Met Life Company Operations Analysis - Report Example

Met Life Company Operations Analysis Met Life Company Operations Analysis Introduction Met Life, Inc. is one of the leading corporate providers of group life insurance products such as whole life products, universal term, as well as, individual insurance products a range of employee benefit programs and annuities. With subsidiaries and affiliates in nearly 60 countries, the company currently controls a considerably large market share in several regions including the United States, Europe, Middle East, Asia, Africa and Latin America. The history of Met Life, Inc. dates back to 1868 when it was founded as a stock life insurance company owned by a group of individuals. However, it later changed through a metallization process in 1915 to a mutual company operating without any external shareholders (MetLife Inc., 2013). For close to 140 years, Met life, has been in the insurance market. The company’s key strengths are particularly attributed to its long history of social responsibility as well as innovative services and products which have helped create a powerful brand and market recognition as a leader in major markets such as Japan and the United States. Generally, the aging markets in these countries has provided for a growing demand for annuity and life insurance products. However, the company has also faced numerous operations challenges some of which are attributed to the market saturation as well as the recent economic downturn. One of the company’s major operations weaknesses are attributed to its current overdependence on the already saturated US market. This has particularly exposed Met Life to a number of financial difficulties as many customers often allow their policies to lapse in times of economic difficulties. Additionally, the company also increasingly faces the problem of little product differentiation that is currently experienced within the contemporary insurance market. This report critically analyzes the operations of Met life Inc. Company including the state of the industry, the company’s various operation challenges and the efforts being undertaken to address such challenges. Fig 1: Projected growth of Met Life Company Problem Definition The operations of the company are largely based on its investments of the insurance premiums which are currently the company’s primary source of revenue. For example, the money paid by the individuals who buy Met Life insurance policies is invested in various ways. In this regard, the company will profit if the return on investment is greater than the potential payout to the policy holder. According to MetLife Inc. (2013), Met Life’s operations are broadly divided into two distinct categories namely, the retail and the group voluntary benefits. Generally, the retail division is largely responsible for catering of the individual policyholders by offering various products such as life insurance, casualty and property insurance, annuities and disability products. On the other hand, the group, worksite and voluntary benefits division provides life, dental, short and long term disability coverage to corporate employers in various parts of the world. However, despite its operational success, Met life Inc. has faced a number of potential operational challenges some of which include the need to innovate their services and products, need to improve supply chain. This is particularly attributed to the fact that this business model is often subjected to a number of operational challenges due to its vulnerability to swings in the equity markets, economic downturns and natural disasters. For example, the relatively high degree of market saturation in the United States has contributed to an increasingly competitive market thereby affecting the operations of the company. As a result, together with its affiliates and subsidiaries, Met Life has recently developed a comprehensive business continuity plan that seeks to locate and address each of the major operational challenges such as the need to improve quality of services and products, innovation and the need to launch new products in the market NASDAQ (2014). Another potential operations challenge facing Met Life is that the company still uses manual processes in carrying out operations like the issuance of life insurance. This is time consuming and is likely to breed a spirit of dissatisfaction among clients. Second, the deliverables of the projects that the company has been undertaking in the past have either been improperly scoped or delivered late. Third, the company has witnessed occasional decline in revenues. A report on the company’s performance in the initial nine months of the year 2012 revealed revenues declining by 5% during the 9 months duration in comparison with the same period in 2011. In spite of the great reductions in revenue, cash flow from the operating activities increased up to $15.3 billion if compared to $9 billion realized in the previous year. Finally, the company incurs high cost of operation associated with the use of Home and Auto Insurance fleet and maintenance of the machines like faxes (MetLife Inc., 2013), copiers and printers. Analysis In order to address some of the operations challenges facing the Company, the management of Met Life Inc. has developed a number of strategies that are designed to ensure the company is able to continue to deliver unmatched customer experience while at the same time ensuring its continuity in an increasingly globally competitive environment. Generally, in view of the aforementioned challenges, MetLife was in search for a solution intended to have its operational flow streamlined, to reduce the level of manual processes and to have the proposal information consolidated into a database as it continues to meet the high quality standards set by the company. For example, one of the strategies that have been adopted by the company to address some of its operational challenges is through the introduction of innovative products that are more profitable particularly during the low interest rate periods. According to Williams ( 2010), some of the new innovative products that are currently being offered by the company include a new living benefit variable annuity product known as GMIB Max V which was recently introduced as a replacement to the old GMIB Max IV which is no longer being sold in the market. The biggest difference between the two products is the significant reduction of the roll up rate. As a result, it is highly expected that the new product will improve the company’s risk profile while at the same time generating higher return. Additionally, due to changes in the insurance market dynamics, Met Life has identified and assessed new value creation options while managing risks and meeting emerging regulatory requirements such as the Solvency. It is a regulatory reform requiring increase in capital reserves for European insurers and reinsurers. Another important strategy that has been adopted by Met Life Company to help overcome its operational challenges is the proposed $600 reduction of operational expenses of the company by 2016. According to many experts, new product designs and changes to the supply architecture are key points to the innovation and fulfillment across the plan and must be enjoined into business processes and technology solutions (Scism, 2010). The strategy of reducing expenses is primarily intended to help Met Life remain competitive as well as improve the value for both its shareholders and customers. This is particularly expected to be achieving through improved efficiency, use of modern technology and better leverage of the company’s vendor agreements to help drive down the operation costs. However, although there are no specific layoffs tied to the new strategy, the company has not ruled out the possibility of future job actions. On the other hand, MetLife has also partnered with Ci & T to help streamline the process involved in the issuance of life insurance. This was realized through the creation of an automated system called Morpheus which gave METLIFE an opportunity to attain a higher level of workforce productivity and an improved data bank control management which is crucial in reaching the company’s objective of increasing the total number of clients worldwide. To manage costs and increase claimant satisfaction, insurance firm carriers refine vendor relationship management and new technology embracement that provide the insight into consumer behavior and expectations. Another important strategy that METLIFE put in place was the implementation of an office printer optimization project, whose success saw the use efficiency office machines reduced to a figure below 4,000 down from 23,000 within the organization. This measure has helped in reducing paper and electricity consumption. In the provision of services to customers, insurance firms rely majorly on business processes alone to monitor growth. However, at MetLife it is the personnel, processes and the acquired transactional data that have been correlated to execute these processes delivering improved customer relations, reduced operational costs and maximizing our margins (Scism, 2010) Lastly, in order to reduce the likelihood of operational challenges associated with disruptions particularly during crisis, the company has developed a set of comprehensive advanced preparations to ensure resumption of normal business operations during such events. Some of the preparations include plans for disruptions due to hurricanes, terrorist attacks, fires, earthquakes and IT disruptions among others. For example, Met Life is currently maintaining numerous back up systems as well as power supplies that can potentially allow critical telecommunications and computer systems as well as facility functions to be effectively maintained in the event of disruptions. The Company uses telephone services that can be effectively re-routed to another site in the event of disruptions telephone services. Implementation Challenges There are a number of challenges to the implementation of Met Life Company’s strategies of addressing its various operations challenges. The implementation of new strategies at MetLife has been faced by the lack of collaboration by the top management and development of incompatible operational systems and disjointed business processes during strategy development and implementation. This has led to costly and low quality product development approaches in the business. The lack of coherent business process has resulted in redundant product portfolios that complicate underwriting, operations and claims processes at MetLife. In the efforts to refresh and expand products the above challenge reduces the ability to react to market changes for consumer satisfaction. The presence of a relatively volatile legislation environment in various countries with regulations that keep on being revised to control business practices has negatively influenced strategy planning and expansion of operations in emerging markets. MetLife insurance has managed all these fundamentals very well and their effect is almost neutralized (Patterson, 2013). Fig 1: Fluctuations of the Stock market Prices Organizational lack of collaboration particularly by the top management is another potential challenge to the implementation. The other challenges include development of incompatible operational systems and disjointed business processes during strategy development; perpetuate costly and low quality product development approaches (FIO, 2013). Sometimes the lack of coherent business process results in redundant product portfolios that complicate underwriting, operations and claims processes. In the efforts to refresh and expand products the above challenge restricts the ability to react to market changes for consumer satisfaction. The presence of a relatively volatile legislation environment with regulations that keep on being revised to control business practices, negatively impacts on strategy planning and expansion of operations in emerging markets. However if these in the firm are well managed their effect is neutralized. Results Despite facing numerous challenges during the implementation of some of the operational efforts, Met Life Company has largely been successful in its operations management. The successful implementation of the company’s operations strategies has enabled it to effectively transform itself into a modern global company with a large customer base in most countries. Additionally, there has been changed in the distribution platforms for the insurance product carriers with a long-term view, which aligns with the market’s changing expectations. Generally, the success of Met Life’s operations is attributed to the fact that the company is not only proactive in adapting new technologies but it has also reduced its risks through the introduction of innovative products. On the other hand, capabilities addition through technology and process transformation has been experienced which has improved the effectiveness of the business architecture through billing and claims management. Tracking of all required transactional information electronically has been possible with enhanced average customer experience on turnaround time and consistency. There has been improved product application tracking and compliance monitoring which is now a reality with enhancement of both. Developing a comprehensive information strategy that aligns with the business strategy is important and this should generate business insights using analytics that provide a competitive edge. It is achieved through use of either predictive or simulation analytics in business prospecting and planning. Insurance companies must target important business processes and systems. They are key pointers where significant gains can be made in the quest of attracting new business and increase customer retention. They can lower expense ratios, and improve service provision to customers. All these important tools that act as the remedies for the different operational challenges encountered in the running of the day to day business have been effective in promoting efficiency although, in the implementation, they have their hindrances either structural or macro-economic. The current insurance industries require immediate and accelerated improvements. Insurance companies should focus in improving business processes and systems. They are good indicators of where significant gains can be made on attracting new business opportunities and customer retention. They lower expense ratios and improve service provision to customers (Miller, 2011). MetLife insurance has focused on these strategies to overcome operational challenges encountered in the running of the day-to-day business activities. They have been effective in promoting efficiency. Their implementations have been faced with structural and macro-economic hindrances. Conclusion In conclusion, Met Life Company has successfully overcome many of its operations challenges to become one of the most successful American companies with affiliates and subsidiaries in various parts of the world. References Scism, L. (2010). MetLife s CEO Completes His Quest -Flush With Capital During The Crisis, the Insurer Had Its Pick of Deals, but Settled on Alico. The Wall StreetJournal. Federal Insurance Office (FIO). (2013). Annual report on the insurance industry. Retrieved March 20, 2014 from http://www.treasury.gov/initiatives/fio/reports- and notices/Documents/FIO%20Annual%20Report%202013.pdf MetLife Inc. (2013). MetLife Official Web Site. Retrieved on March 21, 2014, from www.metlife.com NASDAQ (2014). MetLife, Inc. Competitors. Retrieved on 21 March 2014 from http://www.nasdaq.com/symbol/met/competitors Patterson S. (2013). MetLife Is on Offensive. Wall Street Journal. Retrieved on March 21, 2014online.wsj.com Williams, W. ( 2010). A.I.G. Said To Sell Unit To MetLife. The New York Times. Retrieved on March 21, 2014 from EDGAR Database of Corporate Information Read More