I.

Overview of the Industry

Insurance is a mechanism individuals use to limit their exposure to risk. A risk

refers to a potential for a loss- meaning it is unclear as to if and how individual
will be affected by an event. Individual band together to form a groups that pay
for losses. By forming groups, the risk is spread and no individual is fully
exposed. An entity which provides insurance is known as an insurer, insurance
company, or insurance carrier. A person or entity who buys insurance is known as
an insured or policyholder. The insurance transaction involves the insured
assuming a guaranteed and known relatively small loss in the form of payment to
the insurer in exchange for the insurer's promise to compensate the insured in the
event of a covered loss. The loss may or may not be financial, but it must be
reducible to financial terms, and must involve something in which the insured
has an insurable interest established by ownership, possession, or preexisting
relationship. The insured receives a contract, called the insurance policy, which
details the conditions and circumstances under which the insured will be
financially compensated. The amount of money charged by the insurer to the
insured for the coverage set forth in the insurance policy is called the premium. If
the insured experiences a loss which is potentially covered by the insurance
policy, the insured submits a claim to the insurer for processing by a claims
adjuster.
Insurance companies manage their risk through risk pooling, the rule of large of
numbers, diversification and reinsurance. Risk pooling and the rule of large
numbers is a grouping similar risk reduces the variability and uncertainty
associated with insuring a pool of individual. Given a sufficiently large number
of policies, the actual value of claims should approach the expected value.
Diversification ensures the insurance company is not over exposed to particular
losses by spreading the risk over products, areas or markets. Reinsurance is a
type of insurance purchased by insurance companies to mitigate the risk of
sustaining large losses. Insurance companies sell off portions of their portfolio to
reinsure which aggregates the risk at a higher level.

II. Porters five forces model (Industry Analysis)

 (LOW)
entreprenuerial players .
Emergence of new
ENTRANTS:
POTENTIAL NEW

RIVALRY: BARGAINING
BARGAINING POWER OF
POWER OF (HIGH)
SUPPLIERS: BUYERS:
Number of Depends on price
Availability of Competitors
skilled emloyers offer and quality
and management.
offering same service being
services in same provided.
(HIGH) price. (HIGH)

THREAT FROM
SUBSTITUTE:
Plenty of Subtitutes
(HIGH)

Potential of new entrants: LOW

 New entrants of Insurance companies here in Tacloban, City is Low, because
establishing an insurance companies is not just an easy, it requires a large capital. Merger and
acquisition activity in the insurance industry of Tacloban has not been very significant for many
years.

Threat from substitute: HIGH

Threats from substitute of Insurance companies is high because there are many
bank institution, they engaged into savings and deposits here in Tacloban, City. This is an
disadvantage for all insurance companies, only the upper class of the total population can afford
their offered products such as home owners in which covers the house and other structures on the
property, as well as personal possession inside the house.

Bargaining power of buyers: HIGH

Customers are more likely to purchase insurance from non-traditional sources.

The product of protect customer from losses resulting from illegal actions, medical needs, theft,
earthquakes and typhoon.

Bargaining power of suppliers: HIGH

Bargaining power of supplier is high because there are many universities,

institution offered business related courses in Tacloban, City. That is why the condition of being
available of skilled employees and management is high in Tacloban, City.

Rivalry: HIGH

There are a lot number of competitors offering the same line of business such as
product and services offered by various financial institution such as commercial banks, universal
banks, lending companies and multi-purpose cooperative.