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.

Lean & Six Sigma in Financial Services: Case Study

Norwich Union LifePresented to the IQPC Six Sigma Summit

January, 2005by

Matt Fahy

Director of Transformation

Norwich Union Life

An AVIVA Company

Harvey Dershin

Managing Director, Europe & Asia

Aon Management Consulting

Rath & 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

Bristol

Norwich

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 Out

Item 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:1hr + 30 mins

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 the theorey that 20% NTU but when do NTU 's occur

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

Life Protection Policy Application;Medical Reports, Reissues,Direct DebitsMLALatest estimate from Norwich BCC is that NB post is 2.6 times app flow.

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 Dates

Docs 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-Re

newal

GMP Processor GMP CheckerInternal

Department

ExternalDepartmentCustomer

Book in jobGet file - up to date?

Print jobcard - not up to date,not followed correctly

Collect and fill in job card

Check member list(and accounts : why?)for completeness andresolve discrepancies

Print and sendschedule of members

Bowthorpe

Photocopy scheduleand letter, pass for

checking

Correct any errorsSeal and place for

mailingFile copies, close job

Repeat and checkprocess so far

Collect and takedownstairs

Collect + sort- (Officeservice) > Surrey St

(Main postal)Royal mail collect 6.30

Receive : Updatesalaries and inform of

changesIFA and trustees Receive completed

pack and add taskcode + case

receipt+allocateDifferent methods

between teams

Print job cardGet file

Fill in job card

Tidy the fileRequest admin packs

Tidy admin packsSort anything>1 yr and

send for ficheing(remove staples and

complete form)

Find and bring adminpacks

Check WorkMonitoring System for

outstanding tasksSupposed to take

these over but don’t

Check accounts (AMS)clear

Check schemeAllocation reports

Collate Inserts (pre-printed schedule and

cover letter) (Templatelong winded often not

used)

Complete special caselist

Check if life coverrequired

If yes, followprocedure

(could be separateprocess)

Check equalisation ofpension ages

Check authorisedsignature

Check scheduleupdate

Check whether SORPreport required

Set up special caseslist and individual

member checklist andrenewal reminder kit

(duplicated on jobcard)_

Book in N/E’s

Flexible Allocation/Pull of workwithin teams - fortnightly rolling

plans

Current and Future Stateshould-take times for eachphase of process, Measure

actual

Book in N/E’s

Renewals Yearly statements

OLD PROCESS34 StepsUp to 28 mins

DISCO Tea

m

Renewals - New Process

GMP ProcessorA

GMP CheckerB

InternalDepartment

TimingsCustomer

Prepare & issue pre-renewals pack

1

Calculate newpremiums

5

Pre-renewal packcompleted with

changes2

Issue Statement8

Input new salarydetails & key new

premiums6

Pilot1 schedule, 68members60 mins

Vet Scheme4

Check7

Internal house-keeping9

Office service fiche10

Premium record3

Pilot

60 mins

Pilot90 mins

Pilot20 mins

Total should take timefor 68 membersscheme ~ 17hours

Pilot results= 3hrs 50 mins(3.4 mins/life)

= 76% improvement

Savings7.5 FTE = £127kbased on 116k lifes

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

29.10

22.10

15.10

8.10

1.10

24.9

17.9

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

Date_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”

“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.”

“Well done YOU and well done NU. This is

the kind of service we really value.”

“I wish more areas of NU hadyou and your teams’ positive

and commercially awareattitude.”

“I wish more areas of NU hadyou and your teams’ positive

and commercially awareattitude.”

“You are the best area we deal with

by far”

“You are the best area we deal with

by far”

“Andrew and his team are seriously

good at admin”

“Andrew and his team are seriously

good at admin”

“NU are consistently delivering very

good service compared to other high volume

providers”

“NU are consistently delivering very

good service compared to other high volume

providers”

“Your constant, continual and vigorous support

is very much appreciated.”

“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

“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

“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

“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

“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

“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

“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