Globalization's Impact on Insurance

This assignment delves into the profound influence of globalization on the insurance industry. It explores how international regulatory frameworks have evolved to address a globalized market, examines the expansion of insurance companies into new territories, and analyzes the changing needs and expectations of customers in an increasingly interconnected world.

Contemporary Developments in
Business and Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1: PESTEL ANALYSIS........................................................................................................1
TASK 2: GLOBLIZATION AND BARRIER TO GLOBLIZATION...........................................4
1. Relevance of globalization to Aviva PLC and its influence on policies and decision making
.....................................................................................................................................................4
2. Critical evaluation of the effectiveness of the organization’s response..................................7
3. Demonstrating some areas for improvement in the response of the organization...................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
APPENDIX....................................................................................................................................13

INTRODUCTION
Competition is raising day by day which is creating problem in survival of the business
so, every organization needs to focus on using different techniques for getting success. There are
number of contemporary development in business and management that help in running business
operations and improving strategic performance of the organization (Muhammad and et.al,
2011). The current research project is based on the recent development of the different industry
and management. Regarding this, it has been chosen Aviva PLC which is one of the leading
organization of insurance industry of UK. It offers insurance services to different national and
international customers of the host and foreign countries. Analysing the internal and external
environment of the organization is one of the major aim of this report. Regarding this, it will use
appropriate tool for analysing the macro environment of Aviva and its impact of different
external factors on overall performance and business activities of the organization. Along with
this, study will also focus on globalization and its influence on policies and decision making
process of company. Further, study will determine the effectiveness of the organizational
response towards the different barriers of globalization. Afterwards, scope of improvement in the
response of Aviva is also describing in the following paragraphs of the report.
TASK 1: PESTEL ANALYSIS
As per the present scenario, Aviva PLC has taken into consideration where the
organization works as an insurer and pension provider in London UK and other parts of the
world. The operations of the firm can be influenced by macro and micro factors. In order to make
analysis of the same PESTLE analysis has considered. It will assist the cited firm to identifies the
impact of macro factors on the growth of firm. It aids the company to analyse the areas through
which the earning, income or profitability may get affected. Certain factors are stated below.
Political factors: Political factors consist of tax policies, laws and trade restrictions. This factor
can be responsible to affect business operations of the cited firm. It includes sub factors like
terrorism, tax treatment, regulatory reform and geopolitical risk. Terrorism can affect the
globalization and standardization of the Aviva PLC. If this factor is avail in the economy, at
corporate level firms will not be interested in dealing with the cited company. It can affect the
client and costumer base of the firm Srdjevic, Bajcetic and Srdjevic, 2012).
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In addition to it, the impact of terrorism is affecting the multiple product lines such as
workers compensation, life and benefits. On another side, the geopolitical instability can affect
the operations of the firm. In this, the scarcity of resources is identified which results into
instability of the economy. There is some positive impact of political factor on the cited firm is
that, the government has mad third party insurance compulsory due to which the people of UK
has to get done their insurance. Increase in motor car insurance leads to hike in the income and
profitability of the cited company. On the other hand, increase in taxation can have a negative
impact on the firm as the investment done by the consumers will be low. It will be necessarily
paid the income tax due to which they wont be able to invest in insurance. As a result, the
financial stability of the company will surely get affected (Paterson, Brubaker and Wendel,
1993).
Social factors: Insurance business is complex and competitive as compare to other industries.
Financial responsibilities has been performed by the cited firm. In today's era it is identified that
the standard of living of customers has increased. The policies framed by the UK government
towards insurance is stiff. At the time of purchasing new vehicle it is necessary to make
insurance of the vehicle. It aids Aviva PLC to increase large number of customer base. With the
change in time, people are getting more conscious with health in order to attain this factor life
insurance plans are adopted by the UK citizens. It has provided assistance to the management of
cited firm to increase its operations and profit.
Earlier, customer required to take initiatives for the insurance but with the changing time
company itself offer opportunities to the consumers. It has also seen that the mentioned firm has
diversified into various sector like pension, general insurance and life insurances. It has given an
opportunity to the company to grow and expand at global level. With the changing time the
concept of nuclear family has introduced in the market where all the members of the family can
get their insurance done. The overall impact of the social factor is positive as it has offered
assurance to the firm to get expand in different field of finance.
Technological factors: The changing time has improved the technology that leads to effective
running of operations of Aviva PLC. The emergence of internet has offered opportunities to the
firm where they can communicate with the customers easily. With the help of blogs and pages
over social media, the cited organization can interact with the customers at frequent basis. With
the change in policies and procedure of the company can be updated with the use of website of
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the Aviva PLC. With the use of technology, the large amount of information and data can be
easily analysed. It leads to aid the firm to attain effective decision making by the management of
the company. This factors have assisted the company to offer more accurate actuarial practices.
As a result, effective forecasting of risk can be done (Brown, J.P. And et.al, 1981).
In addition to above, with the use of different software the company can maintain its
private data safely. The personal application of the Aviva helps its users to get updates with the
current information. The users can check the current status of their insurance policy. In context to
it, the customers will be able to compare the insurance policy structure of the two companies. It
will help the customers to select and decide the appropriate policies. The organization has
adopted online system through which premium can be paid with the use of online mode. Queries
and issues can be solved over the websites and required information can also be taken by the
customers. It results into growth of the company with increased market share and customer base.
Apart from this, the customers of Aviva PLC can share knowledge, ideas, feeling ans comments
on blogs. It will result in attracting new customers to the organization. With the use of blogs and
websites there is ample of knowledge is available through which there is no chance of cheating
and frauds by the insurance companies. Ultimately, it assists the consumer to adapt right amount
of policy with accordance to the requirement of customers.
Environmental factors: Environmental factor can play big role in the financial performance of
Aviva PLC. Generally, people get their insurance done for health issues and diseases. Due to
environmental change or natural hazards like earthquakes. Floods and storm can affect the
homes, cars and human beings. In that situation, the cited firm requires providing the amount of
claim which is done by the customers. It can affect the financial stability of the organization. It
can leave a negative impact on the financial stability of the cited firm.
It is also seen that due to environmental change people are suffering from various
diseases and also dying due to different diseases. At the time company needs to pay the amount
of claim due to which the firm can financial instability. Management of these type of risk needs
the company to be more sophisticated in the company's risk models. In order to gain the
advantage of the stated factor, the firm needs to frame an innovative structure so that risk can be
shared and transferred. It is necessary for the company to use catastrophe modelling so that
certain areas can be analysed. The cited firm will be able to deal with such circumstances.
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Economic factors: In insurance industry, economic factor plays a crucial role through which the
performance of the firm may get affected. As per the economic factor, recession can be the
element that can affect the company's position. In UK, there was a period of recession in 2009
where the level of income of people tends to down. It also affects the purchasing power of the
customers because of decrease in real income of consumers. As a result, investment can not be
done by the consumers. It leads to decrease in the income and profitability of the company. It can
affect the company in negative manner (Pestle, Chorpita and Schiffman, 2008).
On other side, rise in income of middle class can assist the company to invest in
insurances. In addition to this, if the income and profitability of the firm tends to increase then
they will be able to make further investment. It can result into increase in infrastructure
investment by the government. With the help of companies wealth can be created and growth in
construction can also be done. However, the investment done by the government of UK can be
useful for the Aviva PLC. These investments can create an opportunity for the firm.
Legal Factors- In financial services corporation, legal factor play a very crucial role in order to
establish business as well as dealing in insurance services with customer. Without considering
legal norms, regulation and rules, company cannot survive it business globally. As per legal
factors, life insurance and pension company must considered pension age at which person
become eligible for pension. It has risen in 2014 to 66 and in by 2028 it will become 68.
Corporation should seriously focused on regulation on insurance. It has increased is expected to
ensure transparency in regard to pension charges. In the year of 2014, 22 year above employees
have automatically enrolled by new schemes of pension. This has given high business
opportunities to Aviva PLC.
TASK 2: GLOBLIZATION AND BARRIER TO GLOBLIZATION
1. Relevance of globalization to Aviva PLC and its influence on policies and decision making
Globalization can be defined as a process which develops scope of international business
and increase the exchange of goods, services, ideas and view points and other aspects of culture
with rest of the world. It helps in expanding business at international level. International trade
and investment and changes in information technologies are the major drivers which leads the
result of globalization (Davidson and et.al, 2012). This process has direct and indirect impact on
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environment, culture, political, economic and social development of different societies of the
world.
Aviva is one of the leading organization of the insurance industry of UK. So,
globalization may create opportunity and threat for the organization. Globalization will be
effective for Aviva in many aspects such as reducing the transaction costs, improving liquidity
position and facilitating economies of scale in investment, etc (Michie, 2011). There are some
specific reasons because of them Aviva has decided to start international business operations. For
example, Aviva wants to secure the better resources for completing business operations.
Organization wants to reduce the cost of the insurance services by declining other cost such as
labour cost, etc. company wants to increase the customer base for the organization so and it has
decided to target national as well as international customers also. Earlier, Aviva PLC has
introduced some new services for customers so, it was seeking new markets for its new services.
So, it has decided to start business at global level (Waltman, Tijssen and van Eck, 2011).
Lifestyle is also one of the important reason behind the globalization. Aviva has analysed that
large number of foreign customer uses insurance services so, it was one of the major reasons
behind the globalization of Aviva.
Along with this, Aviva wans facing high competition in the national market due to the
large number of insurance company so it has decided to increase sales in overseas markets.
Along with this at a specific level profit and sales of Aviva PLC were become constant so by
expanding business at international level this company wanted to raise its financial performance.
Aviva wants to become a strong insurance service provider in all over the world so it has decided
to globalize its services (Globalization of insurance, 2016).
As per the analysis of the external environment it can be said that different factors of the
global market have direct impact on organizational policy and decision making process. For
example, political factors such as political stability of different nations, democracy and
dictatorial regime can influence the general policies of the organization. Monetary policy may
influence the foreign direct investment in insurance services so, pricing policy of organization
may influence by the money exchange rates of different nations. Therefore, pricing decisions of
Aviva can be changed by the fiscal and monetary policies of different nations. On the other hand,
economic factors of the different nation also have positive and negative impact on financial
policy and decision making process of Aviva (Dutta, 2016). Purchasing power of customers and
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level of expenditures are considered as major economic factors which may influence customers
to buy particular insurance services of Aviva or not. So, it can affect the sales performance of the
organization. Along with this, national interest and inflation rates can affect the decision about
the tax payment and taxation policy of the organization. Including this, globalization lead
increment in the technological advancement which help in improving the utilization of the
available resources of the company. Resource mobility is one of the major impact of
globalization which helps in reducing the cost of production and distribution of Aviva.
Therefore, for utilizing available resources in effective manner Aviva has started its business
operation at international level (Robertson, 2012). Further, technology is also one of the
important driver which creates situation of globalization in insurance industry. In addition,
foreign society uses insurance services in their daily life style. So, Aviva wants to get a large
base of customers for its available insurance services. Thus, social drivers also play important
role in globalization of Aviva. Overall, there are number of drivers of globalization which can
easily influence the existing policies and decision making process of Aviva (Maertens, Colen and
Swinnen, 2011).
On the other hand, there are some specific barriers to the globalization which have
negative impact on international trade of Aviva. For example, technological barriers such as for
implementing the latest technologies and competing with the international organizations Aviva
needs to invest huge about of money. It may increase the cost of organization and reduce the
overall profitability of the firm. Along with this, number of countries have their own technical
standards which can create foreign trade barriers in the form of product standards, technical
regulation and testing and certification, etc. Therefore, technical regulations leads changes in the
production process of Aviva (Lane, 2013).
Operating business in foreign country is one of the complex task for Aviva PLC due to
cultural barriers. Due to the globalization and international trade it is very difficult to avoid to
meet different culture and conflicts. Difference in language and culture may create issue in
making communication with customers of the foreign country. It can affect the sales of Aviva in
negative manner. For operating business in international market Aviva needs to have strong
knowledge of existing market, channel and suppliers, customer’s needs and requirements and
domestic and foreign rules and regulations, etc. these factors can decline the overall performance
of the firm in negative manner (Hopkins, 2011).
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Ethical barriers is also one of the major issue for Aviva at the time of running business
operations at international level. Most of the countries have introduced some basic rules and
regulations for ethical trading policies and sometimes it can increase the total cost of the
insurance services. But, these practices play important role in maintaining sustainable
development of the organization (Zoran, 2008).
There are number of economic barriers for Aviva such as government of different nation
has introduced number of rules and regulation that restrict international transactions of increase
the cost of such types of trades. Therefore, these regime decline the economic efficiency. Due to
trade barriers Aviva can provides limited choice of insurance services to foreign customers. It
may have negative impact on competiveness of the organization in international market
(Vinokur, 2010).
Therefore, globalization has positive as well as negative impact on business performance
and management of Aviva. Organization needs to take appropriate response towards the
reduction of negative impact of globalization barriers (Sophie, 2010).
2. Critical evaluation of the effectiveness of the organization’s response
Aviva PLC is operating its business at global level and offering its insurance services to
customers of number of foreign countries. As per the above discussion, at the time of
international trade organizations face number of issues, challenges and barriers which may
decline the overall performance of the company in negative manner. For reducing these effects
Aviva has applied some major strategies which have helped in overcoming all these barriers in
effective manner (Lin and Smyrnios, 2007).
For example, there are number of political barriers and inappropriate regime which may
affect the business operations of Aviva in negative way. So, for overcoming this issue Aviva
PLC has considered all rules and regulation of foreign governments which helps in developing
favourable organizational policies for running operation in international countries (Viswanathan
and Dickson, 2007).
Changes in the exchange rates money supply tax rates and currency fluctuation are
considered as major economic issues. So, for managing financial position and economic
efficiency Aviva follows all standards and regulations of Monetary and Fiscal policy. It helps in
reducing managing international trade in effective manner which will help in maintaining
economic stability in appropriate way (Powers, and Loyka, 2007).
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Along with this, Aviva PLC develop pricing policy of insurance policy as per the changes
in the exchange rates of currencies of host and foreign countries. It helps in reducing the loss
from the current exchange rates. In addition, there are number of social barriers of globalization
and Aviva PLC responding towards this barrier in effective manner. Organization analyse the
needs and requirements of customers which helps in introducing insurance services for
customers of particular nation. It will also help in increasing the level of satisfaction of foreign
customers (Paswan, Blankson and Guzman, 2011).
Culture differences, language barriers and other social issues also have negative impact
on overall performance of Aviva. Along with this, these problems decline the customer
relationship management of the organization. But, response of Aviva PLC is not as strong for
overcoming all these issues in effective manner (Effects of Globalisation on the UK Economy,
2016).
Analysis of the organization’s activities has reflected that Aviva PLC has invested huge
amount of money in adopting new and latest technologies for improving overall performance of
the company. Along with this, company made this investment for handling competition in the
market. This response has helped in maintaining competitive advantage but it has increased the
total cost of the organization. It can decline the total profitability of the firm (Movements toward
the Globalization of Insurance Regulation, 2016).
At the time of globalization organizations face the competition from the foreign countries
and it reduce the number of customers of Aviva. For handling such kind of situation Aviva has
introduced number of strategies as per the competitor’s strategy. Including this, company has
used appropriate strategies of marketing of its insurance services such as social media marketing,
website and digital marketing, Print media advertisement, etc. These promotional strategies help
in developing and maintaining brand awareness of Aviva PLC and its insurance services in
customer’s mind (Globalization, 2016). Therefore, this strategy helps in maintaining strong
brand image in the international market which plays important role in increasing overall
performance of the organization.
Aviva PLC has chosen only those international market where rate of natural hazards is
low as compare to other nations. It helps in reducing the impact on different negative
environmental factors on insurance services and organizational policies of Aviva. Analysis of the
organizational policies have reflected that Aviva PLC follows all legal rules and regulations of
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government of different nations. It helps in maintaining effective relations with government of
nation. Overall, analysis of the organization’s response has reflected that Aviva PLC has adopted
appropriate strategies to overcome globalization barriers and improves the overall performance
of the organization in national and international market (Robertson, 2012).
3. Demonstrating some areas for improvement in the response of the organization
Aviva PLC’s strategies are appropriate for handing different issues associated with
globalization and these issues have helped in overcoming all problems and improving national
and international performance of the company. But, still there are some scope of improvement
and organization needs to pay attention towards the same (Paswan, Blankson and Guzman,
2011).
Aviva is trying to understand the culture of different nation but still there is a huge scope
of improvement. Organization needs to conduct research on culture of foreign countries. It helps
in understanding the social and culture of the different nation by which Aviva PLC can easily
determine the needs and requirements of customers. It will help in providing insurance services
as per their needs which will raise the satisfaction level of foreign customer. Therefore,
understanding social and culture differences will help in improving performance at national and
international level (Maertens, Colen and Swinnen, 2011). Along with this, Aviva, needs to make
appropriate arrangement of training and development of employees for improving their
communication skills and language proficiency. It will be effective for providing appropriate
services to customers as per their needs. It also helps in maintaining strong relationship with
customers also.
Along with this, technologies are changing day by day and it can affect the
competitiveness of the organization. So for managing competition and being competitive Aviva
needs to focus on technological updates in each and every field such as finance, marketing, HRM
and operation, etc. These will raise the total cost of the organization (Viswanathan and Dickson,
2007). Therefore, all these are the major area where Aviva PLC needs to pay attention towards
the same.
Along with this, Aviva PLC was facing issue of poor strategic planning for foreign
market and it may have negative impact on management of the organization in the international
market. So organization needs to use appropriate tools and techniques for developing new
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strategies which will help in improving the overall management of the company in global market
(Powers, and Loyka, 2007).
CONCLUSION
Implementation of appropriate tools and techniques have helped in completing report in
effective manner. It has concluded that Pestle analysis is one of the i8mportnat method for
analysing external environment. As per this analysis, political stability of the different nation,
economic condition, social factors such as values and beliefs, technological innovations,
environmental issues and regulations and legislation so different countries have direct and
indirect impact on overall performance of the Aviva and its business practices. Along with this,
research has also found that globalization plays important role in increasing the sales or financial
performance of Aviva because it helps in augmenting the number of customers for its products
and services, reduce the cost of insurance services and increases growth and development
opportunities also. Including this, regulations, cultural differences, technological changes,
fluctuation in exchange and interest rates, changes in needs and requirements of customers are
considered as major barrier to globalization which have negative impact on performance of
Aviva. But, for reducing the impact of all these barriers Aviva has developed most appropriate
strategies such as appropriate consideration of rules and regulation, following monetary and
fiscal policy deciding price as per the foreign currency difference, etc. all these strategies have
helped in reducing competition at global level and improve the international performance of
Aviva. As per the report, Aviva needs to pay attention towards the culture of different nation and
needs and requirements of customers. These strategy will help in improving performance of
company at global level.
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Srdjevic, Z., Bajcetic, R. and Srdjevic, B., 2012. Identifying the criteria set for multicriteria
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APPENDIX
Aviva PLC is a multinational insurance company which headquarter is situated in
London. It has deal with 16 countries along with 33 million customers .It have 28000 employees
who has engaged in providing customer satisfaction so as corporate can enhance its market
share. Aviva main activities are the provision of general and life insurance, long term saving
products and fund management services. The major vision of Aviva is a make business simple,
effortless and easy for its potential customers. Its investors has around 289.9 billion assets under
management. The cited venture has been increased its popularity and presence due to acquired
AmerUs Group, which is financial based company. It has 2.9 billion deal and it has rebranded as
Aviva USA when deal between these companies was completed.
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