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Northwestern Mutual | Jobs, Benefits, Business Model, Founding Story

Northwestern Mutual’s mission is to do what’s right, put people first, provide financial strength, and take a long-term view.

John C. Johnston was the head of the local state militia in Catskill, New York. In 1850, at the age of 68, he moved with his son to New York City, where they began working as agents at Mutual Life Insurance Company of New York. Within only three years, they were managing the firm’s most successful unit. Despite this fact, in 1854 he sold his interest and moved to Janesville, Wisconsin.

Johnston determined that his new neighborhood would benefit from having low-cost, mutual life insurance. So he founded Mutual Life Insurance Company of the State of Wisconsin and recruited 36 of its citizens to serve on the board of trustees. In 1857 the state legislature chartered the firm. Johnston limited its investments to government bonds and mortgages on Wisconsin real estate.

The company issued its first policy contracts in 1858. When several of the initial trustees left, several Milwaukee residents took their place to gain control. In 1859 the state legislature deemed it was not necessary for Mutual’s headquarters to remain in Janesville, and the new board voted to move it to Milwaukee. This prompted Johnston, who had lost his influence, to leave not long afterwards.

Later that year Mutual formed its first out-of-state contract in Minneapolis, and began opening offices outside Wisconsin. Shortly afterwards it saw its first two death claims, from a train accident. It paid out the claims, leading to a rise in sales and territorial expansion. In 1864 it paid out its first dividends to policy owners, then again in 1867. All the while, it focused on life insurance.

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By 1867 Mutual had many offices in its larger region, prompting it to change its name to Northwestern Mutual Life Insurance Company. In 1969 it started providing disability income insurance, followed by retirement annuities in the 1970s and long-term care insurance in the 1990s. Because of this increase in scope, its name was shortened to Northwestern Mutual in 2000.

Business model of Northwestern Mutual

Customer Segments

Northwestern has a mass market business model, with no significant differentiation between customers. The company targets its offerings at all consumers seeking insurance services.

Value Proposition

Northwestern offers three primary value propositions: accessibility, risk reduction, and brand/status.

The company creates accessibility by offering a wide variety of options. It has acquired many firms since its origin, which has enabled it to greatly expand and diversify its offerings. Its products include life insurance, long-term care insurance, disability income, investments, annuities, and investment advisory products and services. Meanwhile, its services include retirement planning, estate planning, business planning, education planning, trust and private client services, and consultation on wealth and asset income protection.

The company reduces risk by maintaining high safety and security standards. It operates a Special Investigations Unit (SIU) whose purpose is to prevent, detect, investigate, and resolve potential fraud. It also works to assist law enforcement authorities in prosecuting confirmed offenders.

The company has established a powerful brand due to its success. It is the largest direct provider of individual life insurance in the U.S., placing first in market share. It ranks among the top 10 independent broker-dealers in terms of total revenues, with $27.9 billion in revenues in 2015. It manages $238.5 billion in assets and over  $1.6 trillion worth of life insurance protection. It has 4.4 million customers and has a 96% persistency rate (a measure of customer retention) for life insurance in force. It has the highest financial strength ratings awarded by three of the major rating agencies: A.M. Best Company (A++), Fitch Ratings (AAA), and Moody’s Investors Service (Aaa). Lastly, it has won many honors, including a ranking at #100 on the 2016 Fortune 500 and recognition as one of the “World’s Most Admired” life insurance companies by Fortune.

Channels

Northwestern’s main channels are its website and its direct sales team. The company promotes its offering through its social media pages, sports sponsorships, and participation in conferences.

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Customer Relationships

Northwestern’s customer relationship is primarily of a self-service, automated nature. Customers utilize its products and services while having limited interaction with employees. The company’s website features a “Northwestern Mutual Learning Center“ that includes self-help resources such as articles, white papers, brochures, commentaries, podcasts, webcasts, educational videos, and calculators.

It also has a “Studies and Research” section that includes studies and polls on financial topics. That said, there is a personal assistance component in the form of phone and e-mail support.

Key Activities

Northwestern’s business model entails designing and developing its products and services for customers.

Key Partners

Northwestern’s key partners are the suppliers who provide materials and equipment it needs to run its daily operations. These items include the following:

  • Awards, Plaques, Engraving
  • Computer Hardware & Supplies
  • Envelopes, Stationary
  • Office Furniture
  • Printed Materials
  • Software Sales & Support
  • Catering
  • Consulting Services
  • MRO Supplies
  • Office Supplies
  • Restaurant Supplies

Key Resources

Northwestern’s main resources are its human resources, who include the insurance professionals who design and develop its products and services, the sales employees who promote and sell them, and the customer service employees who provide support.

Cost Structure

Northwestern has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of insurance benefits provided. Other major drivers are in the areas of sales/marketing and administration, both fixed costs.

Revenue Streams

Northwestern has three revenue streams:

  • Premium Revenues – Consist of insurance premiums earned from the sale of universal life insurance, disability insurance, long-term care insurance, and annuities.
  • Net Investment Income – Consists of dividends, interest, and prepayment fees received or accrued on bonds, mortgage loans, preferred and common stocks, policy loans, and other investments.
  • Other Income – Consists of ceded reinsurance expense allowances and various insurance policy charges.
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