Insurance companies will use two different types of organizations depending on their size, age and specialty. Most of the time, the beginning organizational structure of an insurance company is functional; workers are organized vertically based on what they do. From there, the company will often move into a divisional structure, where individual teams handle specific concerns. Large insurance companies that branch out into multiple offices will have a choice between a centralized and a decentralized version of their current structure. This determines the level of autonomy of the individual branches.

When most businesses start out, they use a common organizational structure. This breaks down to a leader, one or two managers and a large pool of workers. The organizational structure of an insurance company, even a new one, is far too complex for that simple structure. Instead, insurance companies typically use a functional structure.

In this structure, a person’s job determines his or her position in the company. If the worker is an adjuster, he or she is in the adjustor group; an underwriter is in the underwriter group and so on. This works very well for smaller offices where there are only a handful of people in any one group. When the company begins to expand, the functional structure tends to isolate one group from another, which is usually harmful to the company.

Most of the time, the organizational structure of an insurance company will change to a divisional structure. In this situation, teams are organized and work with specific cases. Each team has a representative from each major area of the organization. The team has specific cases it works on, where it is able to benefit from a wide range of knowledge and skill sets.

While this is the most common type of organizational structure of an insurance company, the structure will often undergo one more modification. In multi-branch or large single offices, the company needs to decide how much responsibility each team or branch has. This breaks down into two main types, centralized and decentralized.

A centralized structure requires everything to process through a single office. A main office, often containing the most experienced workers, will look over every decision made by the organization before it is approved. While this makes the company less likely to make a mistake, it also slows the entire process down drastically.

Decentralized structures are the exact opposite. This organizational modification gives each team a certain amount of discretion over its own cases. This greatly increases the chance for error, but also increases the team’s response time. This improvement often translates into happier clients and more business. Most companies use a hybrid model where teams can make some decisions on their own but others need to go to the main office.