CUP Corporation The Management Control Process Performance Measurement

CUP Corporation The Management Control Process – Performance Measurement Nataraj S Ashutosh Singh F 043 F 104

1 • Overview of the Case 2 • Question 1 3 • Question 2

Company Overview • One of the biggest insurance companies in Europe • Growth rate of >25% over the past 10 years • Had 5 product lines each of which functioned as independent divisions • Exclusive Agents handled 70% of the business Product Lines Life Health Casualty Property Automotive

Changing Business Environment After 1995 growth was flat • Worsening economic climate with increasing economic downsizing • Higher taxes and social welfare levies • Increasing competition • Extensive satisfaction of demand for insurance in Germany sing a e r c In ion t i t e p Com Shorter Contracts More cancellation of existing contracts Recent trends in the industry Incre a Clien sing t. P Sensi rice tivity

The Issue: Customer Loyalty • Lapse Rate – Customer cancellations compared to total contracts • Lapse rate reached DM 850 M in 1995 – 10% of total premium revenue • Problem was customer loyalty cut across product lines – a Corporate problem Bad claims processing Agent related Problem Slow and bureaucratic responses Lapse Rate Problem Too little information Price

A Corporate Problem: Virtual Cycle • More contracts customers had – longer the loyalty • Customer with 1 contract - high replacement - higher commissions to agents • Hence, customer retention was to be the Strategic Target Better service to existing clientele More contracts per customer Virtuous Cycle Lower lapse rate Longer the loyalty Lower the commissio n on new products

Issues with Existing Decentralized Customer Care 1 Customers dial up wrong centers, redirected, suffer delay and hence annoyed 2 A clerk in one center had no access to database of different lines 3 Trade Unions prohibit 24 X 7 support

New Solution : Integrated Customer Care Center One telephone number for all problems Customer Care Centre (CCC) Function: Central Services Profit Center Staffed 24 X 7 90% of the time, problems addressed on first call Rest 10% on follow-up call

Concerns regarding Integrated Customer Care Center • Generalists will not be able to address detailed technical answer • Established own call centers Apprehensions of product lines • 70 -80%Analysis questions were mundane; to be handled by generalists • Special team supplied by product lines for specialized answers • CCC to be located near existing CCs

Questions 1. As an advisor to the project manager, Derrick Westmuller, what set of measures would you advise they adopt? 2. Develop a balanced measurement system showing how the measures and measurement link to what you believe are the key success factors of the CCC.

Measures (1/4) Financial Measures Increase in revenues Increased profitability Lower cost Return on assets Service cost to revenue ratio Cost per incident Cost per exception

Measures (2/4) Customer Oriented Measures Policy lapses Policies recovered Increasing the number of customers with multiple policies Policies cancelled by a customer/ increase in policies by an existing customer Recommendation by existing clients to other non-clients about the center Bad claims processing should decrease

Measures (3/4) Internal Business Measures Error reduced New car insurance Issues resolved on other calls but without taking in views of specialized group Speed of processing Enquiries for agents and brokers Enquiries generated on cancellation of contracts Issues that need specialized group Cutting on process steps Issues resolved on first call New clients Rating of answer then and there and to be mandatory to seek such ratings from the caller

Measures (4/4) Innovation and learning related measures New topics received for different product lines Knowledge reuse rate • Currency • Transparency Time spent by agents in generating new businesses Identification of trends in business

Balanced Scorecard (1/2) Source: dbkay Associates

Balanced Scorecard (2/2) Key Success Factors Reduce Lapse Rate Efficient Cost Effective Customer Satisfaction Measures “What” Measurements How Lapse Rate Defection rate • Lapse Rate trend • Defections by product line • Awareness of call center Calls solved on first try • % of calls solved first time • No. of repeat calls • No. of transfers Call rate charged • Average length of call • No. of rings until pick up Customers pleased with call center • CC customer satisfaction • CC mentioned in general survey • Customer rating of CC staff • Rep satisfaction with CC

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