Brexit's Impact on the UK Insurance Industry: An Aviva Plc Case Study

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The impact of BREXIT on the insurance industry in UK; a
case study of Aviva Plc
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Table of Contents
Introduction....................................................................................................................................................5
Background of the study............................................................................................................................5
Background of the company......................................................................................................................5
Research rationale.....................................................................................................................................6
Research problem......................................................................................................................................6
Literature Review...........................................................................................................................................7
Introduction...............................................................................................................................................7
Theoretical analysis...................................................................................................................................7
Recommendations...................................................................................................................................10
Literature Gap..........................................................................................................................................10
Summary of the Review..........................................................................................................................10
Research Methodology................................................................................................................................12
Research Onion.......................................................................................................................................12
Research Design......................................................................................................................................12
Research Philosophy...............................................................................................................................13
Research Approach..................................................................................................................................13
Data Analysis methods............................................................................................................................13
Sources of data collection........................................................................................................................14
Sampling size and technique...................................................................................................................14
Research Scope........................................................................................................................................14
Research Limitation.................................................................................................................................14
Ethical Considerations.............................................................................................................................15
Timescale.................................................................................................................................................15
Reference List..............................................................................................................................................17
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Research Title: “The impact of BREXIT on the Insurance industry in UK; a case study of
Aviva Aviva Plc”
Aims and Objectives
The aim of the research is to comprehend the impact of the political incidence of BREXIT on the
insurance industry of UK in general and Aviva Plc in particular.
The objectives of the research will be elucidated below:
 To assess the significance of Brexit on the UK
 To outline the current position of the insurance industry after Brexit on the UK
 To critically evaluate the positive and the negative impact of Brexit on Aviva Plc
 To make conclusions and recommendations on the impact of Brexit in the insurance
industry in the UK
 To underline an understanding of the political, socio-economic and legal factors affecting
insurance industry after the onset of Brexit
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Introduction
The progress of Brexit would influence the internal business environment of the country. The
decision of the government to retract from the European Union would enable the country to form
new legislative framework. The implementation of Brexit would affect the economy of the
country in a negative way initially by affecting the purchasing power of the people. The
insurance industry would suffer negative implications due to the lack of business opportunities
since the economic stability of the country is affected negatively. As per the opinion framed by
Sampson (2017), it can be stated that Brexit would influence the economic growth and
sustainability of the companies in the insurance industry of the country. Brexit’s impact on the
operations of insurance organisations is evaluated through the study to recognise effective results
of the political event that may affect the condition of the insurance industry operators.
Background of the study
Insurance activities within the country are influenced by the earning abilities of the people.
Considering the economic condition of the economy that Brexit may develop, it can be identified
that the economic situation of the people and the consumers would be reduced. In such a
situation, the insurance industry could suffer due to the declining rates of exchange rate for
sterling. The reduction in value of the pounds due to Brexit referendum would result in
ineffective market service for the companies operating in the industry (Begg and Mushövel,
2016). The results determined through Brexit would influence the operations of the industry in
other ways as well. UK’s departure from the EU framework would present the country to form
new regulations as per the demand and form business plans as per their benefit (Dhingra et al.,
2016). However, the implementation of new regulations on the operators of the insurance
industry would result in negative implications on the struggling economy of the country.
Background of the company
Aviva Plc is identified as a leading multinational organisation that operates from the UK and
provides services to their consumers through the implementation of the mottos of “Care more,
kill complexity, never rest and create legacy” (aviva.co.uk, 2018). Established in 2000, the
institution provides financial services to the consumers across the country and the world. The
financial institution gained annual revenue of £18 million through their transactional procedures.
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With employee strength of 31000, Aviva is considered as the leading insurance organisation in
the UK economy (Aviva.com, 2017).
Research rationale
The research aims to provide a detailed evaluation of the impact Brexit would have on the
insurance industry of UK, which would be recognised by studying the aspects of business for
Aviva Plc. By identifying the influential factors of Brexit on the business operations for Aviva,
the researcher would be able to develop an outline regarding the positive and negative impacts
the political decision of Brexit referendum may prevail on the company and the industry.
According to the findings developed by Burling (2017), it is identified that the economic impact
of Brexit would cause issues to the insurance industry of the country in varied ways.
Research problem
The issue of Brexit on the UK economy and its impact on the insurance industry needs to be
determined in order to frame appropriate solutions to the companies operating in the country.
The country’s fluctuating decisions regarding the Brexit enhances the uncertainty of the people
and the economic instability of the industry as well (Baker et al., 2016). It is observed that the
referendum may affect the insurance industry operators negatively. The study would evaluate the
possible ways organisations in the industry would be affected due to Brexit. Recognising the
aspects of Brexit on the business operations of Aviva Plc would allow the researcher to develop
an understanding of the implications Brexit could potentially present to the insurance industry of
the country.
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Literature Review
Introduction
In literature, Review section scholarly articles are being collected by researcher also that they
study can be completed soundly. During implementing literature review, academic articles are
being collected from the database known as Google scholar. At the time of collecting articles,
Boolean Search strategy is being used for combing the operators and keywords. Literature
review process can be conducted in two ways such as systematic review and Meta analysis. In
Meta analysis process, statically the researchers are implementing data so that present trend of
the study can be well evaluated. The present study has thrown light on the topic “Impact of
Brexit on insurance sector of UK”. In this section, present trend of financial sector will be
discussed.. Further financial theory has been critically implemented in this study. Role of Brexit
on UK will also been surfaced in the study. Lastly, positive and negative impact of Brexit on the
economy of UK will be considered.
Theoretical analysis
Present trend of insurance sector in UK
In UK, the insurance sector is experiencing a transformation because of technological
development. For instance, insurance sector has implemented technology within the institution
so that customers can use their service based on their convenience. Presently, premiums can be
paid online so that wait time of the clients can be mitigated. They are also launching personalised
premiums so that clients from different income groups can avail their service. Organizations are
leveraging IoT so that personal issues of clients can be overcome. Collaboration between tech
firm and traditional firms are very important to give rise to newer models of business. Sustained
economic growth has been implemented within the insurance sector for the benefits of the
customers. The insurance sector of UK has recruited more than 111 employees so that timely
service can be provided to customers. Presently, in UK, the insurance sector has earned profit
more than 25%. The customers prefer to invest on premiums so that they can live a secured life
after (growthbusiness.co.uk, 2019).
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Figure 1: Trend of Insurance market
(Source: wns.com, 2019)
Impact of Brexit on the insurance sector of UK
As per the report presented by the Economic growth, Brexit has affected the economy of UK.
For instance, insurance sector has also been affected due to fall in market share. Then report has
further stated that Brexit may reduce the market share of insurance sector by 15 %
(growthbusiness.co.uk, 2019). Thus, their productivity will witness a deficit. In UK, the rate of
investment in insurance company has witnessed a rise of 1.8 trillion pound
(growthbusiness.co.uk, 2019). After implementation of Brexit UK will lose the right of Passport
thus, investment rate on insurance sector will also witness a downfall. Thus, overall business
activity will get affected. However, Shen and Bai (2016) has mentioned that UK does not hold a
strong command on insurance sector thus employees, loose interest on their organisation. On
contrary, in the financial year 2018, insurance sector of UK has recruited more than 30,000
employees so that timely service can be provided to their customers. High recruitment rate will
also assist insurance sector to maintain quality service. After Brexit, insurance sector needs to be
restricted so that its competitive position in market can be fathomed. On the contrary, Tannock
(2015) has mentioned that insurance sector witness plethora of uncertainties due to Brexit.
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Positive and negative impact of Brexit on UK
As per the literary underpinnings of Ford (2016), after the implementation of Brexit on the
economy, UK will lose a chance of free trade because investor will lose their options of
investment. However, the economic condition of UK will be improved after implementation of
Brexit because the government will accept import tariffs. The restrictions of financial sector will
also be mitigated after implementation of Brexit because tax rate will witness a downfall. Due to
Brexit 50%, export share will be affected. Thus, overall economic condition will witness a
deficit.
Application of Agency Theory
Insurance Sector can implement Agency theory in order to solve issues between management
and agents of financial sector. The concerned theory also helps to maintain positive relation
between management and their stakeholders. As per agency theory, management of organisation
can recruit employees to manage their activities on regular basis. However, Sheen and bai (2016)
has mentioned that agents may fail to analyse the requirement of clients thus, customers retention
rate may get affected (Blanch flower, 2015).
Figure 2: Agency Theory
(Source: Blanch flower, 2015)
Impact of Brexit on environment of UK
The political condition of UK may witness a turmoil condition due to Brexit because the policy
of dual passport will be mitigated. Thus, rate of investment on the economy will witness a
deficit. Brexit will leave an impact of employment rate of UK. The GDP rate has been reduced
by 2.7% thus; purchasing power of the customers will get affected. British income will also
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witness a deficit by 1.8% (telegraph.co.uk, 2019). However, in the year 2017 the income rate
was 3.8%. The employment rate will also be reduced by 1.0% because employees will be forced
to work by paying less salary (telegraph.co.uk, 2019). Brexit will also affect environment
condition of UK because of high rate of waste. However, it is suggested that management of
organisation need to pay attention to the CSR activities so that environmental pollution can be
mitigated successfully.
Recommendations
The political incident of BREXIT has negatively affected the market functions and the inflation
rate of the insurance companies. It has stirred up the market and brought down the investment
rate applicable in the business. The insurance companies can set a target for the global market
scenario and boost the regulations of the market. This can reduce the negative consequences of
BREXIT and improve circumstances for the other companies. Therefore, working by the
parameters will have a good impact on the companies and boost their trading options and
regulations. It will improve the efficiency of business and would bring on regulations in form of
marketing and trade.
Therefore, the insurance companies should abide by a set of standards that would hold good for
future marketing and trade. The creation of better alliance and services can boost the market
standards and bring in good results. This would help in profit generation and creation of new
trading tariffs important for the research. Therefore, these vital rudiments could be taken into
account for resisting the negative hindrances of BREXIT. That would have an impact and
influence the recruitment company. It would also bring in various diversities, which would play
an instrumental role in the market.
Literature Gap
In this section, positive impact of Brexit could not be analysed in a sound manner due to lack of
data. In the next part, the concerned gap will be met.
Summary of the Review
The literature review has analysed the impact of the BREXIT on the functioning of the markets
and the business in UK. It has given an account of the positive and the negative impact of the
political incident, which affects the functioning of the insurance companies. As per the analysis,
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it has been sought out, that economical crises have affected the growth and the functioning of the
company. The market trends, which are present in the UK, have been analysed and contributed to
the development of the literature. As per the literature review, it can be opined, that the market of
UK has seen a technological rise and development in its sphere of development.
Therefore, with the digital uprising the companies have been able to procure maximum profit
and earn a considerable amount. BREXIT has affected the UK insurance sector, by providing a
deficit of cash by 1.8 million dollars. This has had a negative impact on the functioning of the
business and the markets that are dedicated to the research. Therefore, as per the literature
review, there has been an uprising of competitive pricing. It has reduced the market share and
affected the business cycles of the company. Hence, these are some of the influence of BREXIT
over the insurance companies.
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Research Methodology
Research methodology plays an important role in catering to resolving issues systematically in a
research by adopting a decisive framework. Therefore, the proposal will cover the as important
research methods, that are imperative for the research. The research rationale will also be
discussed while adopting strategies for the research process.
Research Onion
In the words of Saunders and Thornhill (2017), the research onion implicates the three integral
models of ontology, epistemology and axiology. This philosophy is important as it highlights the
planning and the research that are associated with the research. Therefore, the research will
provide an understanding on critical analysis, imperative for research. The epistemology will be
applied for the research as it highlights the branch of the research that guide the knowledge and
sources gathered in a particular field of study. This is the rationale behind the use of this
technique, while catering to the possibilities of the findings on the specified topic.
Figure 3: Research Onion
(Source: Saunders and Thornhill, 2017)
Research Design
The research design is known as the set of methods that are useful for the analysis and the
measurement of the variables, which are specified in the research problem. There are descriptive
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