Lean & Six Sigma in Financial Services: Case Study Norwich Union Life Presented to the IQPC Six Sigma Summit January, 2005 by

Matt Fahy Director of Transformation Norwich Union Life An AVIVA Company

Harvey Dershin Managing Director, Europe & Asia Aon Management Consulting Rath & Strong

Agenda • Aviva / NUL • Our challenge • Approach • Achievements • Conclusion 2

Aviva

3

Aviva •World’s fifth largest insurance group •51,000 employees •30 million customers worldwide •UK’s largest insurance group •Norwich Union Life is part of the Aviva group •UK’s largest provider of life, pensions and investment plans •market share of 13%

4

NUL Business Environment • Products – Pensions – Life Insurance – Mortgages

• Market – Competitive – Regulated – Revenue constrained

• Customers – IFAs (brokers) – Individuals – Corporations

5

NUL Operations • Approximately 5,500 staff in seven locations Glasgow Newcastle

York Sheffield

Norwich Bristol Stevenage

6

Operations in Context • 250+ legacy products • 30+ major systems • 2.7 million postal items received • In excess of 42 million images created • Over 5 million calls to the contact centre, 23,000 per day

7

Our challenge

8

Background • In 2003 we identified that we offered a variable, and sometimes poor, customer experience, that cost us too much money. • Some customers and staff were losing confidence in our service • Our major investments in technology were often not delivering the anticipated customer and efficiency benefits

9

Strategic Ambition We decided to ‘Become the Best’ as recognised by our customers for the delivery of consistent, quality, cost effective service in comparison to our major competitors. We will achieve this by... • • • • •

Being clear about the service promise we make Re-engineering our processes and excelling at performing them Delivering through the quality of our people Aligning technology and focusing on ‘fit for purpose’ and not ‘world class’ Using different sourcing options (e.g. offshore / outsource) where appropriate for reasons of quality, cost and management focus

Winning through our focus on promises, processes and people. 10

Process Excellence • We adopted Process Excellence to provide us with: – quality of outcomes and improved customer experience – continuous improvement, incremental and stepped – clarity of what we do and the information we need on how well we do it – an ability to persistently drive out costs, realise business benefits and performance improvement

11

What have we achieved? •

A major overhaul of single biggest process (Life New Business)

•

Many improvements to customer experience (accuracy & cycle time) across a whole range of smaller processes. By year end this will have affected 40% of all our processes

•

Over 1000 staff engaged and directly involved

•

13 Lean workstreams and 26 six sigma projects underway or completed

•

Over 70 staff trained in specialist skills

•

Process Excellence being adopted across the Aviva Group

•

A 243% return on investment (3 years return on initial investment) 12

Approach

13

Goals for first wave of Process Excellence • Establish core skills • Build momentum and enthusiasm • Start to make real improvements – customer experience – process – Financials • Not be dependant on technology changes 14

Shaping the Approach • Hard financial target to be met in the current year • Implications: – – – –

Address processes across about 40% of the business Roll out across a broad front…quickly Engage large numbers of people…as willing participants Need to demonstrate significant results quickly

• Tactics: – Lead with Lean for waste removal and cycle time reductions and speed of execution – Follow closely with Six Sigma for defect elimination 15

Change Management Context • Environment: – Multi-dimensional transformation (offshoring, technology improvements, process excellence) – Operations-wide scope (approx 3000 people) – Aggressive targets

• Overall change readiness scores were modest. Weakest areas: – – – – –

Little experience with change of this magnitude Rigid administrative procedures Hierarchical organisational structure Concern over organisational stability Lack of skills re process improvement 16

Change Management Strategy • NU – Reach high + unswerving focus on results – Steering committee oversight – Establish Process Excellence Leader & adaptive, “virtual,” team for day-to-day management – Quickly build a track record of delivered results – Use of change “vectors” to communicate success • • • • •

Lean Specialists Lean Teams Green Belts Black Belts Local managers

17

Lean Approach Mgmt Workshop 1

Current State Value Stream Maps Key Metrics

Data Collection

Mgmt Workshop 2

Future State Value Stream Maps, etc

30 days

Just Do It

Kaizen

10 weeks

30 days

Just Do It

Kaizen

10 weeks

30 days

Just Do It

DMAIC

6 months

DFSS

DMAIC

6 months

1-2 years

18

Accelerated Benefits Roll Out Item Management 1 Workshop 1 2 Collect Data Management 3 Workshop 2 4 5 6 7 8 9 10 11 12 13 14 15

Lean Team Trng Pre Event Prep Event Part 1 Data Collection Event Part 2 Post Event Mgmt Benefit Sign off Benefit Delivery Corp Leveraging Leveraging Sign Off Continued Benefit delivery Leadership Audit & Review

1

2

3

4

5

Week 6 7

8

9

10

11

12

X

X

X X X X X X X X X X

19

Cascading Lean Rollout Target Workstream Workstream 1 Workstream 2 Workstream 3 Workstream 4 Workstream 5 Workstream 6 Workstream 7 Workstream 8 Workstream 9 Workstream 10

J

F

M

Lean activities

A

M

Month J J

A

S

O

N

Implementation

20

D

Green Belt Training Format Activity Training

Month 1 2 3 4 3-days 3-days 3-days 3-days

Exam Coaching Project Reviews Pilot/Certification

5

6

7

8

X

X

X

X

X

X

9

10

X X

X X

X

X X

X X

21

Achievements – One Year Later

22

New Business Life Example Before - LEAN

N B PROTECTION Faxes, Telephone calls, e mails

Customer'IFA'Partner,In ternal Seller Life Protection Policy Application; Mediacal Reports, Reissues,Direct Debits MLA Latest estimate from Norwich BCC is that NB post is 2.6 times app flow.

12750 EDI PA 425000 Paper PA Paper 1585 per day EDI 49 per day Post items 4121 per day 5706 Items per day 1

Rewinds Rework: missing info 30% (consumer 30%) Reallocations if ill Re Scans (2 -3 %)

Alastair: Indexing included here also known as shelving . Post also needs indexing. Critical to get post split. Possibly time actually double that shown. Integrated WM will eliminate much of these steps

2

3

Open Post & sort

Admin Team Sort

York example. Batches 500. 0600 1000

Directed to NB teams Rerouted 10%?

4

Batch Props

5

Send On Mini Bus

Scan Prop

Bus takes sacks of mail to Dunnington at 10.00 daily

Part of larger operation

6 Work Allocation 1 Acceptance of work to teamGlasgow only

7 Work Allocatio n2 Allotment to CSR's 2pm

Staff Staff Hrs Errors % Rework % Volumes/day Std Time Total FTE Time Required HRS Time Available HRS

MINUTES LAPSE VALUE ADD CORE ADDED VALUE Figures shown are average per day

5 2 5%

7 1 2%

21 1

1 0.66

3 0.5

5706 0.03 11 2.85 10

5706 0.33 11 31.70 7

5706 1 11 95.10 21

1625 40 11 0.67 0.66

5706 2 secs 11 0.03 1.5

65 57 0.3

90

Sue Hendry said she had this info precisely

11 NTU's

Ian

Cancellin g off unwanted props

13 Allocation to U/W

Required chase and limited # of deals

1176

1038 but daily is

12 MLA

300

382

14 Intitial Assessment

15 Request Info

16 U/W Reminder

17 Receipt It

18 Fee Payment

19 Assess Evidence

What is required, some will be accepted at this point

GPR,s, Fin Reps Others go direct. Role to prod letter and attach dec

System generated plus ad hoc

Reports come in through scanning channel

GPR's only. MM's will be done in bulk

CMO/Reass ur requests add delay but very low level??

2697

53

387 7

354 7

354 7

387 7

387 7

12 7

98 7

300 7

300 7

298 7

30 1585 12.36 387 326.51 2709

470 5 354 39.17 2478

see above 354 7.9 354 46.61 2478 354

0 326 2.69 387 14.62 2709

~1% 727 3 387 36.35 2709

0 2000 0.083 97 2.78 84

3% 1180 4 98 78.67 686

792 5 300 66.00 2100

500 5 300 41.67 2100

1131 4 298 75.40 2086

2.69

3 1.38

4 2.98

5 2.50

2 2

0.5

1200 0.75 0.75

12 12.36

5 1.48

% for lots of time 5760 7.9 1.76

2880

20 Make Decision

21 Issue Decision

22 Decline Process

23 Quality Check

4 2.85

4661

300 7

127 7

127 7

300 7

300 7

300 7

700 26.25 127 306.25 889

1109 2 127 36.97 889

50 5 387 4.17 2100

24 2 387 0.80 2100

15% 1165 4.9 300 95.14 2100

2 2

0.16

0.03

7200

2880

1440 26.25 11.59

1 Admin Team Sort

Look Up Activity

26 Start Date

Scan

3 Index

28 Policy Issue

29 Issue DUH

System generated 99%

System generated 99% of time

Declaration of Unimpaired Health

30 NTU Recourse from IFA

387 7

60 7

300 7

387 7

387 7

727

260 7.5 84.5 32.50 420

1506 1.61 387 40.41 2100

1537

1165

387 0.00 2709

387 0.00 2709

387 0.00 2709

4320

10080 7.5 1.23

4.9 3.60

31 Ageing Balance

Re Issues

Non payment of 1st premium. Needs to be collected

24480

387 7

387 0.00 2709

387 7

260 7

328

500 5 387 41.67 1820

387 0.00 2709

20160

Reminders Q-Checks NTU's Receipts MLA

Request Assess Direct Debits Acceptance Letters

5 Chase

Chasing missing info etc

6 CELL Underwrite & Document

5 Alastair: 1585*97% nwxt cell based on

NTU's Receipts Fees MLA Cancellatio n

Assess Direct Debits Acceptance Letters

7 Chase

NTU'S Start Dates Docs etc

300 7

16.13 mins 300 1503.54 48529.16

70560

1.61

Reduced number of steps from 32 to 10, 25% increase in productivity, 50-70% reduction in avg. cycle time. 4 CELL Register & Underwrite

sub process time value important; 4 days to action and then 1 - 7 days to dearchive, get docs into team up to 5 days Need policy back from client up to 1 month; May take 90 days for customer to advise. Commission issues

12000

Gillian Rhodes: acceptance delay doc

2 Batch Batch Props

27 Cancellation Letter

1187

2908

464 0.59 300 4.56 2100

0.59 0.59

25 Acceptanc e Letter Manual for consumer. 260 per day in York. Rest auto

3128

2880

20160

24 MLA

Accepts would by pass this. Declines or defer would be done by admin

xx%

2880 0.08 0.08

Alastair Gardner:

Back to Check too late in process (if needed at missing all) needs to go back through whole info process 15%

Lead Time =

After - LEAN

Open Post & sort

120

34 7

60 0.03 0.03

Alastair Gardner:

578 daily but WIP is?

Alastair Gardner: Too many contacts with customer from Admin - U/W Can't read images Missing info from customer;

some 5706 0.75 34 71.33 238

20

CT = 44 days

10 Reminder s (several) Chasing missing info etc

Request missing info

Data capture, MLA, Missing Informatio n, etc

24 hrs

1 1 Process Time = 79 mins

9 Missing info

Alastair Gardner: Done by CSR's

7 7

40 135

Caroline

Customer

Alastair: U/W Reminders

Alastair Gardner: done by CSR's We have detail on split of reports. MM are done automatically.

every 2 weeks 52% 17% 18% 11% 2%

1396 0.5 7 11.63 49

some

0.03 0.03

8 Info Transfer

1765

1585 + 18,000 tasks

Glasgow only

12.18 per day. 11.89 hours

No.reminders 0 1 2 3 4

8 Ageing Balance Non payment of 1st premium. Needs to be collected

23

16.13

177250.00 167.36 50.32

123 2.79 0.84

Pensions Examples Discontinuance of Schemes DC1

DC2

DC3

OLD PROCESS 53 Steps 11+ months

DC4

11+ months

Admin

New DISCO process has made 70% improvement in CT Reduce staff by 66% (18 to 6) = £204k

NEW PROCESS 28 Steps 3 months + 1 week

DISCO

3 months +1 week

Renewals Yearly statements Renew als

Renewals (continued) Internal D epartm ent

External Department

Pr i nt an d s end s ched ule o f memb e rs Bo w tho rp e

C oll at e In ser ts (p r epr inted sc hedu le a nd c over let ter) (Te mpl ate l ong win d ed of te n not u s ed)

l f ul ail al m s to ne w r t Au - re in se pre in cl k p ac M

Phot oco py sch ed ul e a nd let ter, pas s f or c h eck in g

C orr ec t any e rro rs Sea l and pl ac e f or m a il i ng F il e cop ies , cl o se j ob

R ece iv e : U pd a te sa la ri es and i nf orm of ch ange s I F A an d t ru ste es

of py d co ep r ise at Ke t ho ies au t or fil e na f ed sig nt o dat f ro up ep ke

R ep ea t and c heck pro c ess s o f ar

e ig at r st fo ve te o In p la inf es ) t em i es em lar ch s sa er ew (n L

R e cei ve co mp le te d p ac k and ad d tas k co d e + cas e r ece ip t+a ll oc ate D i ff er en t me th o d s be twe en te ams

Ti dy th e fi l e

Ti dy admi n p ack s So rt a n yt hi n g>1 y r and sen d f or fic h ei ng (r emo ve s ta ple s and co mp le te fo r m)

Set u p s p ec ial cas es li st and in div id u al memb er che ckl i st a nd ren ewal remi n de r ki t ( dup l ic ated on jo b c ari d B o ok n )_ N/ E’ s B o ok i n N/ E’ s C hec k aut hor is ed s ig nature C h eck sc hed ule u pda te Ch ec k wheth er SORP re por t re qu i red

y lar rs sa ile n ew tra Do ls + ium as s em ve le + pr ti on 1 R ula lc rt of ca pa

C o mp le te sp eci al c ase li st C he ck if li fe c ove r r eq ui re d I f ye s, fo l lo w er c ov sk, p ro ced u re lif e te ta 1 (cou l d be se p ar at e e ra R H av pa lify pr oce ss) se mp rd C he ck eq u al isa ti on of as o si t b ca jo p ens ion a g es

P ro c e s s G M P

P ro c e s s o r A

G M P

C h e c k e r B

In te r n a l D e p a rtm e n t

P re p a re & is s u e p r e r e n e w a ls p a c k 1

P r e m iu m 3

re c o rd

V e t S c h em e 4

C a lc u l a t e n e w p r e m iu m s 5

P ilo t 1 s c h e d u le , 6 8 m e m b e rs 6 0 m in s

Check everything done and add any additions to reminders list

In p u t n e w s a l a r y d e ta ils & k e y n e w p r e m iu m s 6

P ilo t 6 0 m in s

C h e c k 7 P ilo t 9 0 m in s Is s u e S ta te m e n t 8

F le xib le Al lo cat i on/ Pul l of wo r k wit hi n tea ms - fo rtn i ght ly r oll i ng pl ans

Add new salary details/ AVC trailer Calculate new premium levels excel spreadsheet e at ig st atic of r ve m n In to tio gu la au uc re od 5 ’s pr st-9 VC po A J

Fin d a n d b ri ng ad mi n p a cks

st in ue ts as Req en cle em at cy st me n1 ess ge sa oc pr M

es ic rv n se ice ad mi O ff he c ks t f ic pa u es r eq as nl y O th em t io n ep e xc

P ilo t 2 0 m in s

Check

Check agent details Key in new premiums for gen1 system overnight cycle

In te rn a l h o u s e -k e e p in g 9

O ffic e s e rv ic e fic h e 10

T o ta l s h o u ld ta k e tim e fo r 6 8 m e m b e rs s c h e m e ~ 1 7 h o u rs P il o t r e s u l t s = 3 h rs 5 0 m in s ( 3 . 4 m i n s / li f e )

Next day Check updates Request benefit statements Close job and link

Check statements vs schedule Prepare covering letter Pass for checking

Person A

l ga le t h s te e ys k wir tru wa ec Ch et he e al w h at ur ire d n qu sig re

of n o t rid n Ge a tio rd lic ca d up 1 j ob us e s t t R J us kl is ec ch

C u s to m e r

P re -r e n e w a l p a c k c o m p le t e d w i t h ch a n g e s 2

=

76 %

im p ro v e m e n t

S a v in g s 7 .5 F T E = £ 1 2 7 k b a s e d o n 1 1 6 k life s

Check

Print and send statements Bowthorpe

Tab statements Send to IFA/trustees File documents/fiche

C h eck ac cou nts (A M S) cl ea r C he ck sc heme A l lo c ation r epor t s

External Department

Close job

C he ck W o r k M on i to ri n g Sys te m fo r o utst an d in g t ask s Sup p o sed to ta ke the se ove r but d o n’ t d ad to es 80 QH n ot ar d e e c Us em jo b th s ch t on se wi l pu d lia an le ga

Internal Department

Pass for checking

Resolve special cases Send reminder for special info (phone or letter)

Cu rre nt a nd Fu ture Stat e sho uld -take t i mes fo r eac h pha se of p ro c ess , M eas u re actua l

ay d el e at s n u se be do Ca uld e nd co

GMP Checker

Check disclosure requirements Unless Isle of Man Check for AVC Check members not over-funded Check employer contribution Check whether contracted out after April ‘97 (why check this every year?) Check for deferred retirement and note on reminder list

C ol le ct a nd ta ke d ownstai rs C o ll ect + sor t- (Offi ce se rvi ce ) > Su r re y S t (Ma in po stal ) R oya l mai l co ll ect 6. 30

Pri nt j o b ca rd Get fi le Fi ll i n jo b c ard

R eq u est adm i n pack s

R e n e w a ls - N e w

GMP Processor

r fo ck rs in be 4 Che em with R m ing at not < ar o if tir V re e ye . D on ly e EM to t on id ks en ov w pr 20 tirem re

Person A

C he ck mem be r li st (and ac coun ts : wh y?) f or co mp let en ess a nd re sol ve d i sc rep anc ies

Customer s l al rm d fo age t g Sen en st in em wal tir tir ne e re re re os in 12 s at r th ith th fo w mon

Receive statements

DISCO Team

GMP Checker

Bo ok i n j o b Ge t fi l e - up to da te ? Pri nt j ob c ar d - not u p t o d ate, not f ol lo we d co r rec tl y C ol lec t an d fi ll i n jo b c ar d

Pre-R enewal

OLD PROCESS 34 Steps Up to 28 mins

GMP Processor

Person B

Customer

NEW PROCESS 10 Steps Waste Removed (eg checking) = 4 mins per life = £160k

T im in g s

Proposed changes affecting other processes Add note to CBM job card to update card 270 on QH80 J

Ensure docs are recorded on QH80

Amend ELQ job card to ensure leaver is pended until renewal processed

J J

24

Business Capture Centre (document scanning) EXISTING BUSINESS Process Cell designed and implemented • 80% reduction in cycle time – 3.5 Hours to 30 Mins. • 45% reduction in space usage • 50% reduction in travel distance • 40% improvement in productivity… work previously done by 13.5 staff + o/t now done by 8. Improvement is actually much greater as work is finished in between 3 and 4 hours…i.e., finished by noon.

25

Organising For Success - 5 S

After 5 S !

26

Customer Service Improvement Examples: Pensions Backlog: GMP Renew als Cell

Reduced backlog

7000 6000 5000 4000 3000 2000 1000 0 17.9

24.9

1.10

8.10

15.10 22.10 29.10

CT, Information requests: GPP Designer

GMP: Improved productivity

5.11

29.10 22.10 Schemes Issued

15.10 8.10

Old 32 Hrs

1.10 24.9 17.9

0 5 10 15 20 25 30 35 40 45 50 55 60

New 5.5 hrs

27

Customer Service Improvement Examples • Contact Centre: – Incorrect information reduced from 14% of calls to 1% (reducing call-backs by 25-30,000/mo.) – Avoidable Calls: Chasing, incorrect routing, clarifying, incorrect handoffs, Total: 30,000/mo

• Commissions: Partial agency transfer CT reduced from avg of 88 days (max. of 239) to 2-3 days • New Business Life: Acceptance cycle time reduced from avg. of 45 days to 15 days…35% accepted same day

28

Customer Service Improvement Examples: Life 70 (db) Suspensions/Day Before 350

400

UCL=340.4

1 1

250 200

Mean=190.3

150 100 50

Date_1

1 UCL=309.0

300

200 Mean=168.2 100

222222

LCL=40.16

LCL=27.35 0

0 Subgroup

Individual Value

Individual Value

300

0

10 02/04/2004

20 20/04/2004

Subgroup

0

10

Date_1 02

4 /0

00 /2

20

4 / 20

0 /2 04

30

04 / 05

05

00 /2

40

4 / 19

0 /2 05

50

04 / 04

06

60

4 00 /2

After 29

The customers are feeling the difference “Well done YOU and well done NU. This is the kind of service we really value.”

“You are the best area we deal with by far”

“NU are consistently delivering very good service compared to other high volume providers” “Andrew and his team are seriously good at admin”

“I wish more areas of NU had you and your teams’ positive and commercially aware attitude.” “Your constant, continual and vigorous support is very much appreciated.”

“Another example of your team delivering the wow factor”

30

Our people are feeling the difference “We don’t have to walk miles to get a simple answer from Underwriting. They’re now sat next to us” New Business Administrator

“These NB Cells have actually improved morale as well as the process. Admin and Underwriting have a better understanding of each others work and it’s no longer a case of them and us. We work together now” NB Underwriter

“Our queues are so much lower than the non-Cell teams” New Business Manager

“We are running a pilot cell in transfers and you can really see the difference it makes to job satisfaction. We have done a rate change today and whilst the old team are running around like headless chckens the pilot team is an oasis of calm, and that’s down to our new process” Transfer Team Associate

“Under the old process each piece of paper travelled 130 feet. Now it moves no more than 10 feet. That’s a huge time saving” BCC Team Leader

“Emulation has helped us turn a 50 minute process into a 50 second process - automation makes it quicker and generates less mistakes. That’s good for me and the Customer” IPP Pensions Administrator

31

Conclusion

32

Key Solutions • We have identified that – Most of our processes can be organised around ‘cells’ which ensure the handling of work far more efficiently – Most of our processes include re-keying of data from one legacy system to another which we can eliminate through simple use of technology – we call this ‘emulation’

• We can quickly apply cells and emulation to many of processes – we do this through ‘mini-lean’

33

Cultural Changes • Gradual shift in cultural emphasis: • • • • •

Internal focus => Customer focus IT systems solutions => Business process solutions “Task” management => Process management Checking for Quality => Process improvement Isolated functions => Teamwork (e.g., Admins. + Underwriters) • “Can’t be done” => “Can be done” • Work force suppressed => Work force expressed • Micro-management => Process control

34

Key Learnings from 2004 • Rapid momentum can be created through combining Lean with Six Sigma • We have built a platform from which we can move forward to really change the customer experience • The ‘quick wins’ of Lean have tended to dominate – At times ‘cost reduction’ has obscured voice of the customer – We have found it difficult to gather good data for our dashboards in the rush for benefits

• Common themes such as cells and emulation can be leveraged • It is hard work – the only route to success is continued, determined leadership 35