9 May 2018
Allianz is realizing it has very many — too many — different products in its property-casualty portfolio. Increasing the number of different products in an organization in general leads to higher costs.
This theoretical organization principle is to be seen in practice in Allianz. — (In insurance business part of the production process continues after the sale-operation, that is of no impact here).
The original aim to offer many different products was to serve all individual needs of customers in an optimal manner. In time however this market has reached new dimensions of a mass market and customers do not care anymore for very individual products, they feel confused by the many choices offered. – Indeed scientists at the University Tübingen found offering too many product alternatives hinder or even prevent decisions to buy.
Exacerbating the situation for Allianz is, manufacturing these products additionally is quite complicated, the production processes with the assigned workplaces — staff & tools – are very specific and too long, too many workplaces are involved. That increases costs a second time.
The final, actual result is to be seen in the expense ratio of 28,7 % (sales plus administration costs/premium), which is above industry standard.
Solutions are not easy because the organization structure is already quite customer oriented. A usual straight forward solution splitting the organization along product lines can only be achieved if customers of mass products and those of may be still individual products can be separated strictly into different groups.
Whatever the result is, for the remaining mass market group the number of different products and the complexity of the production processes should be reduced. The production processes have to become shorter, fewer workplaces have to be included in the processes. Paring the production process can be achieved by manufacturing simpler products with fewer variations or / and by improving the capabilities of the workplaces. Improving the tools of the workplaces today is achieved with new and more powerful software and access to a wide range of databases.
P. S. These considerations are based on public information in the media. They are to illustrate theoretical findings. If the used assumptions prove to be different, different conclusions might possibly to be taken. – Comments welcome, see impressum.