Lean & Six Sigma in Financial Services: Case Study
Norwich Union LifePresented to the IQPC Six Sigma Summit
January, 2005by
Matt FahyDirector of Transformation
Norwich Union LifeAn AVIVA Company
Harvey DershinManaging Director, Europe & Asia
Aon Management ConsultingRath & Strong
2
Agenda
• Aviva / NUL
• Our challenge
• Approach
• Achievements
• Conclusion
3
Aviva
4
•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%
Aviva
5
NUL Business Environment
• Products– Pensions– Life Insurance– Mortgages
• Customers– IFAs (brokers)– Individuals– Corporations
• Market– Competitive– Regulated– Revenue constrained
6
NUL Operations
• Approximately 5,500 staff in seven locations
Glasgow
Newcastle
York
Sheffield
Stevenage
BristolNorwich
7
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
8
Our challenge
9
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
10
Strategic AmbitionWe 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.
11
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
12
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)
13
Approach
14
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
15
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
16
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
17
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
18
Lean Approach
Kaizen
Mgmt Workshop 1
Mgmt Workshop 2
Current State Value Stream MapsKey Metrics
Future State Value Stream Maps, etc
Kaizen
DMAIC
DMAIC
Just Do It
Just Do It
DFSS
Just Do It
30 days
30 days
30 days
1-2 years
10 weeks
10 weeks
6 months
6 months
Data Collection
19
Accelerated Benefits Roll OutItem 1 2 3 4 5 6 7 8 9 10 11 12
1Management Workshop 1 X
2 Collect Data X
3Management Workshop 2 X
4 Lean Team Trng X5 Pre Event Prep X6 Event Part 1 X7 Data Collection X8 Event Part 2 X
9Post Event Mgmt X
10 Benefit Sign off X11 Benefit Delivery X X12 Corp Leveraging
13Leveraging Sign Off
14Continued Benefit delivery
15Leadership Audit & Review
Week
20
Cascading Lean Rollout
Target Workstream J F M A M J J A S O N DWorkstream 1Workstream 2Workstream 3Workstream 4Workstream 5Workstream 6Workstream 7Workstream 8Workstream 9Workstream 10
Lean activities Implementation
Month
21
Green Belt Training Format
Activity1 2 3 4 5 6 7 8 9 10
Training 3-days 3-days 3-days 3-days
Exam X
Coaching X X X X X X X X
Project Reviews X X X
Pilot/Certification X X X
Month
22
Achievements –
One Year Later
23
12750 EDI PA425000 Paper PA No.reminders every 2 weeksPaper 1585 per day 0 52%EDI 49 per day 1 17%
2 18%3 11%4 2%
5706 Items per day1 2 3 4 5 6 7 8 Caroline 9 10 11 Ian 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Staff 5 7 21 1 3 7 34 387 354 354 387 387 12 98 300 300 298 300 127 127 300 300 300 387 60 300 387 387 387 387 260 300Staff Hrs 2 1 1 0.66 0.5 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7Errors % 5% 2%Rework % some some 30 see above 0 ~1% 0 3% xx% 15%Volumes/day 5706 5706 5706 1625 5706 1396 5706 1585 470 354 326 727 2000 1180 792 500 1131 464 700 1109 50 24 1165 727 260 1506 1537 1165 328 500Std Time 0.03 0.33 1 40 2 secs 0.5 0.75 12.36 5 7.9 2.69 3 0.083 4 5 5 4 0.59 26.25 2 5 2 4.9 7.5 1.61 5 16.13 minsTotal FTE 11 11 11 11 11 7 34 387 354 354 387 387 97 98 300 300 298 300 127 127 387 387 300 387 84.5 387 387 387 387 387 387 300Time Required HRS 2.85 31.70 95.10 0.67 0.03 11.63 71.33 326.51 39.17 46.61 14.62 36.35 2.78 78.67 66.00 41.67 75.40 4.56 306.25 36.97 4.17 0.80 95.14 0.00 32.50 40.41 0.00 0.00 0.00 0.00 41.67 1503.54Time Available HRS 10 7 21 0.66 1.5 49 238 2709 2478 2478 2709 2709 84 686 2100 2100 2086 2100 889 889 2100 2100 2100 2709 420 2100 2709 2709 2709 2709 1820 48529.16
354
MINUTES 40 24 hrs LAPSE 135 65 90 20 60 1200 5760 2880 2880 20160 7200 1440 2880 4320 10080 24480 20160 70560 177250.00 123VALUE ADD 0.03 57 1 0.03 0.5 0.75 12 5 7.9 2.69 3 0.08 4 5 2 4 0.59 26.25 2 4.9 7.5 5 16.13 167.36 2.79CORE ADDED VALUE 0.03 0.3 1 0.03 0.75 12.36 1.48 1.76 1.38 0.08 2.98 2.50 2 2.85 0.59 11.59 2 0.16 0.03 3.60 1.23 1.61 50.32 0.84
Figures shown are average per day Process Time = 79 mins CT = 44 days Lead Time =
% for lots of time
Sue Hendry said she had this info preciselyPost items 4121 per day
2880
Customer'IFA'Partner,Internal Seller
Open Post & sort
Admin Team Sort
Batch Props Send On Mini Bus
Scan Prop Work Allocation 2
CustomerLife Protection Policy Application;Mediacal Reports, Reissues,Direct DebitsMLALatest estimate from Norwich BCC is that NB post is 2.6 times app flow.
York example. Batches 500. 0600 - 1000
Directed to NB teamsRerouted 10%?
Bus takes sacks of mail to Dunnington at 10.00 daily
Part of larger operation
Allotment to CSR's2pm
12.18 per day. 11.89 hours
N B PROTECTION
Info Transfer
Data capture, MLA, Missing Information, etc
Missing info
Request missing info
NTU's
Cancelling off unwanted props
MLA
Required chase and limited # of deals
Allocation to U/W
Intitial Assessment
What is required, some will be accepted at this point
Receipt It
Reports come in through scanning channel
Fee Payment
GPR's only. MM's will be done in bulk
Work Allocation 1Acceptance of work to team- Glasgow only
Request Info
GPR,s, Fin RepsOthers go direct.Role to prod letter and attach dec
Alastair Gardner:
Alastair Gardner:done by CSR's We have detail on split of reports. MM are done automatically.
Alastair Gardner:Done by CSR's
Assess Evidence
CMO/Reassur requests add delay but very low level??
Quality Check
Decline Process
Issue Decision
Accepts would by pass this. Declines or defer would be done by admin
Make Decision
RewindsRework: missing info 30% (consumer 30%)Reallocations if illRe Scans (2 -3 %)
Faxes, Telephone calls, e mails
Acceptance Letter
Manual for consumer.260 per day in York. Rest auto
MLA Cancellation Letter
System generated 99%
Start Date Policy Issue
System generated 99% of time
Back to missing info 15%
Alastair Gardner:Check too late in process (if needed at all) needs to go back through whole process
Alastair Gardner:Too many contacts with customer from Admin - U/WCan't read imagesMissing info from customer;
Issue DUH
Declaration of Unimpaired Health
NTU Recourse from IFA
Ageing Balance
Non payment of 1st premium. Needs to be collected
Re Issues
sub process time value important;4 days to action and then 1 - 7 days to dearchive, get docs into team up to 5 daysNeed policy back from client up to 1 month; May take 90 days for customer to advise.Commission issues
Reminders (several)Chasing missing info etc
Gillian Rhodes:acceptance delay doc
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
1585 + 18,000 tasks
Glasgow only 1038 but daily is
578 dailybut WIP is?
1765 312826973003821176 12053 1187 120004661 2908
Alastair:U/W Reminders
Alastair:1585*97% nwxt cell based on
U/W Reminder
System generated plus ad hoc
Before - LEAN
After - LEAN
1 2 3 4 5 6 7 8
Open Post & sort
Admin Team Sort
Batch Props Index Ageing Balance
Non payment of 1st premium. Needs to be
collected
Chase
Chasing missing info etc
Batch CELLRegister & Underwrite
CELLUnderwrite & Document
NTU'sReceipts
FeesMLA
Cancellation
AssessDirect Debits
Acceptance Letters
Chase
NTU'SStart DatesDocs etc
ScanLook Up Activity
RemindersQ-ChecksNTU'sReceiptsMLA
RequestAssessDirect DebitsAcceptance Letters
Reduced number of steps from 32 to 10,25% increase in productivity,50-70% reduction in avg. cycle time.
New Business Life Example
24
Discontinuance of Schemes
New DISCO process has made 70% improvement in CTReduce staff by 66% (18 to 6)= £204k
DC1 DC2 DC3 DC4
Admin DISCO
OLD PROCESS53 Steps11+ months
NEW PROCESS28 Steps3 months + 1 week
11+ months
3 months +1 week
Renewals
Pre
-Ren
ewal
GMP Processor GMP Checker InternalDepartment
ExternalDepartmentCustomer
Book i n jobGe t fi le - up to date?
Print jobcar d - not up to date,not fol lowe d correctly
Col lect an d fi ll in jo b car d
Check member list(and accoun ts : wh y?)for comp leten ess a ndresolve d iscrep anc ies
Pr int and s endsched ule o f members
Bow tho rpe
Photoco py sch edulea nd let ter, pas s for
check in g
Corr ec t any e rro rsSea l and plac e for
mail i ngF il e cop ies , close job
R epeat and checkprocess so far
Col le ct and taked ownstai rs
Co llect + sor t- (Offi cese rvice) > Surrey S t
(Main po stal )Roya l mai l co llect 6.30
Rece iv e : Updatesa lari es and inform of
ch ange sIFA and t ru stees Re cei ve co mpleted
pac k and ad d taskco de + case
r ece ip t+a lloc ateDi fferent metho ds
be twe en teams
Pri nt job ca rdGet fi le
Fi ll in jo b card
Ti dy the fi l eReq uest admin packs
Ti dy admi n pack sSo rt anything>1 yr and
send for fichei ng(r emove s taple s and
co mplete for m)
Fin d and bri ng ad minpacks
Che ck Wor kMoni toring Sys tem for
outstand ing task sSupp osed to take
these over but d on’ t
Ch eck ac cou nts (AMS)clear
Check sc hemeAl location r epor ts
C ollate In ser ts (pr e-pr inted schedu le a nd
c over let ter) (Te mpl atel ong win ded of ten not
used)
Co mp lete sp ecial c aselist
Che ck if li fe cove rrequired
I f ye s, fo l lo wpro cedu re
(could be separatepr ocess)
Check equ al isa tion ofpension ages
Check author isedsig nature
Ch eck sc hed uleupda te
Chec k whether SORPre por t required
Set u p spec ial caseslist and in div id ual
memb er che ckl ist a ndren ewal reminder ki t(dupl icated on jo b
c ard)_Book in N/ E’s
Au tom ail ful l
pre- rene wal
p ack incl i
n ser ts
M
In vest ig ate
t emp late for
salari es inf o
(n ew er schem es)
LF lexib le Al lo cat ion/ Pul l of wor kwithin teams - fo rtn ight ly r oll i ng
pl ans
Cu rrent and Future Statesho uld -take t imes fo r eac hpha se of p rocess, Measure
actua lKee
p cop y of
aut hor ised
sig natories at
f ront o
f file -
keep up dated
Cau ses d el ay -
could be don e at
e nd
Ch eck with legal
wh et her trus te e
sign at ure al
way s
re quired
Do n ew salary
le ve ls + trailers
+ premium
calculati ons as
pa rt of R
1
Have lif e c ove r
as separa te task,
t o simplify R1
job card
Get rid of
d uplication o n
R1 j ob card
J ust use
chec kl ist s
Use QH 80 to add
s ch eme n otes -
put on job c ard
and liase with
le gal
O ffice services
f ic he ad min
pac ks
O nl y r equ es t
th em as
e xc ept ion
Book in N/ E’s
Renewals (continued)
Pers
on B
Pers
on A
Per
son
A
ExternalDepartmentInternal
DepartmentGMP CheckerGMP ProcessorCustomer
Check disclosurerequirements
Unless Isle of ManCheck for AVC
Check members notover-funded
Check employercontribution
Check whethercontracted out after
April ‘97(why check this every
year?)Check for deferred
retirement and note onreminder list
Pass for checkingCheck everything doneand add any additions
to reminders listResolve special casesSend reminder for
special info (phone orletter)
Close job
Add new salary details/AVC trailer
Calculate newpremium levels
excel spreadsheet Check
Check agent detailsKey in new premiums
for gen1 systemovernight cycle
Next day -Check updatesRequest benefit
statementsClose job and link
Print and sendstatementsBowthorpe
Check statements vsschedule
Prepare covering letterPass for checking Check
Tab statementsSend to IFA/trusteesFile documents/fiche
Receive statements
Check fo
r
members
retiring w
ithin
one year a
t R4
only. Do not
provide E
MV if <
20 w
ks to
retire
ment
Send al
l
retire
ment form
s
at renew
al sta
ge
for those
retiri
ng
within 12
months
Reques
t
statem
ents in
same c
ycle
as
gen1
process
M
Investig
ate
automatic
production of
post-95
regular
AVC’s
J
Add note to CBMjob card to
update card 270on QH80
J
Ensure docs arerecorded on
QH80
J
Amend ELQ jobcard to ensure
leaver is pendeduntil renewalprocessed
J
Proposed changes affecting other processes
Renewals Yearly statements
OLD PROCESS34 StepsUp to 28 mins
DIS
CO
Tea
m
R e n e w a l s - N e w P r o c e s s
G M P P r o c e s s o rA
G M P C h e c k e rB
I n t e r n a lD e p a r t m e n t T i m i n g sC u s t o m e r
P r e p a r e & i s s u e p r e -r e n e w a l s p a c k
1
C a l c u l a t e n e wp r e m i u m s
5
P r e - r e n e w a l p a c kc o m p l e t e d w i t h
c h a n g e s2
I s s u e S t a t e m e n t8
I n p u t n e w s a l a r yd e t a i l s & k e y n e w
p r e m i u m s6
P i l o t1 s c h e d u l e , 6 8m e m b e r s6 0 m i n s
V e t S c h e m e4
C h e c k7
I n t e r n a l h o u s e - k e e p i n g9
O f f i c e s e r v i c e f i c h e1 0
P r e m i u m r e c o r d3
P i l o t
6 0 m i n s
P i l o t9 0 m i n s
P i l o t2 0 m i n s
T o t a l s h o u l d t a k e t i m ef o r 6 8 m e m b e r ss c h e m e ~ 1 7 h o u r s
P i l o t r e s u l t s= 3 h r s 5 0 m i n s( 3 . 4 m i n s / l i f e )
= 7 6 % i m p r o v e m e n t
S a v i n g s7 . 5 F T E = £ 1 2 7 kb a s e d o n 1 1 6 k l i f e s
NEW PROCESS10 StepsWaste Removed (eg checking) = 4 mins per life = £160k
Pensions Examples
25
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.
26
Organising For Success - 5 S
After 5 S !
27
Customer Service Improvement Examples: Pensions
Backlog: GMP Renew als Cell
01000200030004000500060007000
17.9 24.9 1.10 8.10 15.10 22.10 29.10 5.11
0 5 10 15 20 25 30 35 40 45 50 55 60
SchemesIssued
29.1022.1015.108.101.1024.917.9
Reduced backlog
GMP: Improved productivity
CT, Information requests: GPP Designer
Old32 Hrs
New5.5 hrs
28
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
29
Customer Service Improvement Examples:
Life 70 (db) Suspensions/Day
605040302010Subgroup 0
400
300
200
100
0In
divi
dual
Val
ue
04/06
/2004
19/05/2
004
05/05
/2004
20/04/2
004
02/04/20
04Date_1
11
1
222222
Mean=168.2
UCL=309.0
LCL=27.35
0Subgroup 10 20
0
50
100
150
200
250
300
350
Indi
vidu
al V
alue
02/04/2004 20/04/2004Date_1
Mean=190.3
UCL=340.4
LCL=40.16
Before
After
30
The customers are feeling the difference
“Another example of your team
delivering the wow factor”
“Well done YOU and well done NU. This is
the kind of service we really value.”
“I wish more areas of NU had“I wish more areas of NU hadyou and your teams’ positive
and commercially awareattitude.”
“You are the best area we deal with
by far”
“Andrew and his team are seriously
good at admin”
“NU are consistently delivering very
good service compared to other high volume
providers”
“Your constant, continual and vigorous support
is very much appreciated.”
31
“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
“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
“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“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
Our people are feeling the difference
32
Conclusion
33
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’
34
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
35
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