How is an insurance company structured

There are two basic types of structures of insurance companies depending on the size of the company, its age and its specialty. In most cases, when an insurance company is first created is has a beginning organizational structure, which is functional: there is vertical organization of the workers based on the work they do. The next step a company takes is to change to a divisional structure, which means that there are teams to handle specific tasks. When the company grows in size and has numerous offices it changes to a centralized or a decentralized structure depending on the choice of the managers. However, this relates to the level of autonomy of the branches of the company.

In the beginning, most companies are organized the same way. This means that there is one leader, several managers and a large number of common workers. However, insurance companies are more complex than that even in their first stages. This is why they rely on a functional structure. What is important for this type of structure is that the job one person does determine their position in the new insurance company. In case an employee is an adjuster he works in the adjusters’ group, if he or she is an underwriter then they find their place in the underwriters’ group and so on. This is a good structure for a small office with a relatively small number of employees. However, with the expansion of the company the groups become isolated, which might turn out to be harmful for the company.
In most cases, when the time comes the functional structure is replaced by a divisional structure. If this is the case, the teams get organized in order to work on specific cases. There are representatives for the team to work at each area of the organization. The team has its own skills and knowledge and uses them for the cases that it works on.

This type of organization is very common for insurance companies, but it can also undergo one more modification. If there are numerous branches or the main branch is very big then it is important to place the relevant amount of responsibility on each team or branch. This is why the structure can become centralized or decentralized.

With the centralized structure, everything goes through one single office. This is the main office and the most experienced workers are there. They are the ones who approve decisions. This way the company does not make many mistakes but its work is slowed down dramatically.

With the decentralized structure, each team gets to make their own decisions. This way there is a higher chance that there will be mistakes but the time to respond to a situation is shortened. This way the clients of the company are happier and the business improves.

However, most companies create their own hybrid models that are made so as to allow the teams to make some of the decisions themselves but some are taken to the main office.

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