Insights from The Lab

Lean principles in insurance: Insurance process improvement with a Lean Six Sigma Transformation Project

Article by : The Lab Consulting

Lean principles in insurance and banking

If you’re running a life insurance business, there are only so many operating costs you can cut, right? Or there are only so many productivity gains you can wring from the resources you have left, right?

Wrong. The very notion that you have to choose between reducing insurance operating costs and increasing productivity is what we at The Lab Consulting recognize as a “false tradeoff.” In this article, we’re going to share with you some best-practice lessons-learned that you can apply to your insurance operations, based upon numerous experiences with global insurers and their efforts to increase insurance productivity via Lean Six Sigma—a natural fit for The Lab’s services.

Lean management and process improvement in the insurance industry: What works, what doesn’t

The insurance companies in need of lean transformation we’ll be called to help are large and diverse. Many span the globe and offer multiple lines. One we worked with recently serves over 75 million customers in 40 countries, with its U.S. retail life insurance division employing more than 10,000 people.

The number of employees is an important ingoing metric here. That’s because the types of non-technology lean process improvements which The Lab specializes in can be astonishingly small; they’re often broken down into activities lasting ten minutes or less. But if you have, say, 10,000 people doing the wrong thing, hour after hour, and day after day, all those little lean insurance process improvements add up a ton. And we’ll typically identify hundreds of improvements; for that one retail life insurance division, we found 350.

Lean six sigma transformation projects in the insurance industry: Process improvement initiative starting point

Previous cost cutting efforts at many of these insurers, prior to The Lab’s engagement, often eliminate unprofitable agents: a one-third cut isn’t unheard-of. After the cuts, however, insurers rely upon Lean Six Sigma insurance management principles to increase the productivity of the remaining agents and support operations in the home office. That’s where The Lab has been able to help. We are often able to go beyond what a company’s own internal operations consulting team can research and uncover, when it comes to Lean Six Sigma projects in the insurance industry. Their focus is often narrow in scope; ours is end-to-end.

Technology upgrades are no magic bullet. For many of the insurers we help, they fail to improve either operational efficiency or customer service (on their own). Agencies typically operate with their own one-off practices, leading executives to (understandably) believe that non-standard processes are sapping productivity and profits.

Lean insurance transformation projects: Insurance process improvement templates to the rescue

For most clients seeking Lean Six Sigma-based insurance productivity gains, The Lab will employ a two-phase approach. Phase One—project design—lasts about six weeks. Phase Two—implementation and ongoing improvement—typically extends for about six or seven months.

The Lab’s lean non-technology improvement templates can help transform retail network operations into a life insurance “knowledge work factory.” We’ll typically see errors on new business applications plummet by 70 percent. This alone will boost revenue-per-agent by half. Productivity measurement for underwriters will often increase three times over. And operating costs can fall by 20 percent, at the same time—proof positive that the “either/or” trade-off is a costly misperception.

Implementing Lean Principles in Insurance: Transformation Examples 

Here are some typical process improvements we’ll make happen in insurance operations; the following are culled from various engagements:

Rejected applications get rejected earlier with lean insurance transformation.  This is a big deal. We’ll often find that more than 80 percent of applications that get rejected, get rejected by Underwriting. That’s not good, because it means that lots of undue processing costs were incurred before the rejection. Process standardization for application submission—eliminating that killer variance—can slash Underwriting-rejected applications by half, often in just six weeks.

Agents get more time to sell more while reducing insurance operating costs—and do. When we map the “as-is” state during a Six Sigma project in the insurance industry, we’ll often find that agents, incredibly, spend as much time following up with customers for additional information as they spend selling new policies! With simplified new-business applications designed to improve first-pass quality and reduce follow-ups, agents can typically increase their sales time—and revenue—by 60 percent. Amazingly, this transformation can take effect in just 90 days.

Customer service soars with lean insurance process improvement. Customers typically want to get quick, ballpark quotes. They just as typically don’t: Instead, they get ultra-precise quotes… ultra-late. This causes a third of prospects to simply go elsewhere. The Lab eliminates this problem with quick reference price guides. Similarly, customer-focused process improvement rapidly delivers both service gains and sales-force operational efficiency.

Increasing insurance productivity and reducing operating cost with a Lean Six Sigma transformation project: Bottom-line results

Remember that U.S. retail life insurance division we’d mentioned earlier? The Lab’s two-phase lean transformation engagement delivered insurance operating cost reductions of 20 percent. Capacity improved 20 percent. Sales uptime shot up 60 percent. Annual savings reached $54 million.

And the best part? The entire lean insurance transformation engagement—like all engagements from The Lab—was wholly self-funding. The entire project paid for itself with hard dollars in just six months. By Month 12, the process improvement investment had paid for itself five times over.

Are your insurance operations functioning at maximum Lean Six Sigma efficiency? If not, consider spending just 30 minutes on the phone with The Lab. In that one call, we can show you how our proven practices will help you reclaim that missing productivity, without any new technology. Backed by our self-funding, money-back guarantee, it’s an irresistible proposition, as scores of insurance companies worldwide will attest. Contact us now to schedule that no-obligation call today.