Academic journal article Journal of the International Academy for Case Studies

Western National Insurance

Academic journal article Journal of the International Academy for Case Studies

Western National Insurance

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case concerns the approaches used to methodically turn a financially struggling insurance company into one of the top regional insurers in the Midwest. Strategy formulation and execution in the insurance industry, aligning functional strategies to support the organization's strategy, and leadership competencies in turnaround situations are major themes. The case has a difficulty level of 3-5 and is appropriate for junior and senior-level courses, as well as a first-year graduate course. The case is designed to be taught in a ninety-minute class period, with two hours of outside preparation by students.

CASE SYNOPSIS

An insurance company is at risk of falling into a financial death spiral and brings in a new CEO to turn the company around. The CEO and his team take specific measures to bring the company back to financial health. These include mitigating risk, branding the company, solidifying agent relationships, ramping up technology, overhauling facilities, diversifying the business, and becoming an employer of choice. Growth has stalled and the company now is considering whether to change its business model from selling insurance products solely through independent agents to also selling directly to consumers via the Internet and an internal sales force.

INTRODUCTION

In September 2009, Stu Henderson, CEO of Western National Insurance, celebrated with his employees the announcement that A.M. Best, the premier insurance rating agency, had upgraded Western to a full A (Excellent). With this upgrade, Western became the only insurance company in the nation to be upgraded three times in the past eight years on its own merits, i.e. without external capital injections. This announcement came only two months after Western was named for the fourth time in five years to the Ward's 50 Benchmark Group of top performing property/casualty companies in the United States. (Ward's is an independent consulting firm. Each year, based on published financial numbers, they select the top 50 property/casualty insurance companies among the 3,000 companies that operate in the United States. Return on surplus, combined loss ratio, and other factors are compiled to determine this prestigious ranking.) In the crowded cafeteria, Henderson held up his can of diet ginger ale and made a toast:

At a time when the economic news has many thinking that financial stability is the exception rather than the rule, we are pleased to have first the Ward Group, and now A.M. Best recognize Western National's role as an insurance industry leader in financial strength and performance. We owe this recognition to the dedicated work of our employees, agents, and other business partners, whose commitment to serving customers with integrity continues to strengthen the financial foundation protecting our policyholders.

As Henderson looked out at the gathering of smiling employees, he savored the moment and considered how far the company had come in the past eight years. In 2001, Western was in a financially precarious state where a single catastrophic storm easily could have pushed the company into bankruptcy. Clearly, the company journeyed a long and difficult path to bring itself back to financial health.

As much as he enjoyed the celebratory atmosphere, Henderson also recalled the old adage that the moment you think you've accomplished all your goals is the moment your position of strength starts to erode. Aware of the danger of complacency, Henderson was already considering how Western could get stronger.

A dilemma that Henderson and his team had pondered for several years was whether Western should rethink its business model of selling all of its insurance products through independent agents instead of selling directly to the public. The direct sales model had several advantages, including the savings of agent commissions, having more control over the policyholder relationship, and the availability of the Internet and information technologies to provide efficiencies and superior service. …

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