CUP Corporation

The Management Control Process – Performance Measurement

Nataraj S F043Ashutosh Singh F104

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

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

Recent trends in the industry

Increasing

CompetitionIncreasing

Competition Increasing Client Price Sensitivity

Increasing Client Price Sensitivity

Shorter ContractsShorter

Contracts

More cancellation of existing contracts

More cancellation of existing contracts

The Issue: Customer Loyalty

• Lapse Rate – Customer cancellations compared to total contracts

• Lapse rate reached DM 850M in 1995 – 10% of total premium revenue

• Problem was customer loyalty cut across product lines – a Corporate problem

Virtuous Cycle

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

Issues with Existing Decentralized Customer Care

1

2

3

New Solution : Integrated Customer Care Center

Customer Care Centre (CCC)

One telephone number for all problems

One telephone number for all problems

Staffed 24 X 7Staffed 24 X 7

90% of the time, problems addressed on first callRest 10% on follow-up call

90% of the time, problems addressed on first callRest 10% on follow-up call

Function: Central Services Profit Center

Function: Central Services Profit Center

Concerns regarding Integrated Customer Care Center

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

Measures (2/4)

Customer Oriented Measures

Measures (3/4)

Internal Business Measures

Measures (4/4)

Innovation and learning related measures

Balanced Scorecard (1/2)

Source: dbkay Associates

Balanced Scorecard (2/2)

Key Success Factors

Measures “What”

Measurements How

Reduce Lapse Rate

Efficient

Cost Effective

Customer Satisfaction

Lapse Rate Defection rate

Calls solved on first try

Call rate charged

Customers pleased with call center

•Lapse Rate trend•Defections by product line•Awareness of call center

•% of calls solved first time•No. of repeat calls•No. of transfers

•Average length of call•No. of rings until pick up

•CC customer satisfaction•CC mentioned in general survey•Customer rating of CC staff•Rep satisfaction with CC

Thank You