Deutsche Allgemeinversicherung (“DAV”) is one of the world’s largest insurance companies. DAV’s traditional business model was exceeding customer experience for the quality of service in order to maintain current customers and attract new ones. One of the challenges that DAV faced was processing and retrieving information and data without errors in a timely manner across their multiple divisions and various locations. Improving quality was a high priority as there was increasing competition. Annette Kluck, the Head of Operations, wanted to improve their quality of customer service by starting a Process Measurement and Improvement (“PMV”) project by using statistical process control (“SPC”).
The use of on-line technology and a pilot program in the New Customer Policy Process department is recommended to help improve the accuracy and customer service experience. Monthly and quarterly meetings will be held to monitor the recommendations to see if performance and productivity is up to standards
Deutsche Allgegeinversicherung (“DAV”) is one of the largest insurance companies in Germany. DAV is facing pressure from the competitors in the industry such as Allianz, Credit Lyonnais and Aetna; in addition the company also receives competition from smaller insurance companies that are trying to provide customized service. To differentiate from other companies, DAV focused on customer service to distinguish their company in the market. The focus on quality and processing customer information without error was pertinent in DAVs strategy to maintain and grow their customer base.
The Head of Operations, Annette Kluck set out to improve their quality of customer service by starting a Process Measurement and Improvement (“PMV”) project by using statistical process control (“SPC”). Their process of documenting customer information in forms filled by both customers and representatives had a 12% error rate. The use of p-charts was selected as the SPC; however, it was difficult to determine if this was the best method as the manufacturing style improvement techniques used in the insurance industry caused challenges. For example, the service industry was difficult to measure versus the manufacturing industry because it was intangible.
While various departments wanted to be involved with the PMV project, education and training was lacking on what SPC is and the benefits. Some employees believed that the PMV project was just the flavour of the month, while other employees didn’t like the extra work or really understand it.
Another challenge faced by DAV was the business volumes being inconsistent due to seasonal fluctuations. A capacity management problem emerged as the transaction volume on heavy days would be twice as much as the lighter days. A corporate mandate of having information completed on the same day caused unnecessary long hours, employee frustration, and higher cost due to overtime. In addition, the quality of work decreased significantly during the heavy days, and in order to monitor and control the quality, management reduced cost by increasing the number of temporary employees to replace permanent employees which demanded more overtime.
DAV had approximately 51% of business in Germany while 60% of the business in Germany was represented in retail insurance. In order for a customer to become a customer they would apply for DAV’s products by visiting one of the eighty branches to fill out a form or contact an agent. Forms would then be sent intercompany mail to their Retail Transaction Processing (“VEG”) division. Another option to become a customer was to fill out and application and send it via mail or fax to DAV, which would later get transferred to the Hamburg operation. An employee at VEG would work a 7.5 hour shift which would mean processing approximately 70 applications. If information was complete on the application a confirmation would be sent to the customer; however, mistakes on forms were at 12% and cost DM 14.50/hr and would take an additional 20 minutes on average to correct the error.
All departments had to start with a sample size of 200 observations per week. Some departments had to increase their sample rate beyond 200 in order to yield at least 3 incorrect forms. Departments did not like the increased workload. Each sample takes approximately 5 minutes to check.
Management was not satisfied with how the current method of quality was delivered and the thought of 99% accuracy on forms seemed unlikely. By implementing SPC within their operations, it can help identify methods to improve their performance process; using a p-chart to test the first 12 weeks would provide a measure within the correct/incorrect data range. Over time, the p-chart may provide clues to where the process is heading, and whether it is predictable. Using the data in
Using data from in the case, we take the 12 weeks to help calculate data. Please see Exhibit 1
Total sample size is 3600 (12 x 300)
Mean is 0.0522 (0.6267 / 12)
1 – 0.0522 = 0.94778 or 94.78%
Error is 188
From the data used in the12 weeks, this means the average number of correct applications is at 94.78%.
Please see Graph 1 for the percentage of forms accurately processed. The p-chart helps measure the quality and it is important to measure the lower and upper limits. If the measurements go above the lower or upper limits there is a problem that should be rectified. Applying the p-chart over time can allow DAV to forecast and compare employee performance. Upper management will need to understand that results will take time as information, testing, changing processes is no simple task. The p-chart helps provide information and is a control measure; however, DAV will still need to provide an attractive insurance package, train their employees to be polite and encourage customers to give feedback to improve their company outlook. Employees must be rewarded in order to perform successfully.
Graph 1 – Percentage of Forms Accurately Processed
Alternative 1 – Use Technology extend the ability to Apply On-line Pros:
Reduce margin of error – when filling out the application form, DAV can set fields on the application to “must be filled” in order to proceed to the next screen Convenience – no need to wait in line or talk to a representative, customers can do it on their own time Less labour intensive, no overtime required for data entry
Ability to update information on-line instantly
Less processing work for department
Cost and upkeep to run a website
Staffing of IT personnel
May lose that customer face to face experience
Not everyone maybe computer literate
Not everyone may own a computer
Alternative 2 – Focus on SPC pilot study for New Customer Policy Process before Rolling Out Pros:
Testing to see if SPC is applicable to all departments SPC wasn’t meant for all departments i.e. Laywers Gathering information and building processes to provide to other departments Building structure and documenting performance measures that are applicable Defining the required skill set, knowledge, and competence that is needed Strategically examining organization design and identify tasks to reach goal
Long process to implement SPC
One departments sample data is different from another
Departments are not structured alike and have different standards
Alternative 3 – Outsource a Process Improvement Team
Having a team to provide the correct methodology and technique to cater specifically to each department Skilled and trained people with experience
Experienced team will be more efficient in applying their knowledge to problem areas
Could be a high cost if DAV doesn’t follow guidelines once the process improvement team leaves Departments may not be supportive of an outsourced process improvement team Lose a bit of control of your operations
The recommendation is a hybrid with Alternatives 1 & 2, to introduce technology to the application process and focus on a pilot study for New Customer Policy Process.
While the industry is becoming more competitive DAV is looking to provide quality customer service. The use of a website for customers to enrol in the application process is efficient and convenient; it saves both the customer’s time and costs DAV less for labour. Using technology will help eliminate or lower the margin of error. For example, DAV can set fields that must be filled in before they can proceed to the next section. In addition, a programmer can add a feature that re-confirms their spelling to reduce misspelled names. Data can be extracted on the computer through compatible software to analyze data. If people do not have computers, DAV can operate kiosks where customers can correctly enter their own data.
Supporting the SPC to improve the efficiency and accuracy of DAV’s operations will help increase the productivity and lower the costs to the company. Customers benefit from an improved customer service experience and over time will lead to higher revenues. The challenges with applying SPC to the service industry compared to the manufacturing industry are in manufacturing there are processes that are repeated. The service industry differs in that the interaction is more customer facing and interactions are varied. Introducing a pilot program to the New Customer Policy Process department will allow Kluck to experiment and find the correct skills and measures that are suitable for DAV.
Management needs to focus on a department where there is most value add in improving the accuracy of data entry. It would be less complicated to set one control environment and apply a set of rules that pertained to that department than receive and analyze results versus a companywide program. Although departments wanted to participate in the process improvement, it was confusing for many departments as the criteria and rules such as sample size were the same. This did not make sense as departments have different variability and not all departments such as the lawyers were not applicable to SPC.
Technology – Source IT team and have them design and develop a functional website. Purchase a larger server that can sustain higher capacity
Pilot Program – Kluck to start developing measures and sample size and introducing to the manager of the New Customer Policy Process department. Kluck will need to explain the rules and sell the benefits of performing SPC to the employees so that they will be onboard with the PMV program.
Technology – Testing of the website will be performed to fix any issues and bugs. Once the testing meets all the standards, DAV and start directing people to fill out their application on-line. Radio and internet advising will be implemented to create flow to DAV’s website
Pilot Program – Employees will be trained on how to measure, chart and interpret the data; this will empower the employees and make them feel like they are contributing to a bigger cause to DAV.
Since this would be the quarter, Kluck should review the performance measurements of how accurate both the website and the pilot program are doing. If the pilot program takes off in the New Customer Policy Process, than Kluck can start introducing SPC to other departments.
Monitor and Control
To measure performance, Kluck will evaluate the data that is being entered by customers through their website and run reports to check for incomplete or errors. Checking the traffic of the website will also be a good indicator if customers like the on-line experience. If the pilot program is working than the error rate should be decreasing. The involvement of the employees and encouraging them to help interpret data will hopefully increase their engagement and improve the culture in the workplace
With less errors and a positive customer experience on-line and through the New Customer Policy Process department, revenues should increase. Meetings will be held monthly to review the SPC and fixes to be made if there are any issues. Any matters of a better method to improve process would be welcomed.
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