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The original incarnation of Acme Insurance was created as a sole proprietorship in 1938. Four generations of Smiths have worked at Acme. Acme has built a loyal customer base selling primarily life and general insurance that includes auto insurance as well as packages for small businesses. The business has done well over the years, but the current principals desire to take Acme to the next level. The basic market need is a comprehensive insurance brokerage that has developed clear lines of communication with the client. With better communication, Acme will be able to offer better value to our customers by addressing their true needs. The need to establish close, effective relationships with clients is a priority at Acme and a competitive edge.

Market Summary

Having operated in the same town for over 64 years, Acme has developed good information about the common attributes of the most prized and loyal customers. This information will be leveraged to continually collect information about the customers in the "holy grail" of better serving them, meeting their specific needs, and learning the most efficient and effective means of communicating with them.

Market Analysis

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Market Analysis
  20102011201220132014 
Potential CustomersGrowth     CAGR
Senior Citizens7%8,7349,3459,99910,69911,4487.00%
Lower Income Families8%8,0448,6889,38310,13410,9458.00%
Small Businesses8%1,0981,1861,2811,3831,4948.00%
Total7.52%17,87619,21920,66322,21623,8877.52%

Market Demographics

The profile for Acme Insurance's customer consists of the following geographic, demographic, and behavior factors:

Geographics:

  • The immediate geographic target is Small town, with a year-round population of 13,000, and a summer time population of 25,000.
  • A 100-mile geographic area is in need of our services.
  • The total targeted population is 17,876.

Demographics:

  • Male and Female. For the auto insurance and life insurance products, the ratio of male to female is 54:46. For the small business products, the ration changes to 64:36 male:female.
  • The average age of the customer is 54 years old.
  • Only 37% of the customers have attended some college.
  • The average household income is $34,000.
  • The family composition of the customers is two adults, 3.1 children.
  • The unemployment rate is 8%.

Behavior Factors:

  • Are a part of a close-knit community.
  • Most social activities are sponsored by social organizations within the community such as Kiwanis and Rotary.
  • Most business decisions are based on a trust relationship established by being an active member of the community.

Market Needs

Acme Insurance is providing their customers with a personalized, close communication advising/brokerage relationship for insurance products. Acme seeks to fulfill the following benefits that are important to their customers.

  • Selection- The ability to offer a wide selection of insurance products to the rural population of Smalltown.
  • Knowledgeable staff- This benefit is very important to the insurance brokerage business as the interaction between staff and the customer is what Acme is truly offering.
  • Customer service-  Customer's expectations must be exceeded. If this is accomplished, word will spread fast within this small, rural, close-knit community.

The past few years have seen tremendous upheaval in the insurance industry. The number of players has decreased in both the broker and company communities. The automobile product has, in the mind of the public, become unaffordable, unavailable, and impossible to understand. The recession has curtailed insured from properly maintaining their homes and automobiles, and to exacerbate the situation, many clients have turned to wood heat and started doing their own repairs and maintenance that may have increased the number and severity of claims. Insurance fraud has become a major issue for the entire insurance industry.

The traditional close relationship with our companies has been strained. Brokers are concerned that in spite of commission reductions, quotas, contract cancellations, and refusal to write new auto business in some markets, they now may find themselves in competition with some of the traditional broker distribution companies that are setting up direct marketing facilities and branches. The banks, even though thwarted by the federal government in its last budget to retail insurance from their premises, will continue pressure on the government and now have announced they will open stand alone insurance offices to retail insurance.

In spite of the above, Acme believes that the independent broker will survive. Acme is more automated than most service industries. Acme is closer to the customer, regardless of some insurance companies' attempts to sever the traditional broker-client relationship. The clients, in most cases, still do not care or know which company Acme places them with. They trust our judgment in selecting the proper coverage and company for them.

The new federal government is close to adopting a new automobile contract that hopefully will make it affordable, understandable, and available to the clients. A profitable automobile product will entice the companies to aggressively seek new sales and more brokers will see companies offering contracts.

Upload/download capabilities are in many broker's offices, including our own. This will cut costs, improve efficiency and accuracy, and help us meet the competition from banks and direct writers. Companies that truly value and trust the broker distribution system will align themselves with professional brokers and grant more underwriting authority similar to Lloyds.

Market Growth

In 2001, the national insurance market was a $43 billion industry. Insurance sales are forecasted to grow at 6% for the next four years. Insurance is a part of life in the Canada. Some insurance is required such as automobile. Other insurance such as life and home is not required but is a very sensible way of reducing risk. Within Canada, 87% of the population have some form of insurance. Because of the large rate of adoption and its mandatory nature in some segments, the insurance industry will be a growth industry for years to come.

SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses within the company and describes the opportunities and threats facing Acme Insurance.

Strengths

  • Well trained staff.
  • In-depth knowledge of the industry.
  • Comprehensive customer insight.

Weaknesses

  • A limited number of people inhabiting Smalltown.
  • The high costs of switching current insurance consumers from a competing firm to Acme.
  • The struggle to stay ahead on the technological adoption curve in a small, rural community.

Opportunities

  • Participation within a growth industry.
  • Increased sales through an expansion of the current service offerings.
  • As the company continues to grow, the ability to decrease fixed costs over a growing customer base.

Threats

  • Competition from local brokerages that respond to Acme's superior offerings.
  • A significant slump in the economy that will likely have a correlated effect on the industry.
  • A single of series of huge, unexpected, traumatic events that put significant strain on the financial health of the insurance industry as a whole.

Competition

Competition is found in five forms: local indeendent brokers, agents, mass market providers, mass merchandise programs and group plans.

Local Independent Brokers

  • Cal Roberts, Patrick C. Johnson, Rob Champlain
    Strengths - Alternate markets, especially small farm mutuals, that still continue to give low prices, still continue to write wood stoves, and allow discounts and underwriting terms.
  • Weakness - Most are smaller, one-man operations that do not have the backup or finances to aggressively impact the marketplace.

Agents (such as Co-operators)

  • Strengths - Large advertising budget and competitively priced products. Their commercial business is difficult to compete against in some cases because they seem to not have the same restrictions on underwriting as our markets. Also they have large capacity to write certain risks.
  • Weakness- One small operation that does not have the same hours as Acme's offices. Staff, because of salary, do not appear to be very knowledgeable or aggressive.

Mass Market Providers

  • Strengths - Large advertising budget and very competitive prices.
  • Weakness - Not local and largely unknown to the clients at the present time.

Mass merchandise programs heavily advertised over the radio such as "Gray Power."

  • Strengths - Price.
  • Weakness - A still untried, unknown quantity.

Group Plans - Teachers, Public Employees

  • Strength - Group pricing.
  • Weakness - Very little obviously, since we insure very few of the professions.

Service Offering

Acme Insurance is committed to providing professional sales and service for its insurance customers. Acme has established what they consider to be an excellent reputation in our area, and are the largest multi-line insurance broker in our trading area.

Acme Insurance provides home, automobile, and business insurance in the Smalltown district. Acme takes pride in knowing that for over 50 years they have helped clients to find the best coverage at the right price that suits their needs and expectations. In the event of a claim, the clients know that Acme is there to provide help and counsel to ensure a fast, speedy claim settlement.

Like other independent brokers, Acme issues binders and new policies, endorsements and process renewals.

Acme has stressed to the insured the importance of good communication between the broker and client to insure proper coverage is in place. Acme has noticed as the clients become better informed about insurance that there has been a tremendous increase in clients wishing in-depth discussions about their policy coverage and how they can get the most value for their insurance dollar.

Acme also provides insurance services to non-clients, such as lawyers and mortgages, to ensure the mutual clients have proper coverage and binding notes in place for the purchase of homes, businesses, and automobiles.

Keys to Success

Acme believes the keys to success in a small town insurance business are: 

  1. Knowledgeable, friendly staff that can empathize with our consumers needs and circumstances, especially in handling a loss.
  2. Policies that meet or exceed the expectations of the clients, and that are affordable, available, and understandable.
  3. Policies and endorsements delivered on time with minimal errors.
  4. A commitment to an annual insurance review for all of our clients. A phone call is more than any direct mass marketer offers. Acme believes personal contact and service is the cornerstone of success.

Critical Issues

Acme Insurance is an established, family business that is pursuing new growth strategies. The critical issues that we face are:

  • Pursue controlled growth that dictates that payroll expenses will never exceed sales revenue.
  • Constantly monitor customer satisfaction, ensuring that the growth strategy will never compromise service and satisfaction levels.

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