201306 iasa conference-session 602: operational efficiency

Optimizing Operations to Improve Quality, Performance and Profits

Session 602

Session 602 Optimizing Operations to Improve Quality, Performance and Profits

§ Moderator: Steven Callahan, CMC®, FFSIThe Nolan Companywww.renolan.com

§ Panelists Thomas NohFarmers InsuranceHead of Claims Finance, QA and CI

Nick Intrieri, PMPAXA EquitableDirector, Retirement Services Solutions

»3

Overview and Objectives

§ Decision-making processes and strategic focus changed• Economic conditions limiting portfolio returns• Competitiveness and market saturation challenging organic growth• Cost structures seen as unsustainable, cost management critical

§ Costs and capital investments heavily scrutinized• Structural changes: outsourcing, consolidation, acquisition, divestiture• Process changes: LEAN, CI, Value Analysis, Process Optimization• Technology: Legacy replacement, Decision and Process Automation

§ Session Objectives:• Real world review of cost management methods that have been used• Case study of suitable approaches that drove measurable results• Incorporate financial impacts of techniques used4

PC Claims Severity

Setting the Stage: Challenging Economy Driving Financial Governance and Control

5

Investments

Regulation

Market ExitsTechnological Advances

Competition

Setting the Stage: Cultural Shifts Driving Sales and Service Strategies

Generational Differences

New Social Dynamics

Five Generations of Consumers, Large New Wave Coming(% of Total Population)

Ethnic Diversity

The Digital Generations- powerful consumers

6

Service OperationsNew↑ & Old↓Technology

New

Service M

ethods

7

Setting the Stage: Solutions AboundChallenge: what to spend where when & why

Two Questions:One - What Methodologies will Work Best

CustomizedCustomizedRelevantImpactful

Lean Six Sigma

TotalQuality

Mgt

TotalQuality

Mgt

ReengineerReengineerValueAnalysis

ValueAnalysis

ConstraintTheory

ConstraintTheory

Change Based on Importance, Reliability, and Cost

Design to Customer Requirements

Innovative Transformations

Remove Waste and Improve Flow

Reduce or Eliminate Errors

Manage Constraints

8

Second Question:Two – Where is greatest Near Term Impact

§ Common Missing Link: Review of Effectiveness• Expense focus drives reviews of efficiency: doing it fast• Customer focus drives reviews of quality: doing it right• Effectiveness looks: doing the right thing fast and right

§ Best Practice course of action1. Determine key processes / areas of assessment (IT, Service, etc.)2. Assign Impact / Importance to each key process / area3. Evaluate Effectiveness by Process / Area4. Identify Significant Gaps in Effectiveness5. Rank by Impact / Importance across Resource / Timing Map6. Develop Action Plan

9

Efficiency Vs Effectiveness:Consider Using the RATER Model

§ Evaluates Effectiveness across Multiple Key Dimensions1. Reliability – the ability to provide the service you have promised

consistently, accurately, and on time2. Assurance – the knowledge, skills, and credibility of staff; and their

ability to use this expertise to inspire trust and confidence3. Tangible – high quality, or appearance of high quality in the

physical aspects of service delivery. Can include documents, presentation, facilities and packaging

4. Empathy – the extent to which the provider displays concern and values employees and customers

5. Responsiveness – the ability to provide effective answers and solutions quickly or within needed expectations

10

Case Study – Property Casualty

Thomas NohFarmers InsuranceHead of Claims Finance, Quality Assurance, and Continuous Improvement

11

Optimizing Operations

• Continuous Improvement (CI)

• Competitor analysis / external benchmarking

• Internal benchmarking

• Financial planning and analysis

12

Continuous Improvement Foundation

How are the following influencing the customers:

• Operating Systems

• Performance Systems

• Mindsets and Behaviors

• Organization and Skills13

CI Techniques (Six Sigma, Lean)

14

CI Techniques/Tools ..

- Kaizen/Re-creation- Teams and committees- Inititiatives, campaigns

15

CI Techniques/Tools …

§ communication • (huddles, blogs, newsletters)

§ Innovation campaigns

16

External benchmarking/Competitor Analysis

§ AM Best/SNL

§ Annual Statements, Annual Reports, SEC filings, Rate filings

§ Ward group, CCC, ISO, etc….

§ Management consultants

§ Periodical, press releases, publications

17

Sample Competitor Analysis

Grow

th (GPW

)

Profitable Growth(Winners)

UnprofitableGrowth

(Positioning)

ProfitableContraction

(Retrenching)

UnprofitableContraction

(Losers)

Profitability (Combined Ratio)

18

Sample Competitor Analysis

19

Sample Competitor Analysis (benchmark)

20

Financial planning analysis

§ Financial modeling

§ Internal benchmarking

§ Actuarial analysis

§ Business analytics

21

Regression Analysis

Nevada

y = 1.9084x - 584.94R² = 0.8833

$(40,000)

$(20,000)

$-

$20,000

$40,000

$60,000

$80,000

$100,000

- 5,000 10,000 15,000 20,000 25,000 30,000 35,000

X = 2012 work unitsY = 2012 cost

22

Exception reporting/alerts

Airline over $500First class flightsHotel over $200Luxury brand hotelsCell phone international/directory assistanceExcess gasolineCost per policyCost per employee

23

Internal benchmarking example

24

Actuarial analysis

25

Business Analytics

26

Case Study – Annuities

Nick IntrieriAXA – Equitable

Director, Retirement Service Solutions

27

Digital Solutions at AXA-Equitable

Expense Management

E-Insurance Strategies

28

Background - Policyholder

E-Insurance Strategies

§ Life and Annuity carrier

§ Customer Snapshot: ~2.9M clients, $138B of in-force assets

§ Challenge: Increasing operating expenses and stagnant web utilization

§ eDelivery penetration low

29

Policyholder• Build a client experience that is efficient and gratifying

• Provide awareness of digital tools through effective marketing techniques

Self Service Tools

§ Online Account Access: Non financial transactions, account balance inquires, trades

§ eDelivery options: Statements, Prospectus, Annual Reports

§ Win/win for client and carrier?

§ In 2010: 24% Online Account Access; 5.4% eDelivery

Why is the adoption rate so low????

30

Policyholder• Build a client experience that is efficient and gratifying

• Provide awareness of digital tools through effective marketing techniques

Motivation and Awareness

§ Lengthy enrollment process

§ Previous marketing strategy inserts and envelopes

§ Client incentives unclear

§ Company incentives very clear (eDelivery):

31

Policyholder• Build a client experience that is efficient and gratifying

• Provide awareness of digital tools through effective marketing techniques

Savings Breakdown

What is the best way to increase eDelivery?

Inforce Prospectus

Annual Report

Semi-Annual Report

Statements (4x)

Confirms (6x)

Marketing Budget

Service Center Budget

32

Policyholder• Build a client experience that is efficient and gratifying

• Provide awareness of digital tools through effective marketing techniques

Action Plan – Provide Incentive

§ Launched AXA Equitable eDelivery Sweepstakes in 2010

§ Emphasize “Go Green” Theme

1. Grand Prize – Hybrid Car (2011 Ford Fusion)

2. 154 First and Second Place Prizes

3. Contest Spanned from January – October 2010

4. Separate “Employee Sweepstakes” for AXA policy holders

5. Goal – Increase eDelivery rate by 3%33

Policyholder• Build a client experience that is efficient and gratifying

• Provide awareness of digital tools through effective marketing techniques

Approach

§ Formal Project Plan Approach (Led By Service Center)

§ Creation of “EZ Being Green” Team

§ Compliance and Legal

§ IT

§ Sweepstakes Administration

34

Policyholder• Build a client experience that is efficient and gratifying

• Provide awareness of digital tools through effective marketing techniques

Marketing Strategy

§ Stuffers in statements/confirms:

§ Email Campaign:

This image cannot currently be displayed.

35

Policyholder• Build a client experience that is efficient and gratifying

• Provide awareness of digital tools through effective marketing techniques

Results

E-Delivery grand-prize winner John Holland with VP Accumulator Field Services Jim O'Boyle, VP, AXA Equitable and Larry George, Financial Professional, AXA Advisors. – Chattanooga Times

§ Increased eDelivery enrollment 161% from prior year

§ Company save ~$1M annually

§ Positive customer feedback

§ 2012 Sweepstakes yielded additional 50% enrollment increase

§ Currently at 11.5% eDelivery adoption rate

36

Background – Advisor

E-Insurance Strategies

§ 50% of Variable Annuity business from Retail Sales Force (AXA Advisors)

§ 100% of applications submitted via Paper

§ Complex variable annuity products (SCS, Retirement Cornerstone)

§ NIGO Rate for AXA Advisors >50%

§ 3rd party electronic order entry (Aplifi, Ebix) 20% NIGO Rate

37

Advisor• Deliver a more efficient way for our Salesforce to sell our products

• Implement an aggressive adoption plan to maximize return of investment

Clear Opportunity

§ Eliminate multiple manual touch points that result in high NIGOs

§ Further AXA’s strategic goals of straight through processing and brand recognition

§ Position AXA as an industry leader in technological advancement

eApp + eSignature = Straight Through Processing

38

Advisor• Deliver a more efficient way for our Salesforce to sell our products

• Implement an aggressive adoption plan to maximize return of investment

Approach

§ Business Led Project Management

§ Waterfall Methodology

§ Project Team Across All Business Units

§ Vendor Selection Process

§ Compliance & Legal

§ Enormous Budget Pressure

§ Aggressive Adoption Targets (50% Year End) 39

Advisor• Deliver a more efficient way for our Salesforce to sell our products

• Implement an aggressive adoption plan to maximize return of investment

System Design

40

Advisor• Deliver a more efficient way for our Salesforce to sell our products

• Implement an aggressive adoption plan to maximize return of investment

Rollout Plan

§ Launched pilot in 3 branches Jan - March

§ Multiple WebEx Training Schedules for Admins, Advisors, and Branch Operations Managers

§ Comprehensive Communication Plan

1. Intranet/Email/Field Bulletin

2. Materials: Tutorial Video, User Manual, Quick Reference Cards

§ On site training and demos with big producers throughout 2013

§ Dedicated eApp support team (Phone & Email)41

Advisor• Deliver a more efficient way for our Salesforce to sell our products

• Implement an aggressive adoption plan to maximize return of investment

Results

§ Positive feedback from AXA Advisors

1. iPad capability smooth and convenient

2. Electronic signatures flexible and intuitive

§ 7.5% adoption through May on track for 50% Year End

§ NIGO Rate reduced from 53% to 2% for eApp submissions

“It cut the entire process down a week. I don’t have to travel to get signatures or pay for overnighting paperwork. “

-Travis Penfield (AXA Advisors)

“As a new advisor and not being quite as familiar with all of the required forms, Annuity eAppwas a huge asset.”

-Kevin Kaplan (AXA Advisors)

“Game changer”

“Can abandon trunk full of applications”

42

Background – Back Office

E-Insurance Strategies

§ 2011: AXA Equitable engaged Nolan to help streamline Document Management Center (DMC) Operations in order to:

§ Streamline DMC functions (Prep, Scan, Mail) across enterprise

§ Leverage Digital Content (Email)

§ DMC Consolidation

§ *Optical Character Recognition

§ Construction of a Digital Mailroom: Big Opportunity

43

Back Office• Streamline and standardize document management process and best

practice for consistent client experience

• Automate and digitize for increased efficiency

Eliminate Waste

§ 2011 State Document Management:

Scan Verify

Open Sort Prep Scan Index DepositDeposit

§ Proposed “Optimal” State with OCR:

This image  cannot currently be displa…

Open44

Back Office• Streamline and standardize document management process and best

practice for consistent client experience

• Automate and digitize for increased efficiency

Insiders Technologies - smartFIX

45

Back Office• Streamline and standardize document management process and best

practice for consistent client experience

• Automate and digitize for increased efficiency

Approach

§ Consolidation implemented prior to OCR

§ Staggered rollout enterprise wide

§ AGILE Development (Vendor Driven)

§ Business area ramp up at each site (New Business, Inforce, etc.)

§ Project completed in 18 months

46

Back Office• Streamline and standardize document management process and best

practice for consistent client experience

• Automate and digitize for increased efficiency

Results

§ Successful Implementation On Time & Budget

§ OCR Enterprise Support Team: Best Practice

§ Classification Rate: 55%; Straight Through Rate: 8%

§ 2013 Savings to be realized: $.75M/Annual

Still to come….

§ Optimization Ramp Up Savings: $1.8M/Annual

§ Classification Rate 85%; Straight Through Rate: 25%47

Digital Solutions at AXA Equitable

Expense Management

Customer Centricity

Digital Solutions

48

QUESTIONS?

Thank You For Your Time! Have a safe trip home.

Steven Callahan, CMC®, FFSIThe Nolan Company

www.renolan.com

Thomas NohFarmers Insurance

Head of Claims Finance, QA and CI

Nick Intrieri, PMPAXA Equitable

Director, Retirement Services Solutions49

Please Complete the Session Evaluation Form on the Conference App and Include Your Conference Registration ID# to be Included in a Drawing for a Free Conference Registration for the 2014 Annual Conference!NOTE: Your Conference Registration ID# is Located at the Bottom Left Hand Corner of Your Badge.