IAI Actuarial Core Principles · Business Finance · Corporate growth, restructuring and divestment
An Indian insurer takes over a bancassurance distributor to control how its policies reach customers. This acquisition is best described as:
This is forward vertical integration. The insurer acquires a business closer to the customer in its value chain, namely distribution. Horizontal integration would mean buying a competitor, backward integration a supplier, and conglomerate diversification an unrelated business.
- AConglomerate diversification
- BHorizontal integration
- CVertical integration (forward)Correct
- DVertical integration (backward)
- Management buy-out
Explanation
The insurer moves down the value chain towards customers by buying a distributor, which is forward vertical integration. Horizontal would involve a competitor insurer; backward would involve a supplier; conglomerate would be an unrelated business.
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