Identify three significant operational risks, arising from the proposed acquisition, that will impact on BTR plc’s reputation
You are the Head of Risk Management for BTR plc, a UK-based personal lines insurer specialising in household insurance. BTR plc has a long-standing reputation for excellent customer service, supported by bespoke underwriting and a quality claims service. Customer retention rates are high. However, new business growth is low. To improve new business growth, the Board have decided to expand into a new class of business through the proposed acquisition of a motor insurer, PES plc. It is intended that BTR plc and PES plc will be merged into a single insurer retaining the name, BTR plc. Over the last five years, PES plc has been very profitable due to innovative information technology and a low expense ratio. Prior to the proposed acquisition, the following information about PES plc is identified:
• Business is based on system-driven underwriting and claims processes.
• Insurance products are distributed directly to customers via online platforms and/or PES plc`s call centre.
• Customer retention rates are low. However, new business growth is high.
• There is a high staff turnover rate.
• There is a high number of customer complaints relating to claims.
• The Regulator has criticised PES plc`s regulatory and compliance procedures.
You have been asked by the Board to assess the potential implications of the proposed acquisition on BTR plc’s reputation.
• Identify three significant operational risks, arising from the proposed acquisition, that will impact on BTR plc’s reputation.
• Analyse the potential impact on BTR plc’s reputation arising from each of the three operational risks.
• Make recommendations, based on your analysis, to mitigate the operational risks, whilst achieving new business growth and maintaining BTR plc’s current reputation.
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