IAI Actuarial Core Principles · Business Management · Mission, business strategy, teamwork and time management
Kaveri General Insurance has a clear mission of being the most trusted motor insurer in southern India. Management is choosing between two strategies. One cuts premiums sharply to gain volume but would also cut claims-handling staff, which would slow settlements. The other keeps prices moderate and invests in faster claims settlement. Which approach to the decision best reflects sound strategic planning?
Options should be judged against the mission and the long-term competitive position. Here the faster-claims option fits the trust-based positioning, whereas cutting claims staff to fund price cuts conflicts with the stated mission and risks long-term damage.
- AChoose the price-cutting option because market share is always the primary objective of strategy
- BChoose whichever option shows the higher profit next quarter, ignoring the mission
- CEvaluate each option against the mission and long-term competitive position, and favour the one consistent with the trust-based positioningCorrect
- DDelay any decision until competitors have chosen their strategies
- Allow each branch manager to adopt whichever option they personally prefer
Explanation
Strategy options should be assessed for fit with mission and for sustainable competitive advantage. Slower settlements would undermine a trust-based position. Short-term profit alone ignores the mission, and market share is not always the key objective. Waiting for rivals or leaving it to branches gives no coherent strategy.
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