Chubb SWOT and PESTLE Analysis

Strength

This section is available only in the 'Complete Report' on purchase.

Weakness

This section is available only in the 'Complete Report' on purchase.

Opportunity

This section is available only in the 'Complete Report' on purchase.

Threat

1. Intense competition in insurance business: Chubb has many tough competitors such as AIG, Travelers, Zurich Insurance, Liberty Mutual and Prudential Financial among which AIG is the biggest rival followed by Travelers. Various new technologies and product developments by a few competitors of the industry can pose a threat to Chubb as customer are more attracted to these new technologies, which will result a loss to competitors, decreasing Chubb’s overall market share. Increase in number of competitors results in decrease in relative number of suppliers and hence bargaining power of supplier increases, resulting in high costs to inputs. Threat of new entrants is always there since US has moderate entry barriers in the market and hence new competitors can penetrate into the market with new and innovative products to capture market shares. Increase in competition leads to downward pressure on prices, resulting in reduction in revenue. Identical products from competitor’s act as a substitute for the products of Chubb creating a sense of ‘threats from substitutes’.

2. Fluctuating exchange rate: As Chubb operates in 54 different countries worldwide with 54 different currencies; the exchange rate of each of these currencies is different to that of the parent country, United States. Though US dollar is much more stable as compared to other currencies, the exchange rate keeps on fluctuating for the other countries and this affects Chubb as the company conducts sales internationally, while its suppliers are local. Because of the presence of multiple currencies, financial decision making framework becomes far more complicated. Cash flow of subsidiaries operating in other countries may vary significantly to that of parent due to different exchange rates, different risk profiles and different economic and political environment. These constraints can cause deviations in the target capital structure and creates a gap in availability of cash at different subsidiaries. There is a constant movement of capital between parent and subsidiaries that require a constant conversion of one currency to another, that same amount of transaction would differ in value during conversion depending upon that particular exchange rate at that very time of transaction. Chubb is still being able to manage these problems because of its exceptional financial strength.

3. Rise in fraud and default incidents: Insurance frauds are very common these days where people cheat insurance companies out of money by adopting various forms of fraud. Some of the common forms of fraud are stolen cars, car accidents, car damage, health insurance billing fraud, unnecessary medical procedures, staged home fires, storm fraud, abandoned house fire, social engineering attack, fake deaths, renter’s insurance etc. just to name a few. Insurance companies suffer loss of billions of dollars for these fraudulent activities. The costs due to frauds are later on passed on to the bill-paying consumers by increasing the amount the pay for their premiums. When premium amount increases, insurance companies face loss of customers who are not willing to pay excess amounts and switch to companies having cheaper premium amounts. One such example is The Brick Warehouse LP vs Chubb Insurance Company case of Canada (2017), where fraudulent emails, in the form of social engineering attack, were sent to company employees who eventually acted on them by transferring money from the insured's account. For this case, court was held, where coverage under the Fund Transfer Fraud policy was denied since the victim knew or accepted the instructions given to its bank, rather than by means of third party instructions, impersonating the insured, which was covered by the policy.

4. Shortage of skills requirement: From the Chubb reviews of ‘glassdoor.com’ provided by former and current employees of Chubb, it can be estimated that Chubb has presently high employee turnover rates due to work overload and lack of adequate training, which results in high dissatisfaction and low morale of the employees. Compared to the total workload present in the company, the number to workers is less than adequate, which leads to heavy workloads, imposed on every employee. This leads good talents and skills leaving the company and the company can face shortage of good talents in upcoming years. The decision making framework is highly centralized because of which team decisions needs to get approved by the central officials and this results more time consumptions and reduced innovation. This diminishes the employee morale due to presence of dominant and political organization culture which eventually leads to layoffs of good talent. The company can counter this threat by introducing more diversification in the workforce, which will help the company to procure good talent from different parts of the world and fulfil the shortages of skills requirement.

The remaining section of “Threat” is available only in the 'Complete Report' on purchase.

Political

This section is available only in the 'Complete Report' on purchase.

Economic

This section is available only in the 'Complete Report' on purchase.

Social

This section is available only in the 'Complete Report' on purchase.

Technological

This section is available only in the 'Complete Report' on purchase.

Legal

1. Employment and labour laws: As Chubb operates in 54 different countries worldwide having different sets of employment and labour laws; it cannot stick to a single set of employment and labour policies. Each country has different sets of laws pertaining to different Acts followed by the country. These creates differences in working hours, employment rules, corporate social responsibility policies, disciplinary inquiry procedures, employee grievance handling, statutory and non-statutory schemes, compensations, vacations etc., from parent country to that of other countries worldwide. Hence, Chubb has to take care of all these factors before penetrating into a new country so as to minimise all the possible litigation issues that the company can face if they do not comply with all of them. Litigation problems may cause huge penalties for the company, hindrance to normal functioning, loss of customers, employee grievances, nationalisation of assets, expropriation and non-compliance from government. Chubb’s taskforce of approximately 400 world-class risk managers has successfully dealt with these risks, when the company penetrates into a new country with different sets of employment and labour laws. 2. Implementation of consumer privacy legislations: The world is swiftly transforming into a digitized world but brings along with it various risks pertaining to extortion and ransomware, financial loss, cyber disruption, cyber bullying, online privacy invasion (breach of privacy) and identity theft. Hence privacy is a major concern of this new a digital age. For this reason, the General Data Protection Regulation (GDPR), a European law on data protection and privacy, gives rights to the individuals to have complete access to their data and also provides them a right to be forgotten. For the same issue, discussions on consumer privacy legislation are taking place in the U.S. But the implementation of privacy legislation has major implications for the consumers and American business, including the insurance industry and its major players like Chubb. An individual should be given transparency and control of their data as per national privacy law, but at the same time the law should provide flexibility and impose reasonable limitations on the burden of data collection by companies. 3. Increase in litigation activities impacting insurers: Litigation activities, especially in U.S., U.K. and Australia markets, are continuously intensifying and strengthening, which are driven by both the legal and social environments. Various Securities class action (SCA) litigation are creating major impact on corporate directors and officers (D&O). Again, certain errors and omissions (E&O), which are related to coverages where suits are filed for any corporate misfortune, which eventually impacts the share price, are creating operational risk type cover. Litigation activities are also the causes of potential misfortune, which are increasing with the stringency of litigation activities. For example, exposure on product liability automatically becomes a corporate directors and officers (D&O) suit. Same thing is also a resultant of a cyber-breach or a Merger and Acquisition (M&A) transaction. Hence, all of the above cases, whether happening to be meritorious or not, result in substantial expenses on litigation process, as well as, settlements and produce an adverse and similar impacts on insurers, such as Chubb.

Environmental

This section is available only in the 'Complete Report' on purchase.