Aviva PLC is a UK-based company in the insurance and financial services industry. It offers a wide range of products, including life insurance, annuities, unit trusts, pension plans, and financial and investment services. Aviva is the largest insurance company in the UK and ranks seventh globally. Established in 2002 after the merger between Norwich Union and Commercial Union, it has over 53 million customers.
Aviva provides various insurance policies such as house insurance, motor insurance, life insurance, fire insurance, natural disaster insurance, and health insurance. In addition to this, it also offers financial consultancy services and investment solutions along with managing pension funds. Above all else, Aviva prioritizes customer well-being by delivering exceptional service.
Aviva operates in a crucial industry that is vital for individuals in the modern era. Financial security and protection against uncertain events are top priorities for people, especially in western countries where these services are seen as essential for their present and future well-being. As a result, Aviva operates in a high-demand environment.
Furthermore, certain companies and assets are legally obligated to have insurance, which guarantees the necessity of this service. Aviva competes in an oligopolistic market dominated by major financial institutions. Moreover, entering the industry requires significant investment. Although Aviva offers similar services to other companies in the industry, customers primarily consider price rates and customer care satisfaction when selecting among them.
Most financial institutions provide a wide range of services such as health insurance, car insurance, housing loans, education loans, pensions, and investment services.
Strategic Group Map and Discussion of the Company
This is the strategic group mapping of insurance companies in the world. Aviva, which is the largest insurance company in the UK and ranks as the sixth largest globally, had a total sale of $73 billion in 2010. Despite strong foundation for further growth and improvement, Aviva faces challenges in surpassing its rivals who also hold top rankings worldwide. Allianz and AIG are competitors with larger market shares than Aviva. Nevertheless, Aviva aims to compete with these firms and create more opportunities to challenge them. The key factor behind Aviva’s success lies in its commitment to providing exceptional service to customers. Fierce competition exists among these companies as each one strives to expand into new regions and gain more clients. Determining insurance premiums is not an easy task for these firms as they consider market rates, competitor pricing, and varying claim conditions.
Aviva has experienced significant growth in the UK, with its market share increasing from 9.7% in 2009-2010 to 11.1%. The company’s success is further highlighted by a remarkable 16% growth in life and pension sales during 2010. Aviva has effectively positioned itself in group mapping and capitalized on its strengths and opportunities.
With $631 billion under management, Aviva possesses strong financial strength that allows it to target global markets. It serves more than 53 million customers and as of December 2010, it was ranked as the eighth largest insurance company worldwide, with a market value of $33.1 billion.
In comparison, AIG holds a market value of $172.24 billion while AXA holds $66.12 billion. This makes Aviva’s market value equivalent to approximately 5.82% of the total market value of the world’s top 10 insurance companies.
Despite being a well-known global insurance company, Aviva falls behind industry giants such as AXA, AIG, Manulife, and Generali in terms of market share. However, Aviva has a goal to surpass these competitors and enhance its effectiveness in order to gain more market share. Currently, Aviva is weaker compared to its direct competitors and has not achieved the same revenue growth. Nevertheless, Aviva has discovered opportunities in developing countries with large populations like India where there is a lack of reliable insurance companies. The lower-income populations of these nations depend on external factors for their future financial security. Therefore, Aviva has entered these markets by providing life insurance and pension services while acknowledging the potential for growth as individuals increasingly understand the significance of financial security.
Direct Competition and Nature of Rivalry
Aviva, along with other insurance companies like AXA, ING, AIG, Generali, Allianz, State Farm, Nippon Life, and Prudential, faces intense competition in the industry. These competitors offer similar services and strive to meet customer demand for competitive savings rates and affordable insurance premiums. Trust and goodwill have become crucial factors as customers are increasingly concerned about the number of claims they may receive and the efficiency of the claims process. If an insurance company takes excessive time or imposes stringent requirements to approve claims, customers are more likely to choose a different company.
Insurance companies in Europe and India have reduced their premiums due to intense competition, which is also observed in the Insurance and Financial Industry. Though there are variations in terms and conditions, claims, and service types among different companies, customers need to research and compare before buying a plan because the services provided are not identical. Unlike choosing identical products, this selection process requires more involvement. Hence, customers are mainly attracted to trustworthy companies that offer competitive prices.
Threat From Indirect Competitors
Aviva, a company in the investment sector, is facing indirect competition from investing in gold. This shift in preference is driven by recent crises and market uncertainties, leading people to choose gold as a safe haven for their savings instead of investing with companies like Aviva.
Gold has a long history of price increases and is considered highly liquid. Economists predict that individuals who invest in gold are likely to benefit from significant price increases. Unlike investments with financial institutions where returns are limited and assets are tied up for a specific period, gold can be sold at any time.
Data from recent years indicates that the price of gold soared over 100% between 2007 and 2010, increasing from $800 per ounce to $1900 per ounce. In contrast, typical financial institutions offer much lower returns of only 3-4%.
This trend toward investing in gold indirectly competes with traditional financial services, especially among younger generations who prioritize spending and engaging in various activities.
The current generation is saving less and allocating a majority of their income towards shopping and other leisure activities. This trend presents a challenge for financial institutions, which will soon develop motivational advertisements to attract this demographic. The introduction of warranties for assets such as cars and machinery has rendered insurance coverage unnecessary, as manufacturers now address breakdowns and issues under warranty. In times of uncertainty, like natural disasters, government pension benefits and claims indirectly compete with Aviva and other financial and insurance companies. Nevertheless, individuals may not solely rely on the government for security purposes and may opt to seek additional protection from these corporations. The level of potential threat varies depending on individual circumstances.
The financial and insurance industry presents challenges for new players due to its domination by a few large companies, making it difficult to establish a presence. Barriers such as significant investment requirements hinder entry into this sector. Competing at the level of established companies like Aviva is particularly challenging for newcomers. Moreover, customer loyalty plays a crucial role in this industry with customers typically remaining loyal unless they encounter dissatisfaction or problems. Gaining customer trust and building goodwill as a new entrant takes time. Additionally, government regulatory measures relating to customer well-being may pose obstacles for potential newcomers. These factors make market entry difficult for brand-new companies, although there are exceptions.
The Avantha Group, an Indian conglomerate, is in discussions with Munich Re Group, a German insurance company, to establish life insurance services in India. Despite the challenges for newcomers to compete on a large scale, there is minimal risk of losing customers to these fresh players due to Aviva’s established customer base. However, new players entering the market can lower prices. Aviva faces primary threats in markets it dominates if other well-known companies like ING or Allianz enter and capture market share. It is important to note that although these companies may not be considered “new entrants,” they are expanding into new geographic locations.
The insurance and investment market is now an essential aspect for everyone in this era. Each customer holds power as they contribute value to organizations and serve as a source of earnings. Customers who utilize multiple insurance and investment services from a company are considered more powerful buyers. For instance, a customer who has motor insurance, home insurance, life insurance, and various investment services holds more power than someone who solely has a life insurance plan. Within the insurance industry, powerful buyers include large companies that insure all their assets and employees, as well as individuals who trust the financial institution and prioritize their financial security by utilizing their services. These individuals are likely to provide more business opportunities for these companies.
Other important buyers are individuals in developing nations who have relatively low incomes. These individuals own houses and cars but may not have enough financial stability to handle unexpected events. Insurance is therefore crucial for them. Moreover, due to their limited income, they are unable to save a significant amount for their future, making them more inclined towards pension funds, life insurance, and health insurance plans. Additionally, small insurance companies in various regions around the globe are another significant buyer. These companies secure themselves by obtaining insurance from larger companies such as Aviva and Allianz.
Effect of Dynamic Forces on Aviva
During the global crises in 2006, insurance companies were not as adversely affected as other sectors of the business. While Aviva’s stock prices fell by 26%, the company did not face the risk of collapsing due to increased demand for insurance plans and consultant services. As of 16th June, Aviva observed changes in customer prospects after the global crises: 61% of clients are now more inclined to seek advice on pensions, 22% report higher levels of trust in advisers compared to before the financial crisis, and 70% are now more concerned about how to finance their retirement.
The growing worry among individuals is a positive sign for insurance companies in the future as it leads to more customers. Aviva has capitalized on this trend by enhancing their operational efficiency. This is because, while many businesses are struggling to attract customers, insurance companies have customers actively seeking their services. Despite the crisis, the increase in demand serves as a fortunate opportunity for Aviva, motivating them to improve their operational effectiveness.
Life cycle effects on insurance plans are difficult to determine as this type of service typically does not experience a decline in its life cycle. Aviva has undergone various mergers and acquisitions to attain its current position in the industry. Swiss Re ltd, the world’s second largest insurer, reports that natural calamities in Japan, New Zealand, and Thailand since last year have resulted in a $110 billion cost to the insurance industry. These events pose a threat to all insurance companies as the losses incurred are uncertain. The frequency of calamities increases the risk for an insurance agency, as it becomes challenging to measure and compare losses against the company’s credit position. In instances such as when a tsunami hit the coast of India, Aviva had to provide coverage for numerous families’ life insurance, health insurance, and other policies.
The driving forces impact Aviva in a multitude of ways. They open up new opportunities while posing minimal threats, prompting Aviva to reconsider their ideas and policies. These driving forces influence Aviva’s decision-making process, prompting them to change their current actions, adopt new strategies, or halt ongoing initiatives. Key driving forces for Aviva include increased globalization, which has prompted them to expand into various geographic locations and increase their market reach to over 53 million customers worldwide. Additionally, the emergence of online services has allowed Aviva to provide comprehensive information about their insurance plans and financial services online, as well as provide customer support and assistance through online channels.
Advertising is crucial in the insurance sector as it efficiently reaches a wide audience, while people’s awareness of financial services has been growing. The demand for insurance and globalization have contributed to enhanced efficiency and cost reduction for companies. Aviva concentrates its life insurance activities in regions with lower death rates, resulting in fewer payouts for life insurance benefits.
Increased demand and competition in the insurance industry has raised the need for Aviva’s services. To enhance profitability, Aviva must effectively operate and capitalize on its assets to maintain a competitive edge. Otherwise, competitors are well positioned to seize any opportunity.
References
- http://www.popularsomething.com/2010/01/top-10-insurance-companies-in-world.html#comment-form
- http://www.globalbusinessinsights.com/content/rbfs0072m.pdf
- http://biz.yahoo.com/ic/57/57334.html
- http://www.investopedia.com/features/industryhandbook/insurance.asp#axzz1sFCdP8cY
- http://www.fundinguniverse.com/company-histories/Aviva-PLC-Company-History.html
- http://www.cpsinsurance.com/assets/files/News_Docs/3.4.11%20Avivaplc2010results.pdf
