Life Insurance Operations CASE

STUD
Y
Personal Lines—New Business Process
Lean Insurance Operations for
Retail Life Distribution Networks

Situation – Increasing Insurance Agent Productivity While Reducing Application Costs

Top 3
After successfully reducing insurance operating costs, the president of the U.S.
Global Insurer
retail network faced a daunting challenge. To achieve the next level of targeted
performance improvement, the retail network must adopt lean principles in insurance.
The previous cost cutting effort eliminated unprofitable agents: a third of the total. Retail Life—Personal Lines
Now, lean management principles must increase productivity of the remaining agents United States
and support operations in the home office. For a year, the president and an internal
operations consulting team researched six sigma projects in the insurance industry.
The efforts were narrow in scope. Rarely was the operational improvement supported Project Sponsor:
by quantified productivity metrics. The retail network needed end-to-end lean process President, Retail Life
improvement.
Non-technology, self-funding operational
improvement implementation:
Client Description, Project Scope, Objectives
– No new technology
Technology upgrades had not improved operational efficiency or customer service.
Agencies still operated with their own one-off practices. Executives were convinced – End-to-end new business process
that non-standard processes were to blame. The Lab’s non-technology improvement – 7-month implementation
templates transformed the retail network operations into a life insurance “knowledge
work factory.” Errors on new business applications decreased by 70 percent. This
Project Objectives:
boosted revenue-per-agent by half. Productivity measurement for underwriters – Cost reduction
showed a three-fold gain. Operating costs fell by 20 percent. – Service improvement
A Top 3 global, multi-line insurer, the company serves over 75 million customers in 40 – Sales uptime increase
countries. The U.S. retail life division employs more than 10,000 people in its personal
lines business units. Project Scope:
– Retail life
Implementation began with a 7-week Phase I analysis. It delivered a guaranteed, self-
funding Phase II implementation work plan, completed in 7 months. – Underwriting
– Retail annuity
Implementing Lean Principles in Insurance –Transformation Examples
– Individual distribution
The Lab implemented over 350 non-technology, operational improvements.
Examples: Implementation Results:
– Operating cost . . . . . . . . . . . . â 20%
Applications Rejected Earlier—Over 80 percent of application rejections were
issued from underwriting, long after processing costs were incurred. Process – Annual savings . . . . . . . . . . . . . . $54M
standardization for application submission by agencies cut this in half in six – Capacity improvement . . . . . . .  20%
weeks. Quality metrics helped shift the easiest rejection decisions to agency
– Sales uptime . . . . . . . . . . . . . .  60%
management, avoiding unnecessary underwriting costs.
– Break even point . . . . . . . . . . . . 6 mos.
Increased Sales Productivity and Uptime—Agents spent as much time following up
– ROI (12 month) . . . . . . . . . . . . . . . . 5X
with customers for additional information as they spent selling new policies. The
Lab simplified new business applications to improve first pass quality and reduce
follow ups. Within three months, agents increased their sales time – and revenue –
by 60 percent.

Improved Customer Service—Customers initially want quick, approximate quotes

to make decisions. Instead they received exact quotes after a delay. One-third of
prospects went elsewhere. The Lab implemented quick reference price guides. FSO1b.GLO1.170710
Similarly, customer-focused process improvement rapidly delivered both service
gains and sales force operational efficiency.