Taking a Lean perspective to insurance

Let’s take a look at the challenges faced by the insurance industry. Recently I sat down with our President, Brad Schmidt, and we discussed the challenges he had in implementing Lean in the head office of a major insurer in Japan.

We gained some real insights during this multi-year engagement

Insights that strengthened our ability to effect a positive people change using Lean and Kaizen Thinking. The conversation was eye-opening for me, so here is what I learned about the insurance industry from New Product Development, through Sales, to New Business Acceptance.

So firstly, there’s product development.

In insurance, product development often takes a long time. Governments have to ‘okay’ policy, and many other players are involved. There are the people that do the calculations, there are the people that have to make sure everything’s legal, and the people that ensure a digital IT solution exists for your processes. Normally, from a Lean point of view, what we like to do is put them all in the same room, make sure the schedule is visible, and see right away who’s behind and who’s ahead. But a lot of the time that’s not done.

Maybe too many projects are being worked on at one time. Or due to lack of staff, product development is held up. If a product isn’t developed early enough, your competitor will develop a similar product and take the potential work and sales away. That’s a really big deal. A lot of these issues can be addressed simply by making things visual, putting all the right people in the same room together, making a flow line, if you will, and things will fall into place. Faster to market is a big deal in the insurance industry. After product development, you move to sales.

At this stage, there’s a lot of administration and compliance issues that are time and again not properly addressed. You’d be surprised- there are so many problems with compliance. People say the wrong thing or do something illegal, creating a problem. All of these compliance issues have to be investigated. Judgments must be made. Without swift judgments being made, the compliance part of the business becomes very, very backlogged. You potentially have these bad behaviors persisting, leading to the likelihood of government involvement, drawing further attention to the need for compliance.

Then there are sales-type issues

Basically, if you have a good product and a good sales force in the insurance industry, that’s huge. Insurance teams are quite good at sales. They’ll have created videos demonstrating how to sell and whatnot. So we don’t really need to help them get in there, visual management and standard work  are alive and kicking. But who has the best method? Will they teach it? This is an issue.

A lot of the time in insurance, everybody’s got their own targets or goals. They don’t want to share as they are actually competing against each other. In sales, my coworker is my rival. In addition to this, a good sales force results in a lot of extra administrative tasks. These are the challenges to identify and address. Lean and Kaizen often try to break down these issues to serve the greater good of the company – to create overall net gains in sales instead of one team outperforming at the expense of others.

So your sales team drives future earnings. That’s a huge deal. People are very, very concerned about sales. And they’re very concerned about a new product, which helps the sales. Then they’re also particularly concerned with persistency- will the customer be retained? If your product is inferior people will quit and buy something else. The customer shopped around and got the best deal this year. What’s the best deal next year? Lean and Kaizen focus on what the customer wants.  Helping Product Development and Sales work together with the customer in mind is paramount.

Finally, new business acceptance

The assessment of potential new business must take place. We need to protect ourselves against liabilities. If you don’t do a good job here, you take on more risk as a company. Effective assessment of new business is quite important and yet most companies will just let it slide. They just get the sale and worry about it later. Often the parts of the business involved in generating new business are automated, which you want in order to speed up new business acceptance. But not at the expense of effective identification of risks to your business. In this area, short cycle time (through automation, for example) is so important, it creates a good customer experience and is efficient internally – but at what risk? And how does the company use Lean and Kaizen best practices to mitigate this risk?

Brad and I discussed that at the end of the day insurance companies can face the same challenges as many industries – the bulk of Muda occurs between departments, and Lean and Kaizen culture can be used to eliminate this Muda quickly, and get some good and convincing positive changes to occur. From there in-depth work on constraints in the value stream within departments can be more effective and faster.

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Respect,

Daniel.