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IAI Actuarial Core Principles · Business Management · Communicating strategy; culture and structure in decision making; strategy case studies

The CEO of an Indian general insurer wants to shift from a strict hierarchical culture, in which every pricing decision is escalated to the chief underwriter, to a culture of empowered underwriting teams. Which action would most directly reinforce the desired culture, according to commonly taught cultural-change thinking?

Rewarding and promoting underwriters who take sound decisions within delegated limits, with visible leadership backing, best reinforces an empowered culture. Culture changes through what leaders model, reward and permit, so aligned incentives and delegated authority work better than posters, emails or longer manuals.

  1. AKeep the escalation rule but publish a new values poster in each office
  2. BPromote and reward underwriters who take well-reasoned decisions within delegated limits, while the leadership visibly supports themCorrect
  3. CReduce the training budget so teams learn independently
  4. DHire external consultants to write a longer policy manual
  5. Announce the change by email and avoid further discussion

Explanation

Culture is shaped most strongly by what leaders reward, tolerate and model, including systems of delegation and recognition. Posters or emails without changes in behaviour, reward or authority leave the underlying assumptions intact. Cutting training or adding manuals would not encourage empowerment.

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