our lives in a multitude of ways. It is an essential element in our

present day life, securing our standards of living and the stability of our families, as well as our

property rights. Everyone in this country feels the protecting arm in some form of insurance and

most of us are affected by the many forms of its protection. In view of this widespread public

interest in the various insurance coverage, the supervision of this business has become an

integral part of our government process.9

Legal Environment

The Insurance Code of Philippines” Presidential Decree 612

ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES

I, Ferdinand E. Marcos, President of the Philippines, by virtue of the powers in me vested by the

Constitution, do hereby decree and order the following:

GENERAL PROVISIONS

Sec. 1. This Decree shall be known as "The Insurance Code".

Sec. 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the context otherwise requires:

(1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.

A contract of surety ship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter provided.

(2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code, shall include:

(a) Making or proposing to make, as insurer, any insurance contract;

(b) making or proposing to make, as surety, any contract of surety ship as a vocation and not as merely incidental to any other legitimate business or activity of the surety;

(c) Doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code;

9 http://www.insurance.gov.ph/htm/_profile.asp

18

(d) Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefore, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.

(3) As used in this code, the term "Commissioner" means the "Insurance Commissioner". 10

Conclusion: Based on the analysis above, the researcher concludes that government agency

and laws affects the legal environment of Standard Insurance Co. Inc. to ensure the welfare of

consumers and the company itself.

II. INDUSTRY ANALYSIS

a. Threat of New Entrants

When the market is opened to new players, certain barriers to entry will still exist,

including regulatory requirements such as it requires huge capital investment or minimum

capital base, finding knowledgeable and qualified staff, and laws to be followed in order to

establish a new firm for non-life insurance industry like Insurance Code of the Philippines and

application of license in Insurance Commission. As Standard Insurance Co. Inc is already in

existence, it has built up huge capital base, well brand recognition, an existing and growing

agency network. The company has been able to find, train and retain qualified staff. These may

all provide barriers to entry.

b. Rivalry Among Competitors

There will naturally be a rivalry between competitors. There are 94 players in the industry

competing in Non-life insurance. Majority of Non-life insurance market is dominated by Malayan

Insurance Co. Inc. Extensive Research and Development and new product innovation like

Standard Insurance Co. Inc., the one and only company insuring cellular phones are keys in

competing and surviving in stiff competition.

c. Threat of Substitutes

The only substitute for insurance is a “self insured” type of product (i.e. savings set aside). It

is unlikely the entrance of another player will have an impact on this type of substitute product.

10 http://www.insurance.gov.ph/htm/pd612.htm

19

On the contrary, with another player in the market, the education level of the general public

regarding the benefits of insurance could improve, thus increase the overall demand for

insurance products and services.

d. Bargaining Power of Suppliers

Standard Insurance Co. Inc. currently is in a strong position as the contender supplier of

Non-life insurance products. As a result, the Company may not have the ability to dictate

premium rates. Their price range is relatively good among other competitors. Due to Standard

Insurance Co. Inc.’s strong position in the market, clients may not be so willing to move to an

“unknown” supplier, even if their premium rates are lower. Insurance relationships are based on

trust. Trust, knowing when a claim is made it will be paid out. The company has built a strong

level of trust amongst its clients.

e. Bargaining Power of Buyers

The bargaining power of consumers radiate from two major factors which are the size of

customers and number of companies who sell non-life insurance. The size of the customers

dictates the pricing and product feature based on the coverage of the insurance. With regards to

number of companies, they give the customers extensive choices to choose from. If the

company does not offer competitive solution, the customer can easily shift to another company.

f. Summary of Porter’s 5 Forces of Competition

The researcher performed the industry analysis using Porter’s five forces model. The

researcher specifically analyzed the rivalry among competing firms, potential development of

substitute products, and potential entry of new firm, bargaining power of suppliers and

bargaining power of consumers. Based on the analysis above the researcher concludes

- The researcher concludes that the intensity of rivalry is HIGH

- The researcher concludes that the threat of substitutes is LOW

- The researcher concludes that the threat of new entrants is LOW

- The researcher concludes that the bargaining power of consumer is HIGH

- The researcher concludes that the bargaining power of suppliers is LOW

III. COMPETITIVE ANALYSIS

20

The researcher gathered information on the premiums earned position of Standard

Insurance Co. Inc. related to its competitors in the Non-life insurance category. The data as

available of December 31, 2006, the information tells us the premiums earned by other

companies.

21

Source: www.insurance.gov.ph

22

Standard Insurance Co. Inc. ranked #9 out of 93 companies. There is a difference of

P1, 689,509,494 against the top contender Malayan Insurance Co. Inc.,

Source: www.insurance.gov.ph

When Gross Premiums is concerned, Standard Insurance Co. Inc ranked #4 but still the

Malayan Insurance Company Inc. dominated it.

Conclusion: The researcher concludes that Malayan Insurance Co. Inc dominated Non-life

Insurance Category. There so much catching to be done by Standard Insurance Co. Inc.

23

a. Profile of Competitors

Malayan Insurance Co. Inc.

The Malayan Insurance Co., Inc. is considered the core company of the Malayan Group,

having been established first. Originally capitalized at P147, 000 and domiciled in Manila,

Malayan has become a multi-million peso corporation. It has two regional offices: (1) the Luzon

Regional Office, with branches in Angeles, Baguio, Cabanatuan, Dagupan, Laoag, Legaspi, San

Pablo, and Tuguegarao, and service offices in Calamba, Cavite, Isabela, La Union, Lipa,

Palawan, and Subic; and (2) the Visayas & Mindanao Regional Office, with branches in

Bacolod, Cebu, Iloilo, Tacloban, Cagayan de Oro, Davao, and General Santos, and service

offices in Zamboanga, Tagum, and Tagbilaran. In Metro Manila, the company has branches in

Makati, Quezon City, Ayala-Alabang, Marikina and Service Offices in Honda Quezon Avenue,

Honda Kalookan, and Isuzu Manila.

Non-life insurance protection is at the heart of Malayan's diversified operations. The

insurance risks it covers include fire, marine, motorcar, miscellaneous casualty and personal

accident, and surety.

Malayan takes pride in being able to settle just and valid claims in a speedy fashion. It

gives the highest priority to the interest of its customers, as evidenced by the establishment of

the Customer Service Center (CSC) at the company's head office. The CSC is a one-stop-shop

that responds promptly to customer needs, ranging from initial inquiries to assistance in the

processing of claims.

Malayan has also set up the Express Claims Service (XCS), the only one of its kind in

the country, which enables processing of claims of up to P15, 000 on motorcar insurance within

24 hours or less, using a computerized on-line customer database system. In continuously

strengthening its leadership in the industry, Malayan abides by the core values that have been

the bedrock of its business: quality service maintained consistently above standards,

professionalism, the loyalty and results orientedness of its employees, and sincerity in fulfilling

its commitment to serve and protect the Filipino people.11

11 www.malayan.com

24

UCPB General Insurance 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 (Coco life)

since 1989, and 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 roster of which includes prominent multinationals and leaders in the manufacturing,

service, wholesale, retail, and merchandising industries.12

BPI/MS Insurance Corporation

The cornerstone has been laid. FGU Insurance Corporation and FEB Mitsui Marine

Insurance Company, Inc. have combined operations to form BPI/MS Insurance Corporation.

BPI/MS is a joint venture of the Bank of the Philippine Islands (BPI), a member of the Ayala

Group of Companies and one of the country's most respected banking institutions, and Mitsui

Sumitomo Insurance Company, one of the largest non-life insurance companies in Japan.

BPI/MS has ushered a new era of strength and stability, setting a new standard of

consumer-driven insurance services in the country. The expertise of BPI and Mitsui Sumitomo is

being utilized to enhance service delivery and strengthen market focus, while preserving the

stability and integrity which has earned for them distinction and a loyal client base from BPI/MS'

predecessors, FGU and FEB Mitsui.

BUILT FROM A STRUCTURE OF STRENGTH

When it comes to financial strength, BPI/MS stands on excellent footing. Fifty-one

percent of the company is owned by BPI, the most financially sound bank in the Philippines and

a leader in banking innovation. Forty-nine percent is owned by Mitsui Sumitomo Insurance, a

global insurance player with 64 branches worldwide.

LAID ON FOUNDATION OF TRUST

12 http://www.ucpbgen.com/company/ucpbgen.php

25

BPI/MS also carries with it a heritage of trust from FGU Insurance Corporation, one of

the oldest insurance companies in the country. As the non-life insurance arm of the Ayala

Group, it has earned a strong reputation of stability and integrity, becoming a pillar in the non-

life sector. Its forerunner, Filipinas Compañia de Seguros was established in 1913. Through the

years, it has built and nurtured a strong and loyal agency force. In 1999, FGU was acquired by

BPI when the bank merged with Ayala Insurance Holdings, FGU's holding company.

For FEB Mitsui, the groundwork of trust was laid in 1965 when it was then known as

Makati Insurance. In 1998, Far East Bank and Trust Company (FEBTC), then its owner, entered

into an alliance with Mitsui Marine, which bought fifty percent of the company. In the year 2000,

FEB Mitsui became part of the BPI Group after the latter's merger with FEBTC. Backed up by its

financial soundness and quality service, FEB Mitsui steadily grew to become one of the top ten

non-life insurers.

ONE BIGGER AND BETTER COMPANY

The year 2006 marked another milestone, with the signing of an asset purchase

agreement, the transfer of Aviva's insurance portfolio in the Philippines to BPI/MS was put into

place. This is subsequent to Mitsui Sumitomo Insurance’s purchase of Aviva Plc’s general

insurance operations in the Asian region specifically in the Philippines, Singapore, Malaysia,

Indonesia, Thailand, Hongkong and Taiwan. The purchase was made to rationalize the

Philippine general insurance business within the larger organization of BPI/MS Insurance

Corporation. With this integration, BPI/MS and Aviva Philippines is now ONE team, with one

goal, with one vision.13

Competitive Profile Matrix

The researcher used the Competitive Profile Matrix to analyze Standard Insurance Co. Inc.’s

strength and weaknesses in relation to its major competitors which are Malayan Insurance Co.

Inc., Prudential Guarantee and BPI/MS Corporation. These identified major competitors were

based on the ranking as Gross Premiums is concerned (See Competitive Analysis Table

below).

13 http://www.bpims.com/about.htm

26

Standard Insurance  

Malayan Insurance  

Prudential Guarantee  

BPI/MS Corporation  

Critical Success Factor Weight Rating Score Rating Score Rating Score Rating ScoreAdvertising 0.05 2 0.1 3 0.15 2 0.1 3 0.15Variety of Products 0.1 3 0.3 3 0.3 3 0.3 3 0.3Financial Position 0.1 3 0.3 4 0.4 3 0.3 3 0.3Service 0.3 3 0.9 3 0.9 3 0.9 3 0.9Corporate Strategy 0.2 2 0.4 3 0.6 3 0.6 4 0.8Management 0.1 4 0.4 4 0.4 3 0.3 3 0.3Customer Loyalty 0.1 2 0.2 3 0.3 3 0.3 3 0.3Market Share 0.05 3 0.15 3 0.15 3 0.15 3 0.15Total 1   2.75   3.2   2.95   3.2

Service and Corporate Strategy are the most important success factor to top in Non-life

insurance category. Service was given a weight of 0.3 since the industry is more on serving the

customers. Corporate Strategy was given a weight of 0.2 because this is a factor that 4

companies might differ in ways how to do their business and enables the firm to respond to the

changes in the market.

Variety of Product, Financial Position, Management and Customer Loyalty were given a

weight of 1.0 because it will be supporting factors for success of the company.

In terms of the corporate strategy, FGU Insurance Corporation and FEB Mitsui Marine

Insurance Company, Inc. have combined operations to form BPI/MS Insurance Corporation.

BPI/MS is a joint venture of the Bank of the Philippine Islands (BPI). The strategy of having a

joint venture with one of the leading banking institution in the country is an excellent idea plus

the fact the MS Insurance Corporation is one of the biggest non-life insurance Corporation in

Japan to achieve global expansion that’s why it was given the highest mark.

Malayan Insurance and Prudential Guarantee were given the same mark. First, Malayan

Insurance supported of their banking institution it will be an easy process for the company to get

customer because if the customer loan from RCBC the strategy of promoting the non-life

insurance policy is very effective. The company is having one-stop non-life insurance. Secondly,

Prudential Guarantee has successfully entered into a joint venture with Sompo Japan Insurance

Inc. (formerly Yasuda Fire and Marine Insurance Company, Ltd.), one of the first fire insurance

organizations in Japan and one of the top 10 non-life insurance companies in the world, to form

PGA Sompo Japan Insurance Inc. (formerly PGA Yasuda Insurance Company, Inc.) PGA

Sompo Japan is now a highly successful organization, servicing the insurance needs of

27

numerous multinational companies based in the Philippines. Standard Insurance Co. Inc. was

given the lowest mark among the three because the company does not have their own banking

institution and did not reach for global expansion but they survived in this competition and being

ranked #4 means that company is very competitive even without those advantages that other 3

big company players had.

In terms of service, all of them were given a mark of 3, through superior technical

knowledge, innovative marketing and excellent services. These companies handle more than

150,000 clients, many of who belong to the country's top 1,000 corporations.

IV. SUMMARY AND CONCLUSION

a. Summary of Key External Factors

Registered car, population and import of cars in the Philippines are continuously

growing so the demand for car insurance will be increasing and it will be an opportunity to grab

a market share. The researcher concludes that government agency and laws affects the legal

environment of Standard Insurance Co. Inc. to ensure the welfare of consumers and the

company itself. Based on GDP, GNP and other economic indicators, the researcher concludes

that the general economic environment is positive for non-life insurance business.

The researcher concludes that the intensity of rivalry is HIGH, threat of substitutes

is LOW, threat of new entrants is LOW, bargaining power of consumer is HIGH, bargaining

power of suppliers is LOW.

Based on competitive analysis, the researcher concludes that Malayan Insurance

Co. Inc dominated Non-life Insurance Category. There so much catching to be done by

Standard Insurance Co. Inc. The company needs strategies to address the stiff competition in

Non-life insurance. They need to improve the corporate strategy.

b. External Factor Evaluation (Matrix)

The researcher performed the industry analysis using the external factor evaluation

matrix. The external factor evaluation matrix summarizes and evaluates the economic, social,

cultural, demographic, environmental, technological and competitive information. The external

factor evaluation matrix for the Standard Insurance Company Inc. is given below:

28

Key External Factor Weight RatingWeighted

Score       Opportunity      Strengthening of Peso Value as of 2008 (40.32 pesos - 1 dollar) 0.1 3 0.3Increase in Life sum insured as % of GDP last three years 28.59% 0.05 3 0.15Decrease of Inflation Rate last three years by 2.52% 0.05 3 0.15Increase of car related incidents nationwide 0.2 4 0.8New laws governing the insurance code of the Philippines 0.1 2 0.2       Threats      Leading Competitors increased its ad expense 0.1 3 0.3Moral Hazard and Adverse 0.05 2 0.1Leading rival firms are more fully integrated 0.1 3 0.3Economic and Political Disability 0.05 3 0.15Increasing governmental regulation in the industry 0.1 3 0.3Increase of old cars that can't be anymore insured 0.1 2 0.2       Total 1   1.35

Based on EFE Analysis, the researcher concludes that Standard Insurance Company

Inc. response to external factor is just average. Positive economic environment and innovations

on car insurance products and services will help them to grow in the industry.

29

CHAPTER 5 – INTERNAL ANALYSIS

I. MANAGEMENT

Board of Directors

ERNESTO T. ECHAUZChairman

PAULO E. CAMPOS, JR.Vice Chairman

EDITH D. SUMAJITMember

CARMELITA E. La'OMember

GIDEON G. SISONMember

CRESENCIO V. ASPIRAS, JR.Member

ESTELA P. DOMINGOMember

JOSEPHINE E. LICHAUCOTreasurer

VALENTINE B. GARCIAAssistant Treasurer

CELSO P. DE LAS ALASCorporate Secretary

JOEL RAYMOND R. AYSONAssistant Corporate Secretary

Corporate Officers

EDITH D. SUMAJITPresident / Chief Executive Officer

WIVINIA C. RODRIGUEZOFELIA P. YTURZAETAExecutive Vice Presidents

CELSO P. DE LAS ALASChief Legal Counsel / Corporate Secretary

30

ANTONIO B. ESPEJOLEANDRO M. ESTRERA

AMELIA M. HERNANDEZNOEL T. MOLINA

SEVERO L. SANTILLANA, JRMARITA R. SORIANOLETICIA C. TENDERO

ANATOLE DAN R. VIRAYSenior Vice Presidents

MARIBETH C. CASTROEDENA B. ENFESTANJOSELITO L. LAZAGA

DIVINIA D. MITRAJOSEPH G. SEVERINOREYNALDO D. UMALI

ELIZABETH G. VILLAMILFirst Vice Presidents

ELIA AKOLELAINE JOY D. ALAMPAY

CARMEL N. BERKENKOTTERJEFFREY JOSEPH R. BOBADILLA

ANTONIO L. CASTILLOALFREDO F. DELA CRUZ

JOSELITO P. MACAPINLACJESSE JAMES S. MENDOZA

MARLENE P. NAVARRAROLANDO E. RAMIREZ

WILFREDO EMMANUEL JUAN E. REYESZALDY G. RODRIGUEZ

ALEX S. SANTIAGOELVIRA S. SUSMERANO

Vice Presidents

EDEN O. ABITALROGER P. AGUIRRE

PAUL A. AMPOMARVIN M. BAUTISTA

JOEL D. BRAZILMIGDONIO G. BUGARIN, JR.ROGACIANO E. CALUNSAG

JOEL VICTOR K. DE LAS ALASDOMINGO A. ESCOTO

MA. REMEDIOS D. FIDELJOSE GERARDO G. FRANCISCO III

MA. CHRISTINA T. GALANGEDGAR J. GALEA

MARILOU M. GOMEZHILARIO M. GONZAGASILVESTRE D. INDIANA

JANET R. INOCENOMARICHU M. MABIOG

ROMULO M. MANUCOM

31

ARISTON F. MINEZ JR.ROLANDO M. NEPOMUCENO

BERNARDITA H. ORUGAMARIA RICA RAMIREZ

SEYMOUR B. SALDAVIAANTONIO S. TANJUAKIO

FLORIDO V. TEMBLOR SR.PATROCINIO M. VALENZUELA III

ANGELO R. VILLAMEJORSenior Assistant Vice Presidents

CELIA P. ABORDODESIDERIO T. ACEBEROSMA. THERESA Q. ACUNABASILIO F. AGRAMON JR.

MA. TESSIE ALVARESGERALDINE G. BALIGOD

RAOUL V. CASADOREGINA B. CONCEPCION

REMEDIOS H. CRISOSTOMOEDILBERTO M. CUETO

JOAQUIN E. DAVIDMA. CRISTINA G. DEFENSOR

VILMA D. DOLLENTASALMA C. ESPAÑOL

NOLAN E. GLODOVIZARIZALINA D. GO

AUGUSTUS M. GONZALESLINA FLOR G. HIZON

MA. CRISTINA D. LAGRISOLAARLENE O. LASCO

KAY N. LAYUGISIDRO F. MANUELANA LISA V. MUÑIZ

LEILA U. PATAGHERMES PIDO

CONRADO B. PUDESIM S. QUINA

CAMILO S. RAMOSDHORA FLORESSA T. ROJAS

JERALINE Q. COMBALICER-SALDAVIALODY M. SANCHEZGLORIA V. SANTOS

Assistant Vice Presidents

II. MARKETING

4 P’s of Marketing

32

A. Product

Standard Insurance provides the following types of motorcar insurance policies:

Private Car (PC)

Commercial Vehicle (CV)

Motorcycle (MCY)

Motor Trade (MT)

Land Transportation (LTO)

The Standard Motorcar Insurance gives you more reasons to drive with ease and peace of mind

with the following coverages:

Own Damage

Coverage against damages to the property insured arising from accidental collision,

overturning, falling, fire and malicious acts of third party.

Theft

Coverage required by the law that protects the assured against liability for death

of or bodily injury to third party arising from an accident involving the insured

vehicle, subject to the schedule of indemnities incorporated in the policy.

Compulsory Third Party Liability (CTPL)

Coverage required by the law that protects the assured against liability for death

of or bodily injury to third party arising from an accident involving the insured

vehicle, subject to the schedule of indemnities incorporated in the policy.

Excess Bodily Injury (EBI)

Coverage answers for indemnities beyond the limit set forth under CTPL coverage.

Third Party Property Damage (TPPD)

- Coverage against liability for damage to third party property arising from accident

caused by the insured vehicle.

Pa Rider

33

This is a voluntary coverage that financially protects the passengers against injury or

death arising from car accident.

Value-Added Services

Free Accident Coverage (PA)

Free P.A. Coverage for the family. This includes five (5) members of your family for

P10,000 each.

Free Roadside Assistance Program

You will be provided with towing and other services in cases of accidents or vehicle

breakdown

Automatic Technical Assistance

A group of auto-experts will assist you in assessing the extent of damages of your car in

case of accident

Casa Repair

Because of our extensive tie-ups with Car Dealers nationwide, we provide automatic 5- star

motor shop repair for cars 12 years old and below14

B. Promotion

Standard Insurance Co. Inc. has its own marketing group that provides excellent service

strategies to both employees and customers. The company is engaged in Internet and E-

commerce strategies. Online Inquiries and Feedbacks were designed to know customers

insights about the product and services. The major marketing communication strategies

revolved around online marketing, press releases, sales conferences and technical

conferences. The company participated in car exhibits of different car dealers and they have

racing car entry for the Philippine Grand Prix which is an avenue for promoting the company in

other sector.

C. Placement

14 http://www.standard-insurance.com/new_site2/motorcar.html

34

Standard Insurance Co. Inc., have the most extensive and the most advanced in the

industry with 43 computerized full service branches nationwide with underwriting and claims

servicing capabilities, more than 200 car-dealer tie-ups nationwide.

D. Pricing

Standard Insurance Co. Inc pricing depends on which type of car that the customer wants to

insure. They provide quotations and give discounts.

III. Finance/Accounting

For the year 2006, the company fully adopted the Philippine Financial reporting Standards

(PFRS) of accounting from the previous years’ Philippine Accounting Standards (PAS).

In spite of the expected negative growth of the non-life insurance industry at -2% for 2006,

the company posted a 10.4% growth in gross earned premiums to a level of P1.96 billion. This

has placed the company as the fourth largest non-life insurance company in the country with

expectation of being third by the end of 2007. Motor car insurance, which accounted for 61% of

total gross premiums, posted a growth rate of 6%.

A. Net Income (2004-2006)

The graph below shows the annual net income of the Standard Insurance Co. Inc. for the

past three years (2004-2006)

Standard Insurance Co. Inc had an annual net income of P103,566,764 then a major

drop in net income was experienced during 2005 of -15% . Furthermore in spite of negative

35

growth of the non-life insurance industry at -2% for the same year, the company was ale to

regain from P 88,463,882 to P 135,413,026 or 35% increase in net income for 2006

IV. PRODUCTION/OPERATION

Technical personnel are engineers and trained mechanics who perform car repair estimates

supported by the Company's own computerized parts database for all major models of popular

brand vehicles. In the industry, it has the quickest turnaround time with repairs in the car

dealership shops and the only one with its own call center to support its retail operations. In the

meantime, Standard Insurance has adopted the Zurich practices in risk engineering,

underwriting and industrial claims processing complemented with an in-house adjusters team.

The Company's property, marine and liability insurance, as well as catastrophe (CAT) cover are

supported by superior reinsurance facilities procured from the London and Singapore markets

from international reinsurers with the lead rated by S&P at AAA and the rest of the panel at no

less than A-. These facilities are under the excess of loss reinsurance treaties with its property

and CAT covers having the highest capacities in the industry. Its risk engineering process

includes the use of Geographical Information System (GIS) where mapping of property risks

linked to the online system is made against pertinent CAT hazard maps such as fault lines,

liquefaction, and ground shaking and flooding. The Insure/90, the Company's real-time general

insurance system complemented by its own IT department, was carried over from Zurich

General Philippines and is currently in use by corporate marketing and some Metro Manila

branches. The rollout and shifting to the I-90 for the rest of the branches is projected to be

completed towards the end of 2007. The Company is accredited by most of the major banks

and financial institutions. Its ISO certification for quality management systems received in 1998

was upgraded to an ISO 9001:2000 in October, 2003 and has been maintained since then15

V. RESEARCH AND DEVELOPMENT

Electronic Parts Catalog

The Parts Section of the Technical Department plays an important role in the processing of

Repair Valuation Reports as basis in Motor Car Claims Settlement. Automotive parts that are

recommended for replacement by its Technical Assistants are carefully studied to ensure that

correct terminologies and part numbers are used to arrive at accurate quotations for every

model and make of insured vehicle inspected. This is made possible through the use of the

Standard Insurance Auto Parts Data Base, Automotive Parts Catalogs, EPC etc. Standard

15 http://www.standard-insurance.com/new_site2/company_profile.html

36

Insurance Co., Inc., in its goal to continuously lead in the insurance industry, invests on

resources one of which is the acquisition of available EPCs (Electronic Parts Catalogs) needed

by its staff to access varied pieces of automotive information.

The EPC contains Parts List, Part Number Application to Models, List Price and Illustrations

among other details. All you have to do is follow the instructions displayed on the computer

screen and input the vehicle information which could be done in three ways such as the VIN

(Vehicle Identification Number), Model Name / Catalog Code or the Model Code. When the

Search Route appears, a selection has to be made out of various choices to display the

Illustrated Index for the chosen group. The Illustrated Index for the chosen group and the Figure

Number List will appear on the screen in which you just move the "mouse" to the left or right to

such direction and clicking the button of the "mouse" for your chosen figure to appear on the

screen to get the information to match the part description and part number. The company's

application of modern technology in its processes such as the Electronic Parts Catalog to

provide fast and accurate Repair Valuation Reports along with a competent Technical Team

truly makes Standard Insurance Co., Inc. the leader in the motorcar insurance industry.16

How GIS technology helps Standard Insurance in natural hazard assessment?

The insurance industry is continuously improving risk management by installing appropriate

systems and tools for the hazard assessment of perils such as earthquake, typhoon and flood

for insurance cover.

In the Philippines, considered as one of the most disaster-prone countries in the world, extensive

assessment of the natural disasters becomes essential to risk managers.

16 http://www.standard-insurance.com/new_site2/epc.html

37

Through the Geographic Information System (GIS) and

the Global Positioning System (GPS), risk assessment

techniques are developed to determine the degree of

geohazards involved in each risk (property to be

insured).

Standard Insurance Company, Inc. has initiated its own

study of local natural hazards, which GIS graphically

represents in maps. The company's GIS is utilized to provide risk accumulation analysis.

Through this, the company is able to acquire catastrophe cover from international reinsurance

companies at a high coverage against total accumulation.

Natural Hazard and Risk Assessment

In underwriting risk against natural perils, natural hazard information and risk assessment plays

an important role. With the known exposure to the different natural hazards, underwriters, risk

engineers and risk engineering analysts are made aware of the important areas or aspects of a

particular property which will need closer attention with respect to risk assessment. While

hazards may be present in a particular risk exposure, the need for mitigation and engineering

measures against those hazards are likewise taken into consideration in order to determine the

extent of the exposure and their probability of occurrence.

Risk Management

While insurance companies allow themselves to accept sizeable amount of risks and the

number of individual risks for which it wishes to underwrite and accumulate, insurers control its

financial exposure through a risk management technique called risk transfer. The concept of

transferring risk, i.e., one party transferring the financial effects of his loss to another party, is

vital to an insurer to enable him to reduce to acceptable levels of probability the severe claim or

accumulation of claims that will ruin or threaten the company's financial stability.

Accumulation control, portfolio analysis and catastrophe analysis are done as part of the risk

management techniques. Through these analyses, underwriters and risk managers will be able

to apply the concepts of risk transfer or reinsurance, cession limits, liability limits, etc.

38

Catastrophe Risk Monitoring System (CRMS)

Cognizant of the need for a natural hazard and risk assessment tool for better underwriting and

risk engineering, and to provide a system that can generate and manage risk information for the

acquisition of reinsurance facilities and Catastrophe (CAT) cover, the company, through the

Risk Engineering and Risk Management departments of Standard Insurance, developed the

Catastrophe Risk Monitoring System (CRMS).

The system, currently in version 1.0, is in the first phase of development covering Metro Manila.

The natural hazard information included in the system is initially limited to earthquake, typhoon,

flood, landslide, and volcanic eruption.

Utilizing the system for natural hazard and risk assessment enables us to plot the risk being

insured over various natural and geologic hazard maps. Subsequently, the system generates

natural hazard assessment reports which include hazards brought about by earthquake,

typhoon, flood, volcanic eruption and landslide. The hazard susceptibility rating is analyzed and

rated according to grading levels of high, moderate, low and none.

The rating system provides risk engineering analysts and underwriters a better understanding of

the degree of exposure involved and other factors that influence the exposure levels present in

a particular property being assessed against the natural hazards.

However, not all risks located in "high" hazard areas should be treated as "high risk" or

unacceptable risk without considering the engineering measures implemented and the physical

conditions of the property. Apart from the natural hazard information in the database, CRMS

also includes in its records risk engineering information related to the physical characteristics of

the property such as building height, age, type of construction, etc. Engineering measures such

as seismic design, type of structural frame, etc. also form part of the overall risk assessment

prior to acceptance or declination of the risk.

CRMS in Risk Management

CRMS provides risk managers information about the current accumulation of policies in force in

terms of gross sum insured. Accumulation zones in Metro Manila are subjected to accumulation

limits. These limits prompt risk managers not to accept any risk with gross sum insured

exceeding the maximum limits imposed.

39

Risk accumulation information generated by the system is always "current" and is constantly

being updated, thereby allowing the utilization of such information in formulating retention

policies, reinsurance facilities, cession limits, liability limits, and others.

Catastrophe analysis can also be made through the CRMS using the Catastrophe Risk

Evaluating and Standardizing Target Accumulations (CRESTA) Zones. Metro Manila comprises

of 4 out of the 9 CRESTA Zones for the entire Philippines. These zones are 2 (Makati City

area), 3 (Manila Bay Reclamation area), 4 (Sta. Cruz/Binondo area) and 5 (areas within Metro

Manila but outside zones 2, 3 and 4). Most insurance and reinsurance companies use this zone

method to analyze the catastrophe exposure for CAT cover.17

VI. MANAGEMENT INFORMATION SYSTEM

Cellphone Insurance System - CIPD

Cellphone Insurance Policyholders Database (CIPD) is an innovative web-based system used by the

Cellphone Insurance Department (CID) that aims to integrate the figures from its key units namely

claims, underwriting, anti-fraud and accounting. The CIPD allows these units to have a common data

container for a simple and automated data processing and operations. The CIPD can be used for a

simple viewing, updating and accumulation of records

up to a dense and convoluted reports generation. Each

user have their own access code to uphold security

measures where every entree cipher has its vital

confines on the operating modules in CIPD. This

maintains the distinctiveness of each and every unit.

The viewing and accretion of records have been made

easy through a search engine facility that accepts

several user parameters to perform its query. It also

maintains a

'claims forms' section where forms and documents of the claims unit can automatically be

printed by just feeding the essential details. This section also includes the auto-printing of a

denial letter for denied claims.

17 http://www.standard-insurance.com/new_site2/gis.html

40

A customer communication board has been made available as a means of communication for

all the users concerning matters focusing on the clients. A user can post minutiae of a client's

request, complain or anything that concerns a customer. Overall, its objective is to provide

enhanced services for a guaranteed customer satisfaction and improved relationship with

clients.

The 'claims monitoring facility' is another feature on hand in CIPD. This feature intends to

monitor the progress of each and every claim including the status of the claim before and after

the required documents have been submitted. This will ensure a faster and more efficient

processing of claims.

One of the key areas of the CIPD is the Reports Generator section. This section provides Excel

format reports that are based on the encoded figures provided by the users. The report

generator is a restricted module where only unit and department heads are provided with the

access since these records are confidential. Collection reports, no of claims by status and

financial status of policyholders are just some of the reports generated by CIPD.18

VII. SUMMARY AND CONCLUSION

a. Summary and Conclusion

18 http://www.standard-insurance.com/new_site2/cipd.html

41

b. Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight RatingWeighted Score

       Strength             Customer Support 24/7 0.08 2 0.16The company have 43 branches nationwide 0.05 4 0.2The company have 200 car dealer-tie up 0.15 3 0.45The company have different line of services in Non-life Insurance 0.05 3 0.15Standard Insurance Co., Inc., an ISO 9001: 2000 version certified company, one of the leading organizations in the non-life insurance industry. 0.06 4 0.24Internationally affiliated by Zurich General Services in Switzerland 0.08 3 0.24Only company that provides cellphone insurance 0.05 4 0.224/7 Roadside Assistance Program 0.05 3 0.15Online Services and Bidding Program 0.06 3 0.18Agency participation in selling insurance 0.1 3 0.3       Weakness             Standard insurance Company assets is lower than industry average 0.1 2 0.2Irregularity of Prices and Figures in Non-life insurance qoutation 0.06 4 0.24Supply of parts in motor car, cellphone and others 0.06 3 0.18Slow processing of approval in claims 0.05 2 0.1       Total 1   2.99

42

CHAPTER 6 – STRATEGY FORMULATION

The comprehensive analysis on the internal and external environment enabled the

researcher to identify the different opportunities and threats to the Standard Insurance Co. Inc. It

also determined the strengths and weaknesses of the company.

This chapter focuses on generating and evaluating alternative strategies, as well as

selecting strategies to pursue. Strategy analysis and choice seek to determine alternative

courses of action that could best enable the firm to achieve its mission and objectives. The

firm’s present strategies, objectives and mission, coupled with the external and internal audit

information, provide a basis for generating the evaluating feasible alternative strategies. (Fred

R. David). It will utilize several strategy formulation tools to come up with strategic plans which

are:

Boston Consulting Group Matrix (BCG)

Internal-External Matrix (IE)

Strategic Position and Action Evaluation Matrix (SPACE)

The Grand Strategy Matrix

The Threat-Opportunities-Weaknesses-Strengths (TOWS)

The Quantitative Strategic Planning (QSPM) Matrix

The Quantitative Strategic Planning (QSPM) Matrix will then be used to ascertain the

comparative attractiveness of unconventional strategies in order to impartially select the best

strategy.

I. BCG MATRIX

The researcher utilized this tool to aid Standard Insurance Co. Inc. in the measurement of all

their company products and services according to relative market share and market growth. The

concepts underlying this matrix are those of the experience curve (x-axis measures relative

market share) and the product life cycle (y-axis measures market growth). It assists with the

optimization of the benefits associated with relative market share (competitive cost position) and

the impact of the growth rate of the market (position on the product life cycle). The matrix is

made up of four quadrants and the circle size lends a third dimension – turnover. Cash cows are

cash generators and require an invest or hold strategy while maximizing cash flow. Stars are

potential cash cows and require adequate funding to establish a dominant position before the

market growth rate slows down and they become cash cows.

43

Question marks do not have market share on their side. They are found in growing

markets and require funding if they are to become stars. If not withdrawal is possible. Dogs are

neither cash generators nor in many instances cash drains. They can be left alone or removed

from the portfolio. The aim is to achieve a balanced portfolio, sustaining or holding the Cash

Cows, investing in the Stars and some select Question Marks and divesting or holding Dogs. If

necessary, Questions marks could also be divested if they do not have a chance of becoming a

Star. There has been a lot of criticism regarding the growth – share matrix and many

subsequent matrices have been designed to try to overcome these deficiencies.19

Based on the result of two evaluative dimensions in the BCG Matrix, Standard Insurance

Co. Inc is positioned under the STAR Quadrant Stars are potential cash cows and require

adequate funding to establish a dominant position before the market growth rate slows down

and they become cash cows. This division with a high relative market share and high industry

19 Strategic Management 11th Edition by Fred R. David

44

STAR

RMSP - 6.30% INDUSTRY GROWTH 3.43%

CASH COW

QUESTION

DOGS

HIGH1.0

LOW –20

MED. 0

MED.0.5

LOW 0.0

HIGH +20

RELATIVE MARKET SHARE POSITION

INDUSTRY SALES

GROWTH RATE

growth and the recommended strategies are forward, backward and horizontal integration;

market penetration; market development and product development.

CONCLUSION: The research concluded that based on the BCG Matrix Standard Insurance

Co. Inc., is in the quadrant of stars and the recommended strategies are forward, backward and

horizontal integration; market penetration; market development and product development.

II. INTERNAL EXTERNAL MATRIX (IE MATRIX)

The diagram below shows the Internal-External Matrix of the Standard Insurance Co. Inc.

The IE Matrix is based on two key dimensions: the IFE total weighted scores on the x axis and

the EFE total weighted scores on the y axis. Recall that each division of an organization should

construct an IFE Matrix and an EFE Matrix for its part of the organization. The total weighted

scores derived from the divisions allow construction of the corporate-level IE Matrix. On the x

axis of the IE Matrix, an IFE total weighted score of 1.0 to 1.99 represents a weak internal

position; a score of 2.0 to 2.99 is considered average; and a score of 3.0 to 4.0 is strong.

Similarly, on the y axis, an EFE total weighted score of 1.0 to 1.99 is considered low; a score of

2.0 to 2.99 is medium; and a score of 3.0 to 4.0 is high.

The IF Matrix can be divided into three major regions that have different strategy

implications. First, the prescription for divisions that fall into cells I, II, or IV can be described as

grow and build. Intensive (market penetration, market development, and product development)

or integrative (backward integration, forward integration, and horizontal integration) strategies

can be most appropriate for these divisions. Second, divisions that fall into cells III, V, or VII can

be managed best with hold and maintain strategies; market penetration and product

development are two commonly employed strategies for these types of divisions. Third, a

common prescription for divisions that fall into cells VI, VIII, or IX is harvest or divert. Successful

organizations are able to achieve a portfolio of businesses positioned in or around cell I in the IE

Matrix

For the Standard Insurance Co. Inc., the External Factor Evaluation in Chapter 4

resulted to a total weighted score of 1.35 which is considered as low as shown in the y-axis of

the IE Matrix. The Internal Factor Evaluation in Chapter 5 resulted to a total weighted score of

2.99 which is considered average as shown in the x-axis in IE Matrix above. The result of the

EFE and IFE intersect in cell II which indicates a strategy of Grow and Build. Intensive (market

penetration, market development, and product development) or integrative (backward

45

integration, forward integration, and horizontal integration) are the commonly employed

strategies.20

Conclusion: Based on the results of the IE matrix, the researcher concludes that Intensive

(market penetration, market development, and product development) or integrative (backward

integration, forward integration, and horizontal integration) are the recommended strategies for

Standard Insurance Co. Inc.

III. STRATEGIC POSITION AND ACTION EVALUATION MATRIX (SPACE)

The SPACE Matrix characterizes a strategy as being aggressive, conservative, defensive or

competitive in nature. Additionally, the SPACE Matrix analysis functions upon two internal

strategic dimensions: financial strength and competitive advantage. The SPACE factors under

financial strength which analyze a business’ internal strategic posture are: return on investment,

leverage, liquidity, working capital and cash flows. In contrast, the SPACE factors which

determine a business’ external strategic posture are: technology, inflation rates, demand,

industry price fluctuations, Barriers to entry, competitive pressures, price elasticity, and risk.

20 Strategic Management 11th Edition by Fred R. David

46

THE IFE TOTAL WEIGHTED SCORE STRONG AVERAGE WEAK 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

4.00 3.002.00

1.00

HIGH 3.0 to 4.0

3.00EFE=3 I IFE = 2.99II III

MEDIUM2.0 to 2.99 2.00

IV V VILOW

1.0 to 1.99 1.00

VII VIII IX

The SPACE Matrix methodology also examines strategic factors within two external

dimensions: environmental stability and industry strength. The factors considered under

competitive advantage are market share, quality, life cycle, customer loyalty, and supplier

influence while the factors under industry strength are growth potential, profit potential, financial

stability and resource utilization, among others. The SPACE Matrix methodology factors each of

these dimensions and places them on a Cartesian graph with X and Y coordinates.21

FINANCIAL STRENGTH RATING

Return on Assets and Equity is high, 10.3%

and 21.7% respectively; asset turnover is

65.28 times and net profit margin is 17.9%

4.00

The company has a high liquidity ratio,

current ratio of 2.09 times and quick ratio of

1.68 times

4.00

The company increased from gross

premiums of 2005 by 60.5% in 2006 3.00

11.00

ENVIRONMENTAL STABILITY RATING

Political Stability and economic rising of

the country for the year 2007 -1.00

Global Warming and Environmental

Issues that affects business -1.0021 Strategic Management 11th Edition by Fred R. David

47

INDUSTRY STRENGTH RATING

Non-life insurance premiums grew by 9.4 percent, as

premium rates increased. Over the past decade,

global insurance premiums rose by more than a half

as annual growth fluctuated between 2 percent and 10

percent 5.00

Numerical Rating for Motor Vehicle Insurance: Academicians and

Insurance industry practitioners alike always try to come up with a

premium rating structure that charges each buyer of insurance products

according to the risk he/she exhibits. Motor insurance, in particular, has

been the focal point of such attention. An empirical analysis of motor

vehicle insurance data is performed to predict pure risk premiums to be

charged.

4.00

Policyholder loyalty the relationship between loyalty and company-

related factors (e.g., agent services, policy plan and customer

service staff) as well as between loyalty and policyholder-related

factors (e.g., gender, age, income and education level).

3.00

12.00

Threat of New Entrants, the average

entrepreneur can't come along and start a large

insurance company. The threat of new entrants

lies within the insurance industry itself. Some

companies have carved out niche areas in which

they underwrite insurance. These insurance

companies are fearful of being squeezed out by

the big players. Another threat for many insurance

companies is other financial services companies

entering the market. -3.00Price inelasticity in relation to demand for

insurance -3.00

-8.00

COMPETITIVE ADVANTAGE RATING

Customer Support 24/7 -1.00

The company have 43 branches

nationwide -2.00

The company have 200 car dealer-tie up -2.00

The company have different line of

services in Non-life Insurance -1.00

48

Standard Insurance Co., Inc., an ISO 9001:

2000 version certified company, one of the

leading organizations in the non-life

insurance industry.

-1.00

Internationally affiliated by Zurich General

Services in Switzerland -1.00

Only company that provides cellphone

insurance -1.00

24/7 Roadside Assistance Program -3.00

Online Services and Bidding Program -2.00

Agency participation in selling insurance -1.00

-15.00

FS

49

4 (2.5,1.7)

CONSERVATIVE 3 AGGRESSIVE

2

1 CA IS

-3 -2 -1 1 2 3

-1

-2

DEFENSIVE -3 COMPETITIVE

-4

ES

Based on the result of the SPACE Matrix analysis above, the directional vector fell on

the aggressive quadrant which implies that Standard Insurance Co. Inc. is an organization takes

an excellent position to use its internal strengths to take advantage of external opportunities,

overcome internal problem and avoid external threats. Therefore market penetration, market

development, product development, backward integration, forward integration, horizontal

integration, conglomerate diversification, concentric diversification, horizontal diversification or a

combination strategy all can be feasible, depending on the specific circumstances that face the

firm.

Conclusion: Based on the result of the SPACE Matrix analysis, the researcher concludes that

market penetration, market development, product development, backward integration, forward

integration, horizontal integration, conglomerate diversification, concentric diversification,

horizontal diversification strategies for Standard are the recommended Insurance Co. Inc.

IV. GRAND STRATEGY

50

The researcher performed the Grand Strategy Matrix Analysis for Non-life insurance (Motor

car) of Standard Insurance Co. Inc., The Grand Strategy matrix is a popular tool for formulating

alternative strategies, all organizations (or divisions) can be positioned in one of four quadrants

based on two evaluative dimensions: competitive position and market growth.22

Based on the Space Matrix, the company of Standard Insurance Co Inc. is considered to

be located in the FIRST QUADRANT. On this quadrant, it is indicated that the state of the

company have a STRONG COMPETITIVE CONDITION together with a RAPID MARKET

GROWTH in terms of their market. They have running for 43 years in our local industry and

seem to have a convincing improvement in their growth and maturity with their increasing share

of the market sales.

Conclusion: The researcher concluded that Standard Insurance Co. Inc. is considered to be

located in the FIRST QUADRANT. On this quadrant, it is indicated that the state of the company

22 Strategic Management 11th Edition by Fred R. David

51

QUADRANT II QUADRANT I

QUADRANT III QUADRANT IV

Weak Competitive

condition

Strong Competitive

condition

Slow

Market Growth

Rapid

Market Growth

Standard Insurance Co.

Inc.

Quadrant 1 Strategies:

- Market Development

- Market Penetration

- Product Development

- Backward Integration

- Forward Integration

- Horizontal Integration

- Concentric Diversification

have a STRONG COMPETITIVE CONDITION together with a RAPID MARKET GROWTH in

terms of their market. The recommended strategies are Market Development, Market

Penetration, Product Development, Backward Integration, Forward Integration, Horizontal

Integration and Concentric Diversification

V. THE THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTH MATRIX (TOWS)

One of the most widely used strategic planning tools is a SWOT (Strengths, Weaknesses,

Opportunities, Threats) analysis. Most companies use, in one form or another, SWOT analysis

as a basic guide for strategic planning. A SWOT analysis involves a company's assessment of

its internal position by identifying the company's strengths and weaknesses. In addition, the

company must determine its external position by defining its opportunities and threats.

Strengths represent those skills in which a company exceeds and or the key assets of the firm.

Weaknesses are those areas in which a firm does not perform well. Opportunities are those

current or future circumstances in the environment that might provide favorable conditions for

the firm. E. Threats are those current or future circumstances in the environment, which might

provide unfavorable conditions for the firm.

Cell 1 contains important areas in which the company is exhibiting poor performance. When

a company identifies these areas it becomes aware of the need to improve its efforts in order to

strengthen its performance. Important areas in which the company is performing very well are

located in Cell 2. A company should continue its current efforts in these areas. Cell 3 contains

unimportant areas in which the firm is performing poorly. Since these areas are a low priority for

the company, it need not pay a great deal of attention to these areas. The last category, Cell 4,

includes areas in which the company is performing well, but which are unimportant. The firm

may need to pull back some of its efforts in this area, depending on how unimportant the area is

to the overall picture.23

23 Strategic Management 11th Edition by Fred R. David

52

CONCLUSION: The researcher concludes that the TOWS Analysis resulted to strategies

that revolved around market penetration, product development and concentric diversification

which is consistent with the results of the other strategy formulation tools.

VI. The Quantitative Strategic Planning Matrix (QSPM)

53

QSPM is designed to prioritize or determine the attractiveness of the strategies generated in

the TOWS and IE matrices. An organization cannot implement all the strategies generated in

the TOWS and IE, so the QSPM is needed and used to narrow the number of strategies down

by determining the relative attractiveness of each one.

The researcher used the BCG Matrix, Internal-External Matrix (IE), Strategic Position and

Action Evaluation Matrix (SPACE, Threats-Opportunities-Weaknesses-Strengths (TOWS) and

Grand Strategy Matrix to define possible strategies for the Standard Insurance Co. Inc., In

summary, all of these are

Market Development

Market Penetration

Product Development

Backward Integration

Forward Integration

Horizontal Integration

Concentric Diversification

Conglomerate diversification

Horizontal diversification

The researcher utilized the Quantitative Strategic Planning Matrix to objectively evaluate all of

these alternative strategies. To simplify the QSPM analysis, the researcher incorporated all of

these strategies into three major categories which are:

Intensive Strategy

Integration Strategy

Diversify Strategy

The Intensive Strategies include Market Development, Market Penetration and Product

Development. The Integration Strategies includes Forward, Backward and Horizontal

Integrations. The Diversify Strategies includes Concentric Diversification, Conglomerate

diversification and Horizontal diversification

These three major strategies were objectively evaluated using the QSPM based on the

previously identified external and internal critical success factor.

54

55

Results of QSPM

Based on the results of the QSPM, the intensive and diversification strategy had the

highest Sum Total Attractiveness Score which is at 6.97. This indicates that Standard Insurance

Co. Inc., should select integration and diversification strategies over intensive strategies.

Conclusion: The researcher recommends for Standard Insurance Co. Inc., to implement

intensive strategies specifically focusing on market penetration, product development and

market development.

CHAPTER 7 – STRATEGIC OBJECTIVES AND RECOMMENDED STRATEGIES

I. BUSINESS OBJECTIVES:

In this section, the researcher established specific business objectives for Standard

Insurance Co. Inc. These business objectives are both strategic and financial in nature.

1. Double Standard Insurance Co. Inc, market revenue share in Non-life insurance by 2009

2. Improve Excellent Service and add value to the customer’s money

3. Increase Brand Awareness

4. Molding Competent Employees in obtaining highest insurance qualification

5. Achieve a higher rank in Non-life insurance category.

Vision Statement

Standard Insurance Co., Inc. is committed to continuously improve the quality of service

to the insuring public by raising the standard of competency and professionalism, and through

integrity.

Mission Statement

To instill a quality culture that promotes the values of professionalism,

discipline, teamwork and productivity.

By providing customers with the highest quality products and services,

we will spread safety and security to all around us.

To encourage employees in obtaining highest insurance qualifications

to give us the leading edge in technical insurance expertise for the

benefit of our clients.

To provide professional Insurance and Risk Management services with

the highest sense of integrity to all our customers".

While demonstrating responsible management as a good corporate

citizen, we will make a positive contribute to society.

The business objectives above were formulated based on the existing vision. In Chapter

3 which is Standard Insurance Co., Inc. is committed to continuously improve the quality of

service to the insuring public by raising the standard of competency and professionalism, and

through integrity. The first two objectives focus on growing the revenues generated in Non-life

Insurance products. These will enable Standard Insurance Co. Inc., to go head to head against

the Malayan Insurance by the coming years. The third objective is to improve their service. It will

be a big factor for the company enable to improve their line of service to gain competitive

advantage and customer loyalty. The fourth objective is focused is to increase brand

awareness. This will enable the company to increase their premiums as well as to gain good

image when it come to service. The last objective is to mold competent employees. This will

enable the working force being the crème of the top and competitive employees.

Overall, the four objectives established for the Standard Insurance Co. Inc., are fully

aligned to the vision of the group.

II. RECOMMENDED BUSINESS STRATEGIES

In this section, the researcher established specific business strategies for each business

objective based on the results of the strategy formulation in the previous chapter. In summary,

the recommended business strategies from the strategy formulation chapter are market

penetration, product development and market development. The strategic objectives along with

the corresponding business strategies are given as follows:

1. Double Standard Insurance Co. Inc, market revenue share in Non-life insurance by

2008

The recommended strategies to grow Standard Insurance Co. Inc.’s non-life insurance

revolve around market penetration. The specific strategies are to give a quota for

agencies and branches target premiums. Giving rewards and recognition to agencies

and branches whose will perform an excellent production. Improve Excellent Service and

add value to the customer’s money

2. Improve Excellent Service and add value to the customer’s money

The recommended business strategies from the strategy formulation chapter are market

penetration, product development and market development. The specific strategies are

research and development of product line. Secondly, Quality management Control. Third

is to improve the process of claiming the insurance.

3. Increase Brand Awareness

The recommended strategies to increase Standard Insurance Co. Inc.’s brand revolve

around market penetration. The specific strategies are to have extreme marketing

strategies. They need to provide free kits on safety driving tips when an individual is

getting a driver’s license. Together with Land Transportation Office it will help to

penetrate the market. Second is advertising through traffic signs. Together with MMDA it

will help to increase awareness in advocacy of safety driving.

4. Molding Competent Employees in obtaining highest insurance qualification

The recommended strategies in molding competent employees of Standard Insurance

Co. Inc.’s brand revolve around market penetration and market development. The

specific strategies are trainings and career development through job rotation.

5. Achieve a higher rank in Non-life insurance category

When Gross Premiums is concerned, Standard Insurance Co. Inc ranked #4 but still the

Malayan Insurance Company Inc. dominated it. After all these business strategies have

been achieved it will benefit the company to achieve higher rank.

III. STRATEGY EVALUATION

A. FINANCIAL PROJECTIONS

The researcher established a forecast of the Net income of Non-life Insurance of

Standard Insurance Co. Inc., The period covered is 2004 to 2009. The Financial projections below

was based on the strategic objectives and proposed strategies on the different aspects of the

business established in the previous chapters.

YEAR 2004 2005 2006 2007 2008 2009NET INCOME 103,566,764 88,463,882 135,413,026 342,691,829 1,209,947,318 5,481,926,938 0.8541725 0.653289308 0.395145184 0.28322872 0.220715696 85.41725 65.32893076 39.5145184 28.32287195 22.07156956% of Increase or Decrease -14.58275 34.67106924 60.4854816 71.67712805 77.92843044

Conclusion: The strategies recommended by the researcher are projected to gradually enable

the Standard Insurance Co. Inc., to achieve its strategic objectives of growing the net income to

P 5,481,926,938 exceeding the net income of previous years.

CHAPTER 8 – ACTION PLANS AND DEPARTMENTAL PROGRAMS

In this section, the researcher established the specific business action plans for each

strategy developed in the previous section. The action plans are discussed based on the

strategic objective and strategy it supports. The action plan for Standard Insurance Co. Inc. is

given as follows:

6. Double Standard Insurance Co. Inc, market revenue share in Non-life insurance by

2009

Key Strategy: The specific strategies are to give a quota for agencies and branches target premiumsStrategic Program Expected Output Timetable Persons/Unit Responsible

1.) Briefing and Review of Company’s performance last year 2007

They will know how much they will target for next year 2009

June 08-July 08 Management, Agencies, Branches

Management, Agencies, Branches, Marketing

Finance

Marketing, Finance, Agencies, Branches

2.) Execute the business proposal

The company’s agencies and branches will do the job

July 08-May 09

3.) Monitor the company’s new performance

Monitor the premiums that can be earned

July 08-May 09

4.) Rewarding Ceremony for best in production

Rewarding and Giving recognition for the agencies and branches achieving the best production

June08-July 09

7. Improve Excellent Service and add value to the customer’s money

Key Strategy: Research and Development of Product and Service LinesStrategic Program Expected Output Timetable Persons/Unit Responsible

1.) Review product and services compare its viability

2.) Test the process stability, and marketable for the product

3.) Review improved products and services

4.) Launch and Promote the new improved products and services

Product and Services is being study for recommendations

Actual test of marketability

Analysis of marketability

New improved products and services

May08-July 08

July 08-Oct. 09

Oct.08-Dec.08

Jan.09-July 08

Marketing, Production, Management, Technical

Marketing, Agencies, Branches

Marketing, Production, Management, Technical

Marketing, Agencies, Branches

8. Increase Brand Awareness

Key Strategy: Extreme marketing strategies.Strategic Program Expected Output Timetable Persons/Unit Responsible

1.) Review and Briefing of Company’s Marketing Efforts

Analysis of Brand Awareness to the Consumer

May 08-June08 Marketing, Management, Finance

2.) Increase Marketing efforts through free kits on safety driving Together with Land

Direct Advertising with Target Consumer

May 08- June 09 Marketing

Transportation Office and an advertising effort through traffic signs. Together with MMDA

3.) Evaluation of Marketing Efforts

Analysis In changes of production and volumes of premiums earned in finance

June 08-June09

Marketing and Finance

9. Molding Competent Employees in obtaining highest insurance qualification

Key Strategy: are trainings and career development Strategic Program Expected Output Timetable Persons/Unit Responsible

1.) Review and Analysis of Manpower in the Company

2.) Raising the standard of Hiring employee

Analysis of career development in the company

Competent Employee

May 08- June 08

May 08- June09

Human Resource

Human Resource

Human Resource

3.) Conduct Seminars and Teambuilding Increase of Depth

Experience Dec.08 - June 09

CHAPTER 9 – STRATEGY MONITORING AND CONTROL

In this section, the researcher established a framework for Standard Insurance Co. Inc. to

monitor and control strategies implemented. The balance scorecard covers the following perspectives:

financial, customer and internal business.

Financial PerspectiveGoal Measures

Income Growth Actual Income versus Target

Customer PerspectiveGoal Measures

Improved Service Customer Feedback and and Products SatisfactionIncrease Brand Awareness Customer perception

Internal Business PerspectiveGoal Measures

Employees Training Competitive Employees

In every implementation, it is important that the firm monitors the results so that

whenever a problem arises, the firm may immediately address the problem and give the

necessary remedies to correct it.

On the Financial Perspective, the researcher established income growth as the main

goals to measure. The growth can be monitored by historical analysis of checking the income of

the previous years.

On the Customer Perspective, In order to improve the products and services, it can be

measure through feedbacks and loyalty. Increase Brand Awareness will help the customer

perception of the company.

On the Internal Business Perspective, the researcher established employees Training as

goal and it can be measure through the product of competitive employees in working efficiently

and effectively.