University of Phoenix
June 20, 2005
Auto Insurance: Operational Level of Planning
The insurance industry is affected by many economic factors. In an attempt to better understand the operational level of planning within the insurance industry we would like to take a look at how revenue, operating expenses, and the auto insurance market directly affect the operational level of planning of any given Auto insurance provider. Revenue
Revenue generated by the auto-insurance industry is in the billions. According to Automotive News, the personal auto insurance business is a nearly $160 billion-a-year industry (Stoffer, 2005). Thus, many organizations, not just the auto insurance industries themselves, have generated plans for capturing this income.
For instance, automotive finance companies are trying to tap into this revenue source. While, in the past, this did not meet expectations, it is still attractive to automakers. According to Stoffer, "auto industry experts predict market changes eventually will lead to consolidation of vehicle sale or lease payments with insurance premiums. The benefits would include greater convenience for customers and more business for the industry" (2005). However, for the auto insurance industry, this could lead to a loss of business, which in turn would lead to management having to come up with a plan to make up for this lost revenue.
Another organization currently planning to make use of this revenue source is government. In Massachusetts, the legislature has proposed imposing surcharges on insurers that would pay for police training (Telegram & Gazette, 2005). This new fee, according to the insurance companies, would then be passed on to the consumer, resulting in higher premiums. While critics say that this training should be paid for by the taxpayer, proponents say that such police training would lead to a reduction in auto...