Temple University Business Plan Essay Example

Temple University Business Plan Essay The Temple Consultants designed the Virtual Insurance Procurement Portal (IPP or PIP Portal) to align the brokerage model with evolving technology to address these pressing issues. The PIP Portal is an online resource planning tool that automates the overage procurement process, facilitates communications, increases transparency, and serves as a consolidated information source. The IPP will feature two separate, customizable interfaces for the broker and the client to suit each users needs. Figure 1: PEST Stable Social North American Insurance Industry 2012-present Political Demand increased transparency Non face-to-face communications Economic Industry consolidation Disintermediation through technology Technological Technological ubiquity and mobility Market Analysis In order to adapt to the political, economic, sociological, and technological rends affecting the insurance brokerage industry, brokers must redefine their current business model. The future brokerage model allows brokers to fully demonstrate the true value of their supplier, problem solver, innovator, and partner functions to clients. If clients only recognize the value of the brokers supplier function, industry competition will increasingly be based on price. Strategic changes must correspond to current insurance brokerage industry trends, which can be identified with a PEST framework (Figure 1). Political There are no new political trends affecting the insurance brokerage industry today. Despite the stable political environment, brokers must vigilantly ensure that all business practices uphold all federal and statutory regulations. The PIP Portal code will incorporate safety nets to ensure users do not violate any regulatory requirements. Industry consolidation and disintermediation through technology are the main economic trends affecting the insurance brokerage field today. Large brokerages expand and secure market share primarily by merging and acquiring smaller competitors. Increased consolidation is concentrating and intensifying industry rivalry. Disintermediation through technology is encouraging clients with simpler risk management needs to seek inferior broker substitutes. Most clients with simple risk management needs already find it hard justifying investments towards broker services and building relationships with brokers. We will write a custom essay sample on Temple University Business Plan specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Temple University Business Plan specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Temple University Business Plan specifically for you FOR ONLY $16.38 $13.9/page Hire Writer These economic trends are challenging the brokers role in the insurance procurement transaction. Social Entities spend less time socializing face-to-face and prefer to socialize through technology-enabled media. Customers and employees are becoming more accustomed to communicating through technology than through face-to-face tenting or over the phone. Brokers that do not embrace technology to facilitate the broker-client relationship risk being pushed out. Technology is continually affecting the way com pansies conduct operations. Businesses have already adapted significantly to align strategy with new technologies. As technology continues to evolve, companies need to further align strategy with the evolution of technology in order to remain competitive. 3 Our proposed brokerage model was developed to help brokers overcome the various competitive forces affecting the industry and challenging the brokers role as risk advisor. These forces are driven by the trends identified in the PEST evaluation and analyzed under a Porters Five Forces framework (Figure 2). Figure 2: Porters Five Forces Insurance Brokerage Industry Force industry Rivalry Intensity Very Strong Threat of Weak New Entrants Buyer Power Moderate to Strong Supplier Power Us busiest Explanation C] Leading industry competitors (201 3): Marsh, Non, Willis, and Arthur J. Gallagher C] Disintermediation through technology CLC Clients cannot perceive true value C] Threat of strong price competition 0 Low to moderate buyer switching costs CLC Response from powerful incumbents L] Relationship-driven industry C] Access to suppliers I. E. Arises C] Buyers need insurance and risk management solutions C] Small clients have simpler needs, but are price sensitive D Large clients need individualized solutions, and have high bargaining power C] Relationship-driven customer switching costs C] Difficulty realizing true value CLC Control policy form design C] Control premiums 0 Intense competition among carriers C] Direct marketing 0 Alternative Risk Solutions Industry Rivalry The United States insurance brokerage industry is highly competitive. Marsh, Non, Willis, and Arthur J. Gallagher are the strongest commercial brokerage competitors. The industry has undergone a long-standing trend of consolidation as larger brokerages acquire smaller competitors. Disintermediation is becoming increasingly apparent as more clients, 4 particularly those with simpler needs, are severing broker relationships and relying on technology to develop their own, cost-effective risk management programs. Though, clients recognize the value of the brokers supplier function, many clients fail to realize the true value of the brokers problem solver function. Because switching costs are relatively low, clients can easily rancher to another brokerage that clients believe is capable of providing them the best coverage at the best price. Brokers who fail to address the consolidation, disintermediation, and value non-recognition trends threatening the industry will succumb to pressures stemming from increased rivalry. New entrants pose little threat to the US brokerage industry. Though, it is relatively easy to start an insurance brokerage firm, new entrants face hostile responses from industry incumbents. To build a book of business, new entrants must convince potential clients to dissolve pre-existing broker-client relationships. To provide clients the right products at the right price, new entrants must also establish strong broker-carrier relationships. The chosen brokers relationship with carriers, will largely influence the clients risk management program. Built on trust, this relationship-driven industry has high entry barriers lessening the threat new entrants pose to established brokers. Buyers Commercial insurance brokers face moderate forces from large clients and strong forces from small clients. Small clients are those with simpler risk management needs and large clients generally have more complex portfolios. Large clients exert moderate buyer power on brokers because large clients cannot easily find substitutes to their brokers problem solver and partner functions. However, large clients have a higher switching costs compared to small clients 5 because it takes time to rebuild relationships, trust, and understanding with a new broker. Small clients exert strong buyer power on brokers because traditionally, small clients do not avail broker services and have a harder time realizing the true value brokers provide. Small clients can easily access inferior broker alternatives and are more price sensitive. However, buyers relinquish some power since all clients need a means of risk transfer. Buyer power is weakened when considering brokers can leverage relationships with carriers to provide clients with better coverage. The commercial brokerage industry is heavily relationship-driven, wherein most clients tend to remain loyal to their broker. The primary factor disrupting existing broker-client relationships is severe pressure for cost reduction. Overall, buyer power is increasing more clients fail to recognize the true value brokers provide and consider alternative solutions to manage risk. Suppliers Suppliers have considerable strength in the LOS brokerage industry. Insurance carriers largely derive power from control over capacity, policy design, and ability to accept or decline a risk. Without broker-carrier understanding brokers are incapable of adequately serving clients. Strong supplier power is also driven by intense competition among the carriers themselves. However, since carriers compete to ensure that their products are brokers first choice recommendation, supplier power slightly diminishes. Overall, suppliers exert great strength over the commercial brokerage industry. Insurance brokers face a weak to moderate level of threat from substitutes because generally clients are most comfortable entrusting experts with their risk management, consulting, and procurement needs. However, disintermediation through technology and increased 6 availability of alternative risk solutions are jeopardizing the brokers role. Currently, substitutes still pose little threat to the industry. If clients continue underestimate the true value brokers provide, the threat of substitutes will strengthen and exert increased competitive pressure on the commercial brokerage industry. The Virtual Insurance Procurement Portal Technology Integration The Virtual Insurance Procurement Portal (PIP Portal or IPP) is a resource planning system that automates the coverage procurement process, facilitates communication, and provides a cohesive, organized, center of information for enhanced client management. The portal will integrate seamlessly with Windows and MAC operating systems and will be available in standard, touch, and mobile options. Because the IPP tool is designed to enrich the borderline relationship, it must be portable and provide constant access to client-related material. Due to the highly sensitive nature of client information, the IPP will employ state-of-the-art security encryption to ensure account integrity is always protected. Interface The interface will have an intuitive, visually appealing, tiled interface. Each of the tiles is customize able and will provide quicklime to selected information such as policies, interaction logs, chat, conferencing, client preferences, loss history, and industry benchmarking data. The platform will leverage a licensing agreement with Google data analytics to provide superior search capability within client accounts. As an example, the broker will be able to err policy limits, and the portal will return, the per-occurrence and aggregate limits of each policy as well 7 as any deductibles and exclusions. In the event of a loss, the broker will be able to best assist the client regardless of either users location or time. Users can set preferences within each client profile, so they will receive industry- specific news from insurance publications such as Advised and Business Insurance. This will ensure clients are consistently up-to-date on the broad issues affecting clients. Brokers will be able to directly interface with the carriers through the portal or Reps, and carriers will be able to directly upload policy deliverables into the portal. The portal will be able to Scan and quickly return key information, such as rates and exclusions, to the brokers. From the clients perspective, the portal will also have an intuitive, tiled approach, and work similarly to the brokers version. However, certain information, such as internal procedures will be excluded from the clients view. With all marketing and Reps results stored in the application, this will eliminate the administrative burden of preparing transparencies, as made requisite by the 2004 Spirits investigate. Storage and Maintenance The PIP Portal will include 24/7 customer service to detect and repair bug issues, and will make use of site management to ensure that all applications are consistently fully operational. Data storage will be securely encrypted and will be outsourced by a cud storage firm. This platform will be downloaded online, and will not require any hardware or packaged software. The platform will integrate with legacy information and underwriting systems as well the Microsoft suite. This will allow for steady assimilation to the product and will enable brokers to employ the most optimal mix of resources. Financial Market Entry We propose that the IPP be developed in-house, by a large brokerage firm. Due to lack of proof of concept at this stage, it may be difficult to find venture capital. Evidence supporting proof of concept will come from beta testing. Following development, the brokerage firm will have ownership of the PIP Portal. Business Model Our estimates indicate that about $1 will be required to develop a functioning prototype. During beta testing, the brokerage will partner in capital formation, which will enable developers to bring the software to optimal functionality and ensure that the software is capable of large-scale use. The portal is designed to syntactically align with the broker process and become inextricable from placement and client-servicing processes. During the three year battening phase, market share will be low at approximately half a percent. This period will allow brokers, partner carriers, and clients to collaborate and ensure that the tool provides maximum utility and enhances the brokers value-proposition. Upon completion of the beta phase, the brokerage firm will garner significant competitive advantage through full integration of legacy systems in place. Benefits and Cost Savings From a cost and benefit perspective, PIP Portal will increase process efficiencies in placement and servicing drastically reduce transaction costs, add value, and increase clients willingness to pay. We believe that IPP will provide savings for the broker by reducing the 9 number of staff needed to properly service an account and providing tools to assist the client as effectively as possible. The IPP solution will reduce administrative costs, increase efficiency, and provide savings on transaction costs. This does not necessitate a direct monetary discount for clients, but it ill provide greater utility and competitive advantage by increasing value relative to premium paid. Further proof of concept will provide greater clarity on the amount Of savings and the increase in productivity that will result from implementation of the PIP Portal. Financial Analysis By interviewing Bill Mortar, an adjunct professor at Temple University and an IT professional with knowledge in software development, our team estimated development costs for the IPP. The portal will need to be developed in phases. We designed a four-phase implementation process with varying development time and costs. Phase is currently underway and primarily involves researching design functionality and capability. Phases II through IV will build proof of concept that the PIP Portal must establish prior to implementation. The table below shows a breakdown of the four phases and major tasks that must be achieved in each phase. Phase I (6 months) Setting the business requirements Functionality and navigation considerations Screen mock-ups Total Cost Phase I Cost $50,000 Phase II (6 months) Translating business requirements Database structure Detailed software design and documentation Total cost of Phase II 150,000 10 Phase Ill (12 months) Coding Portal testing Bug tracking Total Cost of Phase Ill $700,000 Phase IV (12 months) Beta version testing Further development Maintenance Considerations Total Cost of Phase IV $1 75,000 Estimated Total Time Estimated Total Cost 36 months The team estimated the total time for development and testing to be 36 months at a cost Of $1 We have estimated the amount of value the PIP Portal could provide to a brokerage firm by conducting a net present value (NIP) analysis. According to Hoovers, the insurance agency and brokerage industry in the United States cords approximately 100 billion in revenue annually, and is expected to experience medium growth over the next 1 2 to 24 months. We decided a 5% growth rate is a reasonable assumption based on Hoovers data. We used very conservative numbers to estimate the extent of additional market share a brokerage firm could capture after implementation. Our assumptions is that a firm could capture an extra . 5% of industry revenue in the first year after the three year beta phase and is adjusted up to 3% at year five.