Solutions For Improving The Competitiveness Of Posts Tel. Joint Stock Insurance Company

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS HOANG NGUYEN SOLUTIONS FOR IMPROVING THE COMPETITIVENESS OF POSTS & TEL. JOINT STOCK INSURANCE COMPANY Major: Business Administration MASTER OF BUSINESS ADMINISTRATION THESIS Supervisor: Dr. Nguyen Thi Phi Nga HANOI - 2012 TABLE OF CONTENTS ACKNOWLEDGEMENT ABSTRACT TÓM TẮT TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES LIST OF DIAGRAM CHAPTER 1: BASIC ARGUMENTS ON COMPETITIVENESS IN NON-LIFE INSURANCE BUSINESS 1.1 Concept and feature of insurance business activity 1.1.1 Concept on insurance business activity 1.1.2. Feature of insurance business activity 1.2. Non-life insurance business activity 1.2.1 Concept on non-life insurance business 1.2.2. Operation content of non-life insurance enterprise 1.2.3. Criteria for evaluating the product’s competitiveness capacity 1.2.4 Necessity to improve competitiveness capacity of product in international economic integration condition 1.3. Overview of non-life insurance market in 2011 1.4. Competitiveness capacity of non-life insurance enterprise 1.4.1. Competitiveness and competitiveness forms 1.4.2. Competitiveness capacity of non-life insurance enterprise 1.4.3. Factors reflecting competitiveness capacity of non-life insurance enterprise 1.4.4. Some factors affecting to competitiveness capacity of non-life insurance enterprise. CHAPTER 2: REAL SITUATION OF COMPETITIVENESS CAPACITY OF POSTS & TEL. JOINT - STOCK INSURANCE COMPANY (PTI) 2.1. Introduction about Posts & Tel. Joint - Stock Insurance Company (PTI) 2.1.1. Introduction about the Company 2.1.2 Apparatus organization of PTI 2.2. Some features on competitiveness situation in non-life insurance market in Vietnam at present. 2.2.1. Number of insurance enterprises: 2.2.2. Market share of non-life insurance enterprises 2.2.3. Insurance products to be deployed 2.2.4. Distribution system of non-life insurance enterprises 2.2.5. Financial resources of enterprise Source: Summarized by VNDIRECT 2.3. Real situation on competitiveness capacity of PTI 2.3.1. Financial capacity. 2.3.2. Product of PTI 2.3.3. Distribution system 2.3.4. Commercial partner 2.3.5. Human resources 2.3.6. Product price, assessment quality and compensation settlement 2.4. Operation result, position of PTI in the market 2.4.1. Result 2.4.2. Market share of PTI over the years CHAPTER 3: SOME SOLUTIONS AIMED AT IMPROVING COMPETITIVENESS CAPACITY OF PTI NON-LIFE INSURANCE ENTERPRISE 3.1. Some recommendations for the State to improve the competitiveness capacity on non-life insurance enterprises. 3.2. Solution for PTI insurance enterprise aimed at improving competitiveness capacity in the market 3.2.1. Constructing and developing the trade name 3.2.2. Developing and improving insurance product quality 3.2.3. Implementing statistic and costing work suitably 3.2.4. Strengthening the advertisement, communication activities: 3.2.5. Expanding distribution channel 3.2.6. Increasing financial potential of the enterprise 3.2.7. Completing apparatus organization and training human resources 3.2.8. Modernizing by application of information technology 3.2.9. Active in improving efficiency of capital investment activity CONCLUSION REFERENCES 1 SOLUTIONS FOR IMPROVING THE COMPETITIVENESS CAPACITY OF POSTS & TEL. JOINT STOCK INSURANCE COMPANY (PTI) Hoang Nguyen MBA Candidate 2007-2009 Vietnam National University, Hanoi School of Business Supervisor: Dr. Nguyen Thi Phi Nga INTRODUCTION 1.1 Necessity of the thesis Insurance market is considered as promising market that attracks most financial investment co-operation. Revenue from non-life premiums increased over the years, and accounted for a large proportion of the total revenue of insurance in the entire market. Besides, insurance products are easy to copy. The market for non-life insurance is a promised land which the companies are directing towards. Therefore, it can be seen that each year the companies entering the non-life insurance market are increasing in number. The increasing number of insurance companies will lead to the risk of reducing the market shares of the insurance companies, non-life insurance market of Vietnam will compete more and more severely and violently. This matter will require every business need to form a specific business strategy suitable with each specific period, to enhance their capacity in the market, as well as in front of the competitors, to not be “moved” out of the non-life insurance market which is very eventful at present. In order to develop stably and gain the expected market share, PTI should strengthen their competitive capacity. Within the contend of this thesis, the author propose a number of recommendations in order to increase PTI competitive capacity. 1.2 Research aims and objectives The aim of this thesis is to create a competitive plan for PTI with a numbers of recommendations in order to enhance the competitive capacity of PTI in non-life insurance market. The ulitmate aim of this thesis is to make PTI become more 2 competitive in term of more efficiency of using finance resource, human resource, brand name exploited and so on. In order to achieve that target, there are some objectives that should be reached:  Throughly research current theories of competitive theory including: Non-life insurance activities, competitiveness capacity of non-life insurance company, competitiveness forms and the necessity to improve competitive capacity.  Analysis the real situation of competitiveness capacity of PTI and point out the position of the company in the market.  Recommendations to PTI aimed at improving competitiveness capacitiy of PTI’s non-life insurance company. 1.3 Research questions In order to give recommendations to improve PTI competitiveness capacity, the thesis should finding answers for the following questions:  Why PTI need to improve their competitiveness capacity?  How to improve PTI’s competitiveness capacity?  What are solutions for PTI to improve their competitiveness capacity? 1.4 Research methodology In the thesis, the author adopts statistic and analytical methods to identify the most suitable solution for PTI for improving their effectiveness in administrative and business activities in order to improve competitiveness capacity. Both primary and secondary data used in this thesis to analyze current situation of competitiveness capacity of PTI. Based on the theories of PTI and the author’s own judment, the author presents the operation result and the position of PTI in the market and gives suggestions to improve PTI’s competitiveness capacity. 1.5 Scope of the research The thesis aims to find solutions to improve competitiveness capacity of PIT. The thesis focus on:  Study the PTI business result in field of capital, investement activities and the main business activities in non-life insurance.  Give suggestions to improve PTI’s competitiveness capacity. 3 1.6 Significant of the research The thesis has both theoretical and realistic significance. The thesis provides a review of competitive theories that cover many aspects of business activities including: cost management, human resource administration, finance management and communication. The thesis also provides the recommendations that are applicable to the curren competitive activities of PTI 4 CHAPTER 1: BASIC ARGUMENTS ON COMPETITION IN NON-LIFE INSURANCE BUSINESS 1.1 Concept of insurance business activity It can be understood that insurance business is the activity of the insurance company aimed at revenue-earning, thereby insurance company accepts the risk of the insurance buyer on the basis that the buyer pays the premium so that the company pays the insured amount to the beneficiary or compensates the insurance buyer as happening the insured events. 1.2. Non-life insurance business activity 1.2.1 Concept on non-life insurance business Non-life insurance is still used as a general concept with the significance containing all operations of damage insurance (property insurance, civil liability insurance) and human insurance operations not belonging to the life insurance (accident insurance, disease and illness insurance…). According to the law on insurance business of Vietnam, the term of non-life insurance is explained as follows: “Non-life insurance is the type of insurance operations for property, civil liability and other insurance operations not belonging to life insurance”. 1.2.2Reinsurance business Reinsurance is the operations which the insurer use to transfer a liability part accepted with the person insured for one any many other insurers on the basis of transferring to that person a part of the premium. Reinsurance is a very important activity and always goes abreast with the original insurance business; it is considered as the shield for the operation of each insurance company, a form which the insurance company insures for itself after receiving all risks of the customers. At the same time, the reinsurance activity also helps the company have more revenue source, thus, this activity is attached special importance. Reinsurance business includes the activity of agreeing the reinsurance and activity of transferring the reinsurance. 1.2.3 Assessment, compensation and claim to third person Assessment is the activity implemented directly by insurance company or through a 5 company or other assessment agent to implement the reason determination and loss level aimed at serving the compensation settlement and payment of insured amount to customer. Compensation or payment of insured amount means the insurance company implements the commitment in the insurance contract to pay the person insured a certain amount of money as the insured event happens. Claim to third person is the activity implemented directly by insurance company or through a company or another intermediate agent to require the third person compensating for the loss due to the fault of such third person after the insurance company compensated and accepted right transfer from the person insured. 1.2.4 Investment activity Besides the original insurance business activity of the Company, the investment activity also brings a relatively great income source for the company. The profit source from the investment activity helps the company improve its financial capacity considerably; therefore, all insurance companies in the world place the investment activity parallel with the insurance business activity, and these two activities have assistant and supplementary relation to each other. 1.3 Overview of non-life insurance market in 2011 Non-life insurance market in 2011 attained the revenue of 20,497 billion VNĐ, growing 17.56%, the insurance companies with foreign capital attained the revenue of 2,013 billion Vietnam dongs, growing 55.23%. All operations grew in which agriculture insurance increased 193%, credit and financial risk insurance increased 87%, transport goods insurance increased 43%, business damage insurance increased 37%, human heath and accident insurance increased 34%. Leading the first is mechanical vehicle attaining 6,134 billion Vietnam dongs, growing13%, property and equipment insurance attained 5,034 billion Vietnam dongs, growing 24%, health insurance attained 3,323 billion Vietnam dongs, growing 34%, ship insurance attained 1,850 billion Vietnam dongs, growing 1%, transport goods insurance attained 1,783 billion Vietnam dongs, growing 43%. Leading the first on revenue from original insurance exploitation was Bao Viet with 6 4,900 billion Vietnam dongs, PVI 4,228 billion Vietnam dongs, Bao Minh 2,140 billion Vietnam dongs, PJICO 1,852 billion Vietnam dongs, PTI 1,095 billion Vietnam dongs. The companies grew with high revenue were Samsung Vina 105%, Groupama 93%, Xuan Thanh 79%, PTI 61%, Fubon 53%, Hung Vuong 52%. 1.4 Competition capacity of non-life insurance company 1.4.1 Competition definition Most of the countries in the world recognize competition and consider competition as the environment and the driving force of the socio-economic development. Therefore, competition can be understood as follows: “Competition is the race, the severe, drastic struggle between opponents in the market in attracting customers, occupying the market, thereby, consuming much goods and gaining high profit”. 1.4.2 Competition forms a. Competition by product quality To exist and stand stably in the market, the company has to determine that quality is the objective with strategic significance, and it is the basic means to ensure that the social-economic development is in correct direction, solid and attains high efficiency, satisfies the demand of consumers in the market. Therefore, each company needs attach special importance to this issue. b. Competition on product price The competitive strategy by price helps the company protect and increase their market shares, and it is also the barrier preventing the joining of the potential opponents who do not comply with the orientation of the Government, and reduces the danger from the products having replacement ability. c. Competition on guarantee and after sales services As the quality of goods and service products is similar, the selling price is similar; the competitive and winning factor is the quality of after sales service such as: warranty, after sales service. Especially, for the companies trading in intangible service product, this matter has greater significance. 7 CHAPTER 2: REAL SITUATION OF COMPETITION CAPACITY OF POSTS & TEL. JOINT - STOCK INSURANCE COMPANY 2.1. Introduction about Posts & Tel. Joint - Stock Insurance Company (PTI) 2.1.1. Introduction about the Company Posts & Tel. Joint - Stock Insurance Company (hereinafter referred to as PTI) was issued a certificate of eligibility and conditions of operating the insurance business No. 10TC/GCN dated 18/6/1998 by the Ministry of Finance and issued the establishment license No. 3633/GP-UP dated 01/08/1998 by the People’s Committee of Hanoi city. Posts & Tel. Joint - Stock Insurance Company officially went into operation on 01/09/1998. The main activity of PTI is the business on non-life insurance and reinsurance domestically and internationally. The company has 07 founding members including Vietnam Post and Telecommunications Corporation (VNPT), Hanoi Construction Corporation (HACC), Vietnam Construction Import & Export Joint Stock Corporation (VINACONEX); Vietnam National Reinsurance Joint Stock Corporation (VINARE), Vietnam International Joint Stock Commercial Bank (VIBank), Bao Minh Joint Stock Corporation (BAOMINH). Business lines:  Original insurance business: Health insurance and human accident insurance; Techniques asset insurance; Insurance for cargo transported by road, seaway, waterway, railway and airway; Joint liability insurance; Mechanical vehicle insurance; Fire and explosion insurance; Business damage insurance; Satellite insurance; Aviation insurance; Ship insurance.  Reinsurance business: Agreeing and transferring reinsurance for all non-life insurance operations.  Loss assessment: Assessing, investigating, calculating, distributing loss, loss assessment agent, claim third person to compensate.  Implementing the investment activity in the following fields: Buying government bond; Buying share, company bond; Trading in real estate; Contributing [...]... guides the customers about the best way to prevent the risk The company must regularly renovate in the stage of claim and compensation settlement, this stage is often the big care for customers, the settlement which is quick and easy to understand will be the great reason for customers to renew the contract with the Company To construct the best image of the Company in the eyes of customers, the company. .. Agreeing reinsurance 27 38 70 Total 100.0 575 100.0 869 100.0 1266 Source: Posts & Tel Joint - Stock Insurance Company 2.2.3 Distribution system The head office of the Company is located in Hanoi; it is the place with crowded population, means of transport, companies; therefore, there will be many advantages in the exploitation and management In 2011, the original insurance revenue of the Company was... carefully, thereby have strict decision on whether investing or not, if investing, how much the capital amount is, so that it is possible to avoid the loss in investment activity of the company -Professional training for personnel of Department of Planning - Investment: professional knowledge of officer implementing the investment decides the efficiency of the investment activity; therefore, the Company. .. Tel Joint - Stock Insurance Company) 2.2.6 Product price, assessment quality and compensation settlement PTI did not use price competitive strategy, which means that price of insurance products of the company is not lower than that of other non-life insurance companies in the market Product quality of insurance service is presented through the stage of assessment, compensation of loss of each insurance. .. better the demand of customer 3.2.5 Expanding distribution channel VNPT is a big shareholder of Posts & Tel Joint - Stock Insurance Company; therefore, PTI should expand and develop the product distribution channel through post office network of VNPT The post office network of VNPT is very big; it covers all provinces and cities of the entire country, the product distribution through post 17 offices... shareholders; therefore their financial potential is rather high, in order to increase the capital resources of the Company, first of all, it should call the equity capital from this shareholders -Issuing shares to the market to mobilize the capital: this capital resource is gathered from small idle capital resources of resident levels to form a big capital resource for the company, help the company improve... supplement into the capital resources of the company This profit source also contributes to increasing the financial potential for company -In addition, the Company can pay dividend by share: instead of paying in cash, the Company can issue some shares to pay dividend, and the amount of money which 18 should have paid for dividend will be retained to supplement into the capital resources of the company 3.2.7... and effort +The management of human resources and document in computer is very convenient; the user can look up and search necessary information the most quickly +It is possible to use some useful computer software such as: modern informatics software for the statistics of risk and loss in the insurance operations +The Company should also use the application of working staff management at the office:... reasonable portfolio: The capital resources the company uses for investment activity are very big; therefore, it is necessary to study carefully the investment form so that it ensures the safety and has high profit rate -Constructing the risk evaluation program of the investment project: Before implementing the investment, the Company should have programs on evaluating the risk level of the project strictly... supervision of the insurance business activities in the market: The State needs to check closely the legal implementation of the insurance Companies, apart from the promulgation of general regulations on operations provision and liquidity, the State also needs to supervise the execution of these regulations of the companies It is necessary to construct the financial target system and way of determining the . exploitation and after exploitation… The company supplies for customers with best products and best serving attitude, attaches special importance to the stage of customer care, guides the customers. facilitate the insurance companies. -Implementing the close checking, supervision of the insurance business activities in the market: The State needs to check closely the legal implementation. provident fund 320,619 416,122 508,121 Source: Consolidated auditing statement in 2010 and consolidated financial statement in 2011 The reservation as above supplemented into the annual