Project Management Insurance Companies Enjoy Large Profit

Project Management

Insurance companies enjoy large profit margins in the insurance industry. A reason for these margins would be the project management ability of firm employees to effectively management risk. Project management tools enable managers to effectively manage inherent risk with project implementation and management.

An example of a project management issue at an insurance firm is provided by Pula & Stone (2003), "The authors' research shows that customer relationship management (CRM) projects can achieve higher rates of return by work on data quality. Existing and new data need to be integrated and shared, with updates synchronised among many different systems. These systems (including operational, analytical and customer contact applications and databases) were rarely designed to work together and the data they collect and use are not normally collected, structured or quality-assessed for the CRM purposes for which they are eventually used." (Pula, Stone, 2003)

The block quote is to provide the understanding necessary to identify the comprehensive nature of the type of project for which a project management principle will be selected. Essentially, the why is a function of the problem of integrating data collection and quality control using one technological framework. The net benefit to insurance companies can be explained by Pula & Stone (2003), "The risk of using spurious data is spurious results. Just imagine the cost impact when bad data lead an insurance company to abandon the wrong product line or to pursue the wrong kind of customer." (Pula, Stone, 2003)

The insurance industry is somewhat different from other industries, which would elect to select an alternative form of team integration of project management principles. Rather than focusing on a number of projects at a time, the optimal methodology here is to intently focus a group of employees on one project at a time. The 'Pure Project' (Aquifano, 2005), has been asserted by world famous management guru Tom Peters. The pure project approach centralizes a work group onto a task with just one project to manage. For the insurance industry, to focus intently on one project can amass a much higher return than multi-tasking due to the marginal cost associated with adding an additional good driving customer.

The advantages of using the pure project approach includes the ability for the project manager or PM to have full control of the project management, and the development of a close knit team that is comfortable with being open and objective with regard to the project. (Aquifano, 2005) As projects are expeditiously completed due to the centric nature of focusing on one project, many projects can be tacked over a period of time with extreme precision and with tremendous organizational value over other methods employed by insurance firms.

Management theorists will often cite project management charts that include the Pareto Chart (Lind, Marchal, Wathen, 2010) as central to resource usage and effort within project management as, 20% of effort will yield 80% of results. Gantt Charts are used throughout the project management cycle to convey which activities are creating the most value to the firm during the process. Gantt Charts provide a visual to determine the where the project is on the estimated timeline of project activity and completion.