Building a Culture of Continuous Improvement in Insurance
After years of often intense change, insurers in North America are facing a new set of challenges that their previous investments may not be able to solve. They need more flexible technology—and tighter cost controls. They need higher performance from their workforce—and more employee engagement. They need to retain current talent—and acquire entirely new capabilities in data analysis, mobile technologies and social media. And they need to protect their current competitive advantages, while rethinking business models and launching new ideas.
Each of these challenges is essentially a question of capacity. In working with some of the world’s largest insurers, we have found that the most reliable and sustainable forms of capacity increases come not from quick cost or performance initiatives, or even from redesigning business processes. Instead, capacity grows as a result of improvements that flow from a culture that continually assesses what clients value, how the institution can provide that value, and what changes it must undertake to make it all come together. Getting to that point is not easy. But it is possible, as shown by the experiences of several leading institutions. These companies made targeted, sustained investments that improved how they serve their customers, develop their people, find new ways to work, and translate strategy into tangible outcomes. By transforming themselves in all of these dimensions at once, these organizations have achieved both short- and longterm success: increasing efficiency by twenty to thirty percent in the first two-to-three years, and continuing to improve by three to five percent annually thereafter. The increased capacity allowed them to enhance the customer experience, increase employee engagement, and improve collaboration among businesses and functions—results that can be worth two to three times the value of the cost improvements alone.
Three years into its lean management transformation, one of the largest U.S. life insurers is seeing lasting impact. Increases of 20 to 30 percent in productivity and return on equity are only part of a larger story. Across a wide range of functions and business lines, cycle times are between 15 and 20 percent faster. Error rates have fallen by over 90 percent. And customer satisfaction has risen by 15 to 20 percent.
Beyond Improvement Initiatives
Many insurers have undertaken transformation efforts in the past—enabling dramatic reductions in claim times and cost per transaction, for example. But these carriers often discovered that after an initial breakthrough—even one as noteworthy as processing claims in 15 minutes rather than three days—performance would plateau. At worst, many of the hard-won gains eroded. In most cases, the benefits proved fleeting because the changes solved an immediate problem, but did not provide the ability to identify and solve similar problems in the future. Nor did the changes provide leaders and managers with the extra time and capacity they need to guide a constant process of evolution. In short, the solutions addressed the symptoms of performance issues, but not their underlying causes.
Organizations need the capacity to meet challenges as they arise: new regulations, capital-market volatility, aggressive pricing practices, or novel products and channels. The ability to do so rests on four disciplines that together form the lean management system, supported by a cohesive set of tools and management methods that nurture a culture of continuous improvement.