A dynamic modelling for decreasing of loss time average in insurance companies: system dynamics approach

One of the most challenging problems in our country insurance industry is the phenomenon of increase of loss pay average time by insurance companies. A lot of research and analysis have been conducted on both the roots and possible solutions for this problem, none of which has had success in annihilating it. This paper presents a discrete model (nonlinear mathematical model) of insurance services chain based on the system dynamics approach. The studied services chain has multi levels and consists of insurance company, agents and customers. This chain model is simulated for analysing and quality improvment of insurance services, such as decrease of loss pay average time. The developed model is a nonlinear mathematical model which is simulated by the Vensim software. The purpose of simulation exercise is to analyze performance of the insurance companies and insurance industry in terms of service quality and to predict services’ performance improvements with proposed strategies. The result shows that two main factors that account for increase of loss pay average time are: Increased office paper work and increased number of company’s customers. Moreover, two main factors that are likely to decrease loss pay average time appear to be: performance improvement of human resource and betterment of IT efficiency.