1 NTUC Income Insurance Co-operative Limited 1.0 Purpose The focus of this assignment is to analyze the impact of external environment of NTUC Income, with a better understanding of where the power lies in its business situation. 2.0 Introduction Today, the insurance industry plays an essential role in the growth of Singapore economy. NTUC Income Insurance Co-operative Limited founded in 1970, is the only insurance cooperative company driven by social purpose which makes insurance accessible, affordable and sustainable for all workers in Singapore (Income, 2017). It provides professional and reliable insurance services such as health, life, motor, home, travel, personal accident and commercial services. Furthermore, Income manages its business in all areas which are pricing, underwriting, claims settlement and customer service. Currently, Income has seven main branches and six lite branches island-wide (Income, 2017). There are approximately 2000 employees and serving more than 2 million customers with over 32.6 billion in assets under management. As a market leader, Income is dedicated to make insurances simple, honest and different to put customers first (Income, 2017). Income has its own mission, which is bringing more value to the policyholders and maximizing shareholder wealth. 2 3.0 External Environment Analysis 3.1 PESTEL Analysis 3.1.1 Political, Legal In today’s context, Singapore is well positioned to serve as a leading legal hub in Asia (Zaid Hamzah For The Straits Times, 2015). As a result, insurance companies in Singapore are licensed and governed under the Insurance Act (Monetary Authority of Singapore, 2016). The Monetary Authority of Singapore (MAS) has implemented rules and regulations in insurance industry by issuing Balanced Scorecard (BSC) Framework for sales distribution channels, such as financial advisers, insurance agents and brokers. MAS has also set up dedicated departments to combat money laundering and terrorist financing (Monetary Authority of Singapore, 2016). Based on MAS’s guidelines, Income requires all frontline service staffs and financial advisers even management levels to attend the mandatory trainings every year which aim to equip them with the required competence in terms of knowledge and skills. With reference to the above, Singapore has successfully built up a secure, reliable, safe and stable financial environment to attract more global investors. 3.1.2 Economic Singapore is recognized as a financial hub in the world because of its currency stability. Based on the statistical information on total currency in circulation from 2006 to 2015, it shows a constant growth throughout the years (Monetary Authority of Singapore, 2016). With reference, the total currency in circulation has increased constantly from $16943.24mil in 2006 to $38432.2mil in 2015 (Monetary Authority of Singapore, 2016). Hence, Income has benefited from the upward trend of Singapore’s economy. This leads Income to have more investment returns in its participating funds which allows it to declare more bonuses to the policyholders and therefore this will attract more new businesses. 3 3.1.3 Social Singapore is known as a multicultural country that makes it unique and harmony. Resultantly, Singapore government has successfully implemented many social programs, regulations and laws to the society. For example, CPF Board has launched healthcare programs which are MediShield Life and ElderShield (Central Provident Fund Board, 2016). It is important not only to provide the health benefits to the citizens but also to create the health conscious to the society. Meanwhile, CPF Board also opens opportunities to the private insurance companies that allow them to enhance these healthcare programs which are called Integrated Shield Plans (IPs) (Central Provident Fund Board, 2016). With this opportunity, Income has designed its own IPs which is Enhanced IncomeShield and IncomeShield Standard Plan which offer affordable premiums to all different age groups. To promote these healthcare programs and IPs, Income has organized public seminars and campaigns regularly to raise awareness of the importance of life and health insurances. It is not only good for new business growth, but for creating good and healthy public image to the company. 3.1.4 Technological In the 21st century, smart technology has changed every industry in the world, especially internet. During the old days, when customers purchased insurances, they had to apply through hardcopies and signed on the thick contract documents on 4 every single page. As the technology improves, customers are able to purchase their insurances and submit their insurance policy documents and forms through paperless softwares by using their smartphones, PCs or laptops. At the same time, technology has made financial advisers and insurance agents much easier to do recommendations to their customers by using mobile devices and apps, such as tablets and iPads which content unlimited information and resources that will make them more efficient and effective. Simultaneously, this will also create better purchasing and servicing experiences to the customers. Under these circumstances, Income has equipped the latest technology softwares and hardwares into its company system. With the technology support, this will definitely take the business to the next level. 3.1.5 Environmental In today's world, Singapore has created an environmentally conscious to the society. Government of Singapore has encouraged Singapore companies to going green (Tech in Asia, 2012). As a result, Income has embraced smart technology and ecofriendly working process. For instance, most of the insurance policy applications and services are paperless and thus this will create a good reputation and public image to the company. 3.2 Porter’s Five Forces Analysis 3.2.1 Competitive rivalry within an industry - High Rivalry among industry competitors will have an impact on the profitability of the industry. The competitive intensity of Income is high when the industry growth is slow and when there are more competitors in this industry, such as Prudential, AIA, AXA and Great Eastern. In addition, rivalry among Income and its competitors refers to price competition, service quality and business scale that can create stability and make it more attractive in this industry. As a result, Income offers affordable premiums and provides fast claims services to the policyholders and it is the only insurance company who declares the bonuses to the public every year. As a market leader, Income always shows the transparency and honesty image to the public and today Income has provided broad services and products, not only leading in life and 5 health insurances, but also owning a big portion of market share in general insurance market. 3.2.2 Threat of new entrants – High The entry of new competitors into the market will affect the profitability of the industry. Although there are heavy regulations and huge capital requirements for getting an insurance license in Singapore, however as mentioned earlier Singapore provides a safe and sound financial environment and it is known as one of the best location in Asia for multinational companies to set up business centers. Thus, many giants in the world enter into Singapore business market. For example, the world’s No. 1 insurance company, AXA entered the Integrated Shield Plan market in May 2016; one of the largest insurance company in the world, China Life with strong and solid financial support entered into Singapore insurance market in June 2016. Thus, Income is facing many challenges in the future, especially in the aspect of new competitions and therefore the threat of new entrants is high. 3.2.3 Threat of substitute products or services – Low The substitute products or services in the industry will influence the company to achieve profitability. There has been a great awareness of public having a healthy lifestyle in Singapore, partly due to an increase in the number of people who have been diagnosed with cancers and chronic diseases. This also creates consciousness of getting protections against the unforeseen circumstances. In today's world, insurance has become a necessity for everyone. As a main player in the market, Income has designed and promoted a variety of products and services to meet consumer needs and wants. Hence, the threat of substitutes of Income is rather low in this industry. 3.2.4 Bargaining power of suppliers - Low There are two types of supplies in Income, which are reinsurance supply and manpower supply. Transferring the risk to reinsurance companies (re-insurer) is an efficient way for insurance companies to manage their own risks. If an individual purchases super high sum assured that might be too risky for Income to insure him, in this case re-insurer can sell Income a risk protection to diversify the risk. However, 6 the current business focus in Income is the mass market. In this targeted group, there is a very low chance for an individual of getting a super high sum assured. In addition, Income is capable to absorb and diversify the risks and hence Income does not rely much on re-insurers because of its low demand, the bargaining power of suppliers is thus low. This social enterprise entity, over 40 years of growth and development has become a stable and sound financial institution with a good reputation. In a meanwhile, Income also sees the importance of employees' development and enhancement, therefore, it has formed a solid training team and recruitment team to ensure that the fresh energy is able to join the company in a constant rate and at the same time the existing employees are satisfied with their progresses. With all of these efforts, Income has comparative advantages in the labor market than majority peer companies in Singapore. In this case, there is no much bargaining power for manpower supplier. 3.2.5 Bargaining power of customers – High As of the latest update by MAS on 15thJanuary 2017, there are total 182 licensed insurers in Singapore, and 80 of them are direct insurers. Therefore, thousands of insurance products in the market that allow customers to choose on their preferences. In the Internet age, customers can easily compare these products online, such as the difference between premiums, features and investment returns. Thus, Income is facing an increasingly fierce market competition in Singapore. Furthermore, buying an insurance policy especially for life or health insurance is a long term commitment. When customers purchase insurances, they become more prudent and censorious that many factors may need to take into their considerations, like premiums, company performance, service efficiency and marketing promotions. As a result, customers can easily change their mind if there is a shortcoming in the products or companies and therefore the bargaining power of customers is high. 4.0 Issue Analysis and Recommendations By comparing the technological factor with other direct competitors like AIA and Prudential, Income has fallen behind the pace. For instance, to increase in the distribution channel productivity, both competitors launched the mobile device 7 application systems such as tablets and iPads in 2012, which enhanced the working processes. However, Income only equipped this similar technology system four years later, in 2016. Singapore is well known as the great tourist city and financial hub in the world. There are millions of tourists, businessmen and investors visiting Singapore every year. Recently, AIA and Prudential have opened the life insurance applications to foreign passerby. Income should also grab this great opportunity to expand its business and clienteles. Besides, Singapore is an attractive offshore center because of its independence, stable financial environment and tax laws. With the population of over 5.5 million, there are over 142,000 millionaires, and one in six of Singaporeans is a millionaire, which is defined as high-net-worth individuals (HNWI), who is holding total investable asset of US$1 million (S$1.41 million) or more and there is a huge business potential for HNW group (Government of Singapore, 2017). Therefore, Income should design a few products to target this group to expand its business. Based on the survey by PricewaterhouseCoopers (PwC), Indonesia has become the most attractive insurance market in Southeast Asia and almost half of the insurers have performed 20% of financial growth in 2016 (Bacani, 2016). As Income has succeeded in the local market, it should bring this success to other countries, such as opening branches or aligning with domestic players in foreign countries. Based on the current position in the local competitive market, a strong alliance and strategic mergers & acquisitions have become the ideal of the future path, such as Great Eastern merged with OCBC, Prudential aligned with UOB and AXA tied-up with SingPost. To preserve the competitiveness, Income has to look out for its long term business partners. Like what it is doing currently, Income has worked closely with NTUC FairPrice and opened more lite branches inside NTUC FairPrice that makes people feel and experience its one-stop services. 8 5.0 Conclusion In a nutshell, Income plays a critical role in insurance industry. As it is in a dominant market position, it aims to become a Singapore icon, the market leader at home and abroad, purpose-driven social brand and quest for commercial leadership to achieve its commercial success, reputational success and organizational success. 9 Referencing 1. Bacani, L. (2016). Indonesia ‘most attractive insurance market’ in Southeast Asia, survey says. Insurance Business , http://asia.insurancebusinessmag.com/asia/news/breaking-news/indonesia-mostattractive-insurance-market-in-southeast-asia-survey-says-217017.aspx. 2. Central Provident Fund Board. (2016, 12 7). MediShield Life. Retrieved 1 15, 2017, from CPF Schemes: https://www.cpf.gov.sg/Members/Schemes/schemes/healthcare/medishield-life 3. Central Provident Fund Board. (2016, 12 12). Private Medical Insurance Scheme. Retrieved 1 15, 2017, from CPF Schemes: https://www.cpf.gov.sg/Members/Schemes/schemes/healthcare/private-medicalinsurance-scheme 4. Government of Singapore. (2017, 1 17). Latest Data. STATISTICS , pp. http://www.singstat.gov.sg/statistics/latest-data#14. 5. Income. (2017, 1 5). About Us. Retrieved 1 5, 2017, from NTUC Income: http://www.income.com.sg/about-us 6. Income. (2017, 1 5). Corporate Profile. Retrieved 1 5, 2017, from About Us: http://www.income.com.sg/about-us/corporate-profile 7. Income. (2017, 1 5). Visit our branches. Retrieved 1 5, 2017, from Contact Us: http://www.income.com.sg/contact-us#branch 8. Monetary Authority of Singapore. (2016, 11 26). Currency Statistics. Retrieved 1 15, 2017, from Statistics: http://www.mas.gov.sg/Statistics/CurrencyStatistics.aspx 9. Monetary Authority of Singapore. (2016, 11 26). Insurance. Retrieved 1 14, 2017, from Regulations and Financial Stability: http://www.mas.gov.sg/regulations-andfinancial-stability/regulations-guidance-and-licensing/insurance.aspx 10 10. Monetary Authority of Singapore. (2016, 11 26). MAS Sets Up Dedicated Departments to Combat Money Laundering and Strengthen Enforcement. Retrieved 1 15, 2017, from News and Publications: http://www.mas.gov.sg/Newsand-Publications/Media-Releases/2016/MAS-Sets-Up-Dedicated-Departmentsto-Combat-Money-Laundering-and-Strengthen-Enforcement.aspx 11. Tech in Asia. (2012, 3 23). How businesses in Singapore are going green. Retrieved 1 15, 2017, from Tech in Asia: https://www.techinasia.com/howbusinesses-are-going-green 12. Zaid Hamzah For The Straits Times. (2015, 1 16). Positioning Singapore as Asia's legal capital. OPINION , pp. http://www.straitstimes.com/opinion/positioning-singapore-as-asias-legal-capital.