A basis for survival

The well-being and survival of the insurance industry is being threatened by new market entrants, changes in distribution relationships, stricter regulations, consumer awareness and higher costs. These problems exist in all segments from life to automobile insurance. The entire industry needs to be able to focus on costs, profitability and particular services and products. However, traditional methods based on historical information and budgets are inadequate for decision-making, because these are oriented toward regulatory compliance rather than management. Instead, activity-based management (ABM) is an alternative technique that focuses on a firm's core business activities. When these have been identified, the corresponding inputs and outputs, as well as the cost drivers for these processes, can be pinpointed. In this manner, ABM allows a better understanding of business processes, customer profitability and establishes a basis for continuous improvement.