C-Direct Insurance Company

201KM GROUP PROJECT CASE STUDY 3 Case Study 3 The C-Direct- Insurance Company Developed by Peter Race, Henley Management College Call centres have fast become one of the most important channels for organizations and their customers to interact. There are around 4,000 call centres in the UK today,employing over 400,000 people. The direct sell insurance industry is increasingly using call centres to access and service its market. The C-Direct -Insurance Company has its call centre in Newcastle, England. The company itself is just 6 years old and specialises in selling automobile insurance policies direct to customers. The process
Advertising and promotion initiatives attract customers’ interest and generate enquiries to the CD Call Centre. These lead to the provision of quotations for personal car insurance. In order to provide the quotation, CD operators need to collect the customer’s personal and vehicle related data (in total 17 items) and input them to the computer. The process is as follows: Customers call the CDCall Centre (the focus of this case) by a freephone telephone number and submit the required information. This is entered directly into a computer terminal during the call, their questions answered, and quotation provided within 12 minutes.
Customers can pay by credit card and receive immediate insurance cover. Customers receive their personal insurance offer confirmed in writing by mail, about 23 days after initial contact. Mr Small, the Operations Manager, is responsible for all operations in the Call Centre. The Call Centre employs 105 people in three shifts over a core day between the hours of 0800 and 2000. The resources for the Call Centre are: · its facilities – for example the buildings and the staff’s workspace/workstations · the equipment – for example, computers/systems the People who use them. Car insurance is compulsory in the UK, so customers are price sensitive and tend to shop around to compare the company’s offer with those of competitors. Only about 17% of CD’s offers are converted into policies. The operations management strategies of scheduling, capacity and quality management were reactive rather than proactive; for example, poor forecasting of demand resulted in excess manpower being under utilised. Staffs were inflexible and showed little sympathy or understanding to frustrated and angry customers.

The interfaces with support functions such as Marketing or Information Systems Department tended to be confrontational rather than supportive. Fortunately, in the early days, competition was not very tough and Mr Small had no special performance targets or formal control mechanisms – he was literally his own boss. The policy change After five years of high growth, over the last twelve months sales have only grown by 3% and the company is beginning to struggle with diminishing profits. The main reasons for the slowdown have been identified: · New Entrants: 15 companies in the last 2 years, producing a wave of ‘direct insurance startups’.
These companies have targeted the same customer segment as CD, the market for which has remained stagnant. · Customers are more price sensitive and new entrants offer extremely low prices. · Substitute Products are unchanged – customers still require car insurance. The new situation has forced management to review business policy options to provide a competitive advantage. Research has shown that for direct selling insurance products, the key market drivers are to: · Offer a wider range of insurance products, so minimising the need for customers to deal with many suppliers. Offer low prices · Provide excellent service. A recent internal report showed that the CD Call Centre still had potential to improve service levels and cost efficiency. The decision was therefore taken to extend the product range and improve service by addressing: Product flexibility CD will respond to customer’s demand by launching a new product – household insurance – and deliver it via the Call Centre, alongside car insurance. Household insurance is often requested by customers and they have been in the past disappointed not to source it from CD.
Furthermore, the product margin for household insurance is high, thanks to low average claims. Since only a few competitors currently offer household insurance, management believed they could generate an above average profit margin in the first year after launch. Responsiveness In order to make the new product successful, it will also be necessary to fulfill customer expectations for ‘time’ response. Consequently, operations management will need to ensure quick access to the Cal Centre and efficient treatment of customers for both products.
Quality Improve customer service – at least to match competitors’ standards. Internal analysis has shown that the auto insurance ‘lapse rate’ (customers not renewing their policies) – which is an indicator of customer satisfaction – was above the market average. To avoid this trap with the new product, significant improvements in service delivery of all CD’s activities is needed (including settlement of claims, which is not part of the Call Centre’s responsibilities). Cost Ensure price decrease of insurance premiums by reducing internal costs.
All possibilities for further cost reduction must be exploited to permit a price level lower than the top five price leaders. By launching this policy change, senior management believe a successful implementation will lead to higher customer satisfaction and consequently to profitable growth. Influences on the operations The change in business policy will have an impact on M. Small’s current operations strategies. The policy change has been developed at corporate level but the benefits will have to be delivered by Mr Small, the Operations Manager, in the future.
Therefore, Mr Small will need to address the changes to operating systems structures and operations management objectives. The determination of the tradeoff between customer service and resource utilisation will be a key factor for sustainable operation, especially in this competitive environment. The new business policy decision will affect Mr Small’s current practice in two ways. First, he will have to interface with the project setup to manage the launch of the new product and modifications to the delivery processes.
Second, Small will have to establish operations management strategies to allow the business to meet the objectives of the policy change. The Project phase Workforce The existing staff will be responsible for the new product, alongside the existing offering. Therefore an intensive training programme on Information Technology (IT); enhancements and new product features will be required. To improve the overall quality and service provision, customer acquisition techniques and friendly handling of difficult customers will be covered during the training.
Mr Small will work with the training department to develop a training plan which will take at least four days per group to deliver (each group has about 10 employees). Therefore, he will have to schedule the training so that the normal business will not be hampered by too few staff in the Call Centre. The new training approach will also have a long term influence, because training updates for employees will be held at least once a year. One of the aims of the training is to reshape corporate culture so as to engender a commitment to high efficiency and excellent ervice. This will demand empowering the workforce to focus on customer service, together with better collaboration between staff, by using more teamwork, to raise the overall efficiency levels of the operation. Mr Small will also have to install a feedback process to evaluate the satisfaction level of the staff, to help identify continuous improvement areas. Better motivation will be achieved by introducing a new incentive system, using positive customer feedback as a measure for rewards. Facilities & equipment
The current workspace/workstation for a Call Centre staff member is a small, open ‘boxlike’ area (less than one square metre), containing a terminal, keyboard and telephone. The boxes are very close together and do not have a proper noise protection. Staff complains about the workstations, because with the background noise of five or more colleagues, concentration is difficult, and the number of data input errors are high. Staff have little space to write notes, so for example, noting down a telephone number to return a call to a customer is very difficult.
After looking at the staff’s workspace, Small realised they would have to modify the building in order to create more space and provide noise protection. He thought that only by providing a convenient and ergonomic workspace would he be able to ensure his staff’s full commitment to performance improvements. A careful forecast of future demand will be necessary in order to install the right number of new workstations and avoid under/over utilisation of resources. Technology A new terminal mask (template or standard screen) for the Call Centre needs to be developed by the Information Systems Department (ISD).
This mask must contain all questions that need to be answered by the customer. To ensure service quality, ISD would have to create a flexible IT system, which would enable the Call Centre staff to quickly switch from one screen to another, according to customer’s demand. The competitor benchmark for ‘time to switch’ screens is less than 3 seconds. Furthermore, high IT reliability is vital, because breakdowns in the past have stopped all activities of the Call Centre, (since they depend on online access to the mainframe) and customers could not be served during that time. Mr.
Small wonders if an ISD/Call Centre staff taskforce should be setup to explore the main historical problems for poor reliability, define development areas and try to find the best possible solution. Organisation Experience in the past has shown that the first few months after a product launch to be critical. Therefore, a new role of a ‘first alert support person’ needs to be established. The ‘first alert’ person will help improve service by patrolling the Call Centre and helping the staff during busy times, in cases of difficult customer questions or with technical problems.
Furthermore, they would have a coaching role for new employees and also support staff training. The Human Resource Department (HRD) will need to develop the job description, provide a career plan for that role, manage the necessary recruiting and training process and determine how this new position fits into the organisation. Questions 1. Prepare the Project Definition Report for implementation of the policy change. This report should cover: vision; purpose (including a stakeholder analysis); objectives; scope; strategy; project phases; and project organisation. 2. What are the risks for the project and how should they be managed?