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IAI Actuarial Core Principles · Business Management · Business and consumer needs, the industry value chain and competitive forces

Suraksha Life, an Indian insurer, sells term plans through the same channels, with similar premiums and benefits, as most rivals. Its management decides to cut claim-settlement time sharply and to make this the feature customers notice most, accepting that it will not be the lowest-priced firm. Which generic strategy, in Porter's framework, best describes this choice?

The strategy is differentiation. The insurer is creating a valued, distinctive feature, namely faster claim settlement, rather than competing on lowest price. Cost leadership would need the lowest cost base, and no narrow segment is targeted, so a focus strategy does not fit either.

  1. ACost leadership
  2. BDifferentiationCorrect
  3. CCost focus
  4. DDiversification into unrelated businesses
  5. Harvesting the business

Explanation

The firm is building a distinctive feature (fast claim settlement) that customers value and is willing to forgo the lowest price. That is differentiation. Cost leadership would require being the lowest-cost producer, and the scenario states price is not the aim. Nothing indicates a narrow segment, so it is not a focus strategy.

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