Operation Overview Operation Overview and and Strategy Summary Strategy Summary December 2006 1
Non-life insurance market Non-life insurance market and environment in Japan and environment in Japan what we are expected to be like what we are expected to be like Organizational reform towards Organizational reform towards Rising customer expectation and social demand Social surroundings of Social surroundings of Rising customer expectation and social demand Social surroundings of insurance industry insurance industry insurance industry new corporate culture creation project new corporate culture creation project new corporate culture creation project Mismatch Mismatch Conventional systems of product development, Conventional systems of product development, new group vision new group vision new group vision claims handling and sales claims handling and sales Japan; High growth in overseas, Japan; High growth in overseas, Domestic non-life insurance Domestic non-life insurance Domestic non-life insurance Steady earnings secured in Steady earnings secured in life and related businesses life and related businesses Intense competition under low economic growth Intense competition under low economic growth ! Demographic change ! Demographic change market market market ! Premiums reduced due to no-accident discount ! Premiums reduced due to no-accident discount system system ! Increased sales costs for checking requirements ! Increased sales costs for checking requirements ! Increased claim investigation costs ! Increased claim investigation costs 2 Policyholder and consumer protections Social surroundings of insurance Social surroundings of insurance ! Sufficient accountability of important matters required (more explicitly in FSA’s revised guideline) ! Advanced sales process ensuring checking confirmation documents with customers ! Agent and employee education to make sure of customer retention and policy renewal in routine industry industry Higher claim payments and loss adjustment expenses ! Burden of proof of contingency, etc of the incident shifting from appellant to insurer ! Loss adjustment costs rising for detailed investigation from viewpoint of fair policyholder treatment Fire-, miscellaneous-, personal accident- and marine insurance lines Domestic non-life insurance Domestic non-life insurance Net premiums written increased at a growth rate almost equivalent to that of nominal GDP ! Growth seen in product groups related to pension, elderly care and medical services, which function as supplementary to social welfare Automobile insurance line market market ! Net premiums written sliding aside or slightly decreasing ! Premiums discounted for no-accident drivers ! Average premium per vehicle dropped due to increased weight of smaller cars ! Number of registered cars slid aside ! Simplified insurance products resulted in lower average premium per unit 2
Business Improvement Plan in Progress Business Improvement Plan in Progress Product development ! On-site examination by Claims Handling Examination Department Product development Principles and resolutions made Principles and resolutions made Claims payment / Claims payment / New sections and programs New sections and programs ! Auto-retrieving monthly payment check and its review Business Improvement Plan formulated Business Improvement Plan formulated ! Developing automation system of Eligible Claims Notice to customers established established ! Developing eligible claim inquiry system for claim receiving desk staff ! Claims handling personnel reinforced, education program enhanced ! Post-sale customer survey started ! Consultation offered at CPE Council* ! Compliance News launched Policyholder Policyholder protection protection ! Customer Service Department gathering and analyzing complaints ! Council on Promotion of Customers' Viewpoint proposal submitted to BoD Compliance Enhancement Month ! Performance evaluation linked to compliance New sections and New sections and governance governance New vision formulated New vision formulated Corporate Corporate ! Auditing personnel reinforced programs programs “Meet-the-Management” campaign “Meet-the-Management” campaign Jul 2006 August September October November Dec 2006 Jul 2006 August September October November Dec 2006 *Claims Payment Examination Council 3 ! Principles on Upgrading Claims Handling System for Appropriate Payment formulated (Aug) Principles ! Claims Handling Examination (“CHE”) Department established (Sep) Claims payment administration ! Claims Payment Examination Council established (Sep) New units and ! Claims Handling Consulting Section opened (Sep) programs Appropriate claims handling ! Claims Payment Objection System established (Sep) ! Long-Term Medical Service Center established (Oct) ! Workforce increasing in claims handling Personnel ! Education staff reinforced ! Standard education system formulated Education ! Education course of diseases and medical care launched for acquiring practical knowledge and use in claims handling ! Automatic multi-claim payment system set up (Sep) ! Car accident registration and under-payment warning enhanced Systems ! Building systems for eligible claim notification, eligible claim inquiry system for claims receiving desk staff (under development) Product ! Product Development Guidelines governing product development and retirement formulated development ! Conducting post-sale customer survey ! Product Division established ! Product revision ! Standard Policy Interpretations, Criteria in Determination of Ineligible Claim, etc. prepared (Sep) Interpretation, criteria, review ! CHE Dept making on-spot examination (Sep and onwards) ! Monthly payment check, findings review (Sep and onwards) Principles ! Complaints Response Guidelines formulated (Sep) Policyholder Complaints response protection ! Customer Service Department established (Sep) ! Council on Promotion of Customers’ Viewpoint established (Oct) New units ! Claims Handling Consulting Section opened (Sep) ! Compliance Enhancement Month campaign (Aug-Sep) ! Strengthening compliance education (Aug and onwards) Legal compliance ! Periodical Compliance News launched (Oct and onwards) ! Performance evaluation systems linked to compliance (Oct) Corporate ! Audit Committee established (Sep) governance Corporate governance ! Nomination Committee and Remuneration Committee increased outside directors to majority (Sep) Reporting of routine ! Corporate Quality Control Department established (Sep) ! New Vision Promotion Division established (Aug) operations ! Closer communication between management and front-liners (Jul and onwards) ! Supervisory Section established (Sep) Internal control ! Internal Audit Dept substantially increased audit staff (Sep) 3
Towards better corporate quality Towards better corporate quality “a company that puts the first priority on the customers’ view” MSI, reliable corporate group New vision (new mgmt plan) New vision (new mgmt plan) New Group Vision Promotion New Group Vision Promotion New Group Vision Promotion Headed by CEO Egashira, formulating new management plan by Mar 2007 Headquarters Headquarters Headquarters 8 task-specific meetings, 8 task-specific meetings, 8 task-specific meetings, Meeting set up for specific issue, each chaired by executive responsible for issue 4 business-specific meetings 4 business-specific meetings 4 business-specific meetings Management committee and executive meeting setting principles feedback feedback New corporate culture project New corporate culture project proposal proposal Headed by Chairman Shin, considers suggestions gathered, sends agenda to specific Project committee Project committee (“PC Project committee (“PC”) PC”) committees under New Group Vision Promotion Headquarters PC summarizes discussion and proposals raised from workplace meetings, Meet-the- How to promote How to promote How to promote Management campaign, proposal project, customers and MSA (agents’ organization) Workplace meeting Workplace meeting Workplace meeting ! Discusses company-wide reform issues at each workplace Meet-the-Management Meet-the-Management ! Executives visiting offices to explain new vision and exchange opinions Meet-the-Management Proposal project Proposal project ! Intranet board provided for discussion, open to reform proposals from employees Proposal project 4 Long-term vision “ Long-term vision “Challenge 10 Challenge 10” ” FY2003 results FY2010 planned Y64 bn Y100 - 120 bn Group Core Profit Group Core Profit Assumptions Nikkei average 12,500 yen Forex rate 110 yen / US$ Financial and risks (5%) 10-year JGB yield 2.3% Life insurance (20%) Financial and risks Y0.9 bn (1%) Life insurance Y4.0 bn (6%) Overseas business (20%) Overseas business Y8.6 bn (14%) Domestic non-life insurance Domestic non-life insurance (55%) Y50.5 bn (79%) 4
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