Read the given case and answer the following question in detail with examples.

Case on FSM

Kooperativa pojistovna a.s. (Kooperativa Insurance Company Ltd.), or KICL, is one of the largest and fastest-growing insurance companies in post-Communist Eastern Europe. In just 15 years it has grown from scratch to become the Czech Republic's second largest insurance company, with a record-breaking US$1.1bn of written premiums in 2005.

The following factors have been of significance in enabling KICL to achieve its success:

the formation of a group of competent and well-skilled staff from the insurance business who were willing to take the risks associated with leaving the former monopolist company to set up the new venture

support from shareholders, chief of which was Wiener Staedtische Allgemeinge Versicherung

a favourable backdrop whereby the Czech insurance market was open to new kinds of insurance

the extensive use of reinsurance to hedge risk

a willingness to gain know-how from foreign shareholders and reinsurers.

KICL strengthened its position as second in the market, and by the end of 2005 its market share had increased to 22.9 per cent; non-life insurance accounted for 28.9 per cent of the market. Life assurance written premiums had grown by 25 per cent to a total of CZK 6 billion. It has more than two million clients - indeed, KICL insures every fifth Czech citizen. The financial results are also positive; for example, in 2004, KICL achieved a gross profit of CZK 765 million (US$30m) and in 2005 it was CZK 1300 million (US$52m) - a year on year increase in profit before tax of 11.9 per cent and 70 per cent respectively.

Today, KICL offers a complete insurance service for all kinds of clients - business as well as individuals. Its product range comprises general insurance and life assurance, including insurance for liability risks. From the beginning,

KICL positioned itself in the market with an individual approach to the client - a new phenomenon in the Czech insurance market. For the country's budding new entrepreneurs, it has helped to identify the risks that most endanger their economic prospects in both their personal and business affairs. It offers modern contracts drafted in order to inconvenience them as little as possible.

Being simple and quick to complete, they save time and provide a wide range of insurance coverage according to customers' wishes, needs and financial possibilities - from its very start the company has always provided insurance to fit closely both their product and service needs.

Another reason for KICL's success is the quality of its claims adjustment. This includes the ability to report losses by telephone, the use of up-to-date methods of communication, and technologies such as digitalization and the Internet.

In 2004, the company acquired four smaller insurance businesses and established the development of a strategic co-operation with the Ceska Sporitelna Financial Group (one of the biggest Czech banks). These events represented the company's response to changes in its business environment - including: the Czech Republic's entry into the European Union, new competition, and the continuing adaptation of the Czech market to the up-to-date insurance trends found in more commercially advanced countries. This has enabled KICL to respond to the challenges posed by bancassurance and other financial new product developments in an effort to provide for all clients' financial needs at a single sales point.

KICL's trade representatives are gradually becoming true financial advisers, able both to satisfy all clients' insurance needs and to act as brokers for other financial services - whether obtaining a credit card or a mortgage, or executing contracts on building savings or supplementary annuity insurance. They are also able to broker consumer loans for clients, or to assist them in opening a bank account.

Recently, the company has reaffirmed that the core of its corporate strategy for the next few years will be based upon:

developing KICL as a large, modern insurance company transacting all types of life assurance and non-life insurance based on the needs of the clients,

continuously improving the quality and comprehensiveness of the services offered, to transact business swiftly, and to take a flexible and personal approach to the clients, and

guaranteeing the clients a considerable level of security based on high registered capital and a high-quality reinsurance programme.

KICL endeavours to be not only an insurer but also a reliable partner, providing advice and support under all circumstances. Again, a key strategic objective of the company is to strengthen its position in the domestic insurance market and increase its market share.

Questions

a. Identify the key problems and issues of the KICL business