Dynamic simulation for strategic insurance management

In this paper, a dynamic model-based management consultancy project carried out for a major insurance company in Turkey is presented. The objective of the project was to address certain strategic managerial problems of the company by using systemic dynamic simulation. The main strategic problem of concern was that the company exhibited a fast growth between 1988 and 1993, followed by persistent stagnation and even a slight decline. This paper describes the main structures of the model, presents the validity tests and lists the major results of the study. The model is developed, calibrated and validated using real data for seven years, between 1989 and 1996. The main benefit of the model is that it generates a systemic and dynamic understanding of the company's internal and external interactions so as to enable creative solutions for existing and potential problems. One of the recommendations of the project has actually been initiated as a pilot project. A new interactive gaming version of the model is in the final stages of completion. The model and the game version can be used as a "learning laboratory" in the company, which would be a first step toward "organizational learning". Copyright (C) 2000 John Wiley & Sons, Ltd.