Organizational Behavior of Pareco Insurance

Robert Kennedy College
University of Cumbria
ID 1552914
Organizational Behavior
FORUM/Class ≠ 2126
Final Assessment
PARECO INSURANCE plc:
A Case for organizational Change
Start and End Date: (Jun 4, 2018 - Aug 26, 2018)
Supervisor
Prof. Benedicta Lusk
Table of contents
1

I-Introduction........................................................................
...............................................................4
II-Industry overview and
analysis..................................................................................................
II.1
Regulation..............................................................................................................................
.......
II.2 Key
operators...............................................................................................................................
5
II.3
Management........................................................................................................................
.........
II.4 Market
evolution.........................................................................................................................
II.5 Industry demand determinants and profitability drivers..................................................6
II.6 The outlook for strategic planning and strategic change..................................................
II.7 Personal
challenges...................................................................................................................
III-Company assessment .....
...........................................................................................................8
III.1 External
analysis........................................................................................................................
III.1.1
PESTLE.................................................................................................................................
......
III.1.2 Porter’s Five
Forces...............................................................................................................9
III.2 Internal
analysis......................................................................................................................10
III.2.1 Pareco Insurance core
competence.................................................................................
III.2.2 SWOT
analysis.......................................................................................................................
III.2.3 McKinsey Extended 7-
S......................................................................................................11
III.2.3.1 Hard
Triangle.....................................................................................................................
2

III.2.3.2 Soft
Square.........................................................................................................................
IV-
Recommendations..................................................................................................................
...13
V-
Conclusion..............................................................................................................................
.......17
Bibliography...........................................................................................................................
.............25
Appendix..............................................................................................................................
................27
Abstract
Success in a changing environment cannot be sustained without a clear understanding of the
forces and processes that drive performance, without a visionary leadership. Pareco Insurance
is a clear example of a company which has been managed but not led.
Hopefully a sound assessment with the right tools can help taking stock of the situation and
clearing the path to an enduring success through a strategic change.
3

I-Introduction
“The business world is a fast-paced, uncontrollable environment. You have to be able to take
action and make your move based on what’s going on at the time.”
Mountaineer Alison Levine (2014)
Pareco Insurance plc is an insurance company headquartered in Douala, Cameroon. It’s a
result of a merging operation in 1999 between two companies, Chanas & Privat (1), founded
in 1953 by a French resident, Mrs Anne Legno (2), and SOCAR (3), a public insurance
company.
Cameroon is a Central African country of 475,000 km2 with a population of 23 million people
and a GDP/capita (4) of just $1446 (https://data.worldbank.org).
With an equity capital of $10,500,000, Pareco Insurance has currently on its payroll an aging
and poorly skilled workforce of 130 employees operating nationwide with main branches in
Douala, (economic capital), Yaounde (country capital), Bafoussam (third largest city).
Having had in its portfolio the largest public companies in most sectors (upstream oil, airlines,
oil refinery, sea transport), Chanas has dominated the local insurance market from its
creation to year 2014 when Mrs Anne Legno, was forced to resign from her position of
Chairman & CEO by the Chanas Board due to her advanced age-89.
As a result of that unprepared succession, the company has entered since then into a period
of turbulence that has resulted in the loss of roughly half of its market share three years later
and a seriously damaged brand:
K$ 2014 2015 2016 2017
Market share % 16 11 9 9
Source: Industry Corporation ASAC Report 2017
4

A new CEO appointed last December 2017 has been requested by the Chairman of the Board
to find out the way to improve company performance and redeem its reputation.
Early this year, the National Hydrocarbons Company (NHC) (5) has acquired 75% of the
46,000 company shares. Pareco is now under Government control.
II-Industry overview and analysis
II.1 Regulation
The insurance market is regulated in Cameroon by the CIMA (6) Treaty signed in 1989 in
Yaounde by the representatives of the fourteen Francophone African countries so that the
rules be the same in all those countries for and the companies assessed on the same basis.
Two major branches are operated: life insurance and other insurance products covering all the
other risks representing respectively 15% and 85% of the current total demand.
The market penetration is still too low, at roughly 3%, according to the Industry Corporation
(ASAC) (7) which collects all the industry data and issues a yearly report.
II.2 Key operators
Twenty-eight companies are sharing the business out of which only eight are offering life
insurance products.
Only considered here are the other insurance products as Pareco is not yet offering life
insurance products.
The top 5 brands account for 60% of the total proceeds at end 2017 as shown below:
Market
shares %
2012 2013 2014 2015 2016 2017
PARECO 21 17 16 11 9 9
SAAR 13 15 15 14 14 14
AXA 10 10 11 15 16 13
ALLIANZ 9 8 9 10 10 13
ACTIVA 13 13 13 13 13 12
Cumul
Top 5
66 64 65 62 63 60
Source: ASAC Report 2017
The smaller players are gaining ground.
II.3 Management
The average industry managers/total staff ratio has improved between 2012 and 2016 as
shown by the figures below:
2012 2013 2014 2015 2016
5

Total staff 1348 1348 1348 1321 1261
Number
of managers
351 351 351 461 448
Ratio
managers/total
staff %
26 26 26 35 36
Source: ASAC Report 2016
This ratio for Pareco Insurance is far lower as it is just 25% at end 2017.
II.4 Market evolution
The demand is consistently increasing year on year:
K$ 2012 2013 2014 2015 2016 2017
Total
proceeds
196,880 213,790 209,110 233,330 234,634 253,038
Source: ASAC Report 2017
II.5 Industry demand determinants and profitability drivers
The market product mix is highlighted in Exhibit1.
The main demand driving factors are: Government policy, risk awareness, urbanization,
education, disposable income, knowledge of the companies’ offerings, attitudes towards
health, insurance companies’ commercial networks, and so forth. The Government policy is
instrumental. The car insurance is the number one product just because it is mandatory.
Health insurance is number two as here as well, companies operating in Cameroon are bound
by the law to take care of their employees’ health. Given the low level of the GDP/capita and
hence of the disposable income, few individuals have the means to contract health insurance.
Ranking third is the insurance against fire and other liabilities: risk awareness is demonstrated
by managers of industries and service companies who have to protect their assets and ensure
business continuity.
It is however likely in years to come as people will be more risk-aware due to a better
education and with a higher disposable income that more and more individuals will contract
health insurance and this will significantly drive the market revenue.
As the country economy is expected to be boosted in the near future with more oil and gas
discoveries, a new deep sea port in Kribi*, the relaunching of the national airlines company
Camair-Co, so is transport in general (road, sea and air).
A stronger enforcement of the regulation in the insurance market can reasonably be
anticipated as a dot-mover for both revenue and profitability.
Brokers who actually control 60% of the insurance business are gaining more and more power
and most of the largest customers have their dedicated broker through which they contract
insurance. Pareco management has so far neglected to get close to them.
6