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A Case Study On College Assurance Plan

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1. Societal Environment
A. Sociocultural Forces
Connecting with Customers-
One of the most important social factors in the insurance business is insurance agents’ ability to establish a rapport with customers. Insurance buyers aren’t going to choose agents who lack industry knowledge, come across as uncaring salespeople or can’t provide legal contracts to back their products and services. Competition with Business-

Insurance companies and their agents must have a dynamic, competitive and visible online presence. Insurance buyers want websites that are easy to maneuver, links that provide all the necessary details and message centers that make correspondence quick and simple. Social Media-

Social media has changed the way insurance companies market their policies and coverage options and strive to maintain strong reputations with consumers. Many insurance agents use Facebook, Twitter and LinkedIn to appeal to customers and spread the word about their products and services. B. Political Legal Forces

Regulatory and political dispensations of any given national or state government are determined by the orientations of its ideology. These political and legal forces shape the profile of your business environment. Members of CAP can sue the company because of its inability to pay them back. C. Economic Forces

Premiums paid to insurers are invested, poor economic output can offer less return for insurers, hence higher premiums. Insurers have to take more of a hit in terms of risk themselves. More fraudulent claims occur during times of economic downturn, due to lack of money. Companies failing economically will relocate to other countries and pull out or markets. This causes less revenue for insurers. Insurance is management of risk; in a down turning economy less businesses are willing or able to take risks. The economic concerns are significant in contributing to the outcome of gross state product revenues. The insurance industry pays high tax rates and invests in various bonds for the state. The percentage rates make up a great portion to gross state product. D. Technological Forces

Insurers should embrace new technologies to differentiate themselves in the insurance arena. Technology Investment: When it comes to technology insurers have underinvested historically. Insurers expect to see a continuing increase in technology investment across a large portion of client base. There’s a trend in using technology to sell insurance, and insurers thinking like a consumer service business in how they interact with customers. There’s a great deal of momentum in using technology to augment or disrupt existing business models. That will require CAP to be much more strategic and collaborative with marketing, sales and other aspects of the business.

2.) Task Environment
A. Government
The Makati Regional Trial Court has given embattled pre-need company College Assurance Plan Philippines (CAP) a second lease on life. In a resolution dated Nov. 8, the Makati RTC granted CAP’s petition for rehabilitation and ordered the implementation of the firm’s revised recovery plan. Makati RTC Judge Cesar Untalan also requested the Securities and Exchange Commission to give CAP a second chance at reviving its business. He emphasized the need to give CAP another chance to re-establish itself for the good of its planholders. “It is really very difficult to develop and construct, but it is very easy to destroy. Let us go rehabilitate CAP rather than liquidate,” Untalan wrote. B. Special Interest Group (Board of Directors)

Alejandro R. Roces
Chairman Emeritus

Ambassador Raul I. Goco

Atty. Enrique A. Sobrepeña, Jr.
President & CEO

Col. Coronado P. Muñasque (Ret.)
Corporate Secretary

Mr. James Marsh Thomson
Corporate Treasurer

Mr. Ernesto V. Espaldon, Jr.
Mr. Quintin S. Doromal

Mr. Robert John L. Sobrepeña

Mr. William Russell L. Sobrepeña

Ms. Gillian Akiko N. Thomson

Mr. Arleigh Joseph A. Espaldon

Mr. Silvestre H. Bello III

C. Customers
Sobrepeña’s invention of the traditional educational plan, where the pre-need company guarantees full payment of tuition at the time of maturity has been copied by many pre-need companies. Filipino parents quickly snapped up the educational plans and money rolled in for CAP, which became the number one educational plan provider in the country. D. Creditors

The seven trustee banks are led by the Bank of Commerce (BOC), which manages more than 60 percent of the trust fund; the rest are Allied Banking Corp., Bank of the Philippine Islands, Union Bank of the Philippines, Metropolitan Bank and Trust Co., Equitable PCI Bank, and Philippine Veterans Bank.

E. Communities
CAP was banking on the country’s economic growth, as well as former President Marcos’s tight regulation of fees of colleges and universities. Every year, college fees would go up by only 10 to 15 percent. However, the pre-need industry did not foresee the deregulation of fees in 1992. Just before the Asian financial crisis, from 1990 to 1995, tuition jumped a whopping 275 percent. And for 1996 to 2000, the price of education went up by another 26 percent. CAP’s revenues generated from collections of planholders were no longer enough to meet the increasing costs of tuition and the higher number of maturing plans. For instance, CAP said that fees at the Ateneo de Manila stood at P9, 200 in 1990, but swelled to P37, 000 per semester in 2000.

F. Trade Association
CAP introduced the traditional educational plan in 1980, appealing to every parent’s dream of being able to send their children to college. It was founded by Enrique A. Sobrepeña Jr. together with James Marsh Thomson, Rafael E. Evangelista, Ernesto M. Espaldon, and Romulo M. Espaldon. G. Competitors

Other firms offering educational plans adjusted their products and offered fixed value plans, or those that have a pre-determined value come maturity time. Yet, CAP continued to offer traditional educational plans for 10 more years, or up to 2002. Industry players say the Sobrepeñas, well-regarded as consummate marketing people, saw the 10 years as an opportunity to sell more plans, and thus positioned themselves as the best alternative among all other educational plans. They strengthened their position as the market leader in the educational plan business. H. Employees/ Labor Unions

Plan holders are up in arms over the failure of a pre-need company to give them their hard-earned money. Surprisingly, the company’s employees are now behind them in their struggle. Employees of College Assurance Plan (CAP) are preparing for protests over a series of retrenchments, violation of their collective bargaining I. Suppliers

The College Assurance Plan (CAP) is the second largest pre-need company in the country. From 1980 to 2003, CAP had a total of 780,603 apart from 37,421 planholders fully served by CAP. About 81,029 are currently being served. More importantly, 382,483 planholders are fully paid but had not yet availed themselves of their benefits as of end-2003. These plans will mature in the next few years. However, there are still 164,000 planholders who are actively paying their plans. Ninety-one percent of these existing planholders are holding on to traditional plans.

J. Shareholders
Apart from the Sobrepeña family, other major shareholders of CAP include the Thomson family, Jose A.R. Bengzon III, Rockshed Management, Romulo Espadon, Rafael Evangelista, Coronado Munasque, Euron Realty, Ernesto Espaldon, and
Melchor Morales.

3. Porters Five Forces Model of Competition

The intensity of rivalry among the competing players in the industry Most Outstanding pre-need company
Model Taxpayer
Many strategies of other company through advertising establishments. Bargaining Power of Consumers
Incoming college student, working individuals, senior citizens and physical handicapped person –
Bargaining Power of Suppliers

Threats from new entrants and entry barriers

Many pre-need companies existing have their own variety or strategies in terms of social responsibility Low initial capital investment
Threats from product substitute

4. Industry Analysis

External Factors
Weighted score


This is the most important because they will be the one to innovate or improve of their product and services. Money

Opportunity to put their trust funds in safe and profitable investments. And it is also important.


You should know your place if it is safe to calamities.


This is not as important as others and I rate them not as high. Environment

You should know your competitors in your areas. Total

5. Internal Forces
a) Core Values
Educational equity
High achievement for all
Ensuring every child succeeds
Constant learning
Mutual responsibility

6. SWOT Matrix
The company being the first to offer the pre-need educational plans in the Philippines has the capacity and experience required to be engaged in this business. Money
CAP Inc. as of 2002 has trust fund assets in the amount of P8.49 billion. Method
The company followed a business model which capitalized on the need of Filipino parents to provide their children with tertiary or college education.

Diversification and expansion.
Investment of its funds to unrelated business
Capitalized on its track record and continued to offer pre-need educational plans and other insurance products. Environment
With the passage of the Educational Act of 1992 deregulating tuition fees, the company faces skyrocketing college costs.

With a pool of talented and experienced employees the company has the capacity and chance to improve and expand their products and services. Money
Opportunity to put their trust funds in safe and profitable investments.
Capacity to invest in new formation technology.
Recent calamities and greater uncertainties.

Trained and competentemployees of the company could be subject to “pirating” from rival firms offering better compensation and benefits. Money
Financial crisis and economic downturns.
New and stricter regulations from the SEC and Insurance Commission. Environment
Competing or rival firms

7. Strategic Problem
College Assurance Plan, Inc. is currently facing Liquidity problems resulting to their inability to cover its liabilities and obligations to their plan holders.

8. Strategic Alternatives with 3 Criteria

A.) To increase liquidity by selling company assets
B.) To increase company’s capital through the issuance of shares and new investors C.) To reorganize the business through retrenchment
D.) To close down the business

9. Decision Matrix
In making decisions, the group considers the following criteria: Competitive advantage of CAP
Financial Condition of the Company
Market demand of the Company’s products and services
10. Recommendations
The group recommends alternative number 1 which is for the company to sell some of its assets to have the needed liquidity to settle its current liabilities and obligations. The group also recommends that the company should recognize its business operations to cut cost and improve profitability and efficiency.

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