What Is the Typical Organizational Structure of an Insurance Company?
The organizational structure of an insurance company generally depends on the company's size, age and specialty. Most of the time, it will start with a functional structure where workers are organized vertically based on what they do. From there, the company will often move into a divisional structure, where individual teams handle specific concerns. Large insurance companies that branch out into multiple offices have a choice between a centralized and a decentralized version of their current structure. This determines the level of autonomy of the individual branches.
When most businesses start out, they use a common org chart. This breaks down to a leader, one or two managers, and a large pool of workers. Insurance companies, however, even new ones, are far too complex for that simple structure. Instead, they typically start out with a functional structure.
In a functional org structure, a person’s job determines his or her position in the company. If the worker is an adjuster, he or she is in the adjustor group, an underwriter is in the underwriter group, and so on. This works very well for smaller offices where there are only a handful of people in any one group. When the company begins to expand, the functional structure tends to isolate one group from another, and that division may negatively impact the company.
Most of the time, the insurance company will shift to a divisional format. In this situation, teams are created with a representative from each major area of the organization. The team has specific cases it works on, where it is able to benefit from a wide range of knowledge and skill sets.
Divisional organization is the most common among insurance companies, but it may undergo one more modification. In multi-branch or large single offices, the company needs to decide how much responsibility each team or branch has. This breaks down into two main types, centralized and decentralized.
A centralized structure uses a single office where everything is processed through. A main office, often containing the most experienced workers, will look over every decision made by the organization before it is approved. While this makes the company less likely to make a mistake, it also slows the entire process down drastically.
Decentralized structures are the exact opposite. This organizational modification gives each team and office a certain amount of discretion over its own cases. Such a structure increases the chance for error, but also increases the team’s response time. This improvement often translates into happier clients and more business. Most companies use a hybrid model where teams can make some decisions on their own but others need to go to the main office.
An insurance company organizational structure will most likely not include the individual insurance agents who sell policies for that company.
Instead, the main company is where the policies are actually issued, decisions are made on whom and what to cover, claim payments are made and workers research new products and information on rates and other financial aspects of the business.
Meanwhile, the agent is the person who sells policies to customers and deals with their day-to-day questions and needs.
The individual agency, however, cannot make any coverage decisions or issue payments.
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