The proposed strategy to focus on new home insurance business, to offer discounts to new customers and offer to pay for switching fees imposed by existing insurers, indicated that the bank want to take up the challenge to compete with other insurance service provider in increasing the bank’s market share. Competition is encourage as most countries have a legislative framework to address anti-competitive practices such as the European Union legislation, US anti-trust legislation and Malaysia-Competition Act 2010. The two new executives proposed to outsourced the management of arrears and recoveries to a specialist credit management company. The outsourced company is expected to minimize mortgage losses and reducing arrears balances. They will be remunerated largely on its performance to achieve that task.
By outsourcing, XYZ Bank may be able to get the help from the specialist to better manage the arrears and recoveries. They may also be able to reduce some costs. However, XYZ Bank need to consider the consequences and benefit of outsourcing.