Making the Case for Quality

India-based Life Insurer Improves Customer Retention Through Six Sigma, Quality Tools

• Recognizing their company’s customer retention rate dipped below acceptable levels, Max Life Insurance Company leaders initiated the quality improvement project, Unnati, to reclaim deeply lapsed policyholders.

• Using Six Sigma and quality tools, team members identified more than one dozen possible solutions for sales agents to improve relationships with customers and recoup their business.

• The improvement project helped put Max Life on the path to nearly tripling its retention rate while generating $8.6 million in additional revenue.

• Project Unnati was named a finalist in ASQ’s International Team Excellence Award Process.

At a Glance . . .

When an organization’s vision and purpose is publicized as being the most admired corporation for service excellence by local citizens, maintaining a high customer retention rate must be a priority. While attracting new business is a critical component to long-term success, organizations will not reach maximum profitability when failing to retain large swathes of its own customers.

In the insurance industry, some customer policies will inevitably lapse, or expire, without payment. If sales agents lack the requisite drive to recover the business from these individuals, the organization’s retention rate will suffer. So when agents for one India-based life insurance company became more focused on attracting new customers than keeping old ones—retaining less than 1 percent of all lapsed policyholders—company leaders initiated a year-long quality project to identify why customers were not renewing, and how best to regain their business.

Achieving quality success from such a project would mean gaining millions of dollars in what would have been lost revenue.

About Max Life Insurance Co. Ltd.

Founded in 2000 and headquartered in New Delhi, India, Max Life Insurance Co. Ltd. (Max Life) is the largest and fastest growing nonbank-owned private life insurer in India. With a capital base of $3.9 billion, Max Life manages more than $37.9 billion in assets. Max Life is a joint venture between Max India Limited and Mitsui Sumitomo Insurance Co. Ltd., and was certified to both ISO 9001:2000 and ISO 9001:2008.

Organizational Growth Highlights New Challenge

Like all young organizations, Max Life’s early years focused on identifying and attracting new busi-ness. Money from new customers dominated the company’s revenue stream for eight years, always growing from the previous year, until the trend shifted in 2009 and renewal income became the pri-mary source of revenue. Renewals increased from 45 percent of annual revenues in 2008 to 56 percent in 2009, followed by 67 percent and 73 percent in 2010 and 2011, respectively.

A life insurance policy is a long-term contract between an insurance company and the insured indi-vidual (policyholder). The payment of premium toward a regular policy—which can be on a payment schedule of monthly, quarterly, semi-annually, or annually—is spread over the premium paying term of the policy. Max Life provides policyholders grace periods of 15 to 30 days on their due dates, depend-ing on the payment schedule. If at the end of the grace period a premium is still not paid, the insurance policy lapses effective as of the first unpaid premium (FUP). Customers can revive lapsed policies,

by Adam Wise

May 2014

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Of the six strategic pillars, “Improve persistency” was the one most directly connected to this improvement initiative. In simple terms, Max Life defines persistency as nothing more than cus-tomer retention. In a perfect world, for every 100 policies being sold, Max Life should retain all 100 policyholders by the end of that year. But in reality, the company was only retaining 70 out of every 100 customers.

Jumpstarting the Customer Recovery Process

When Project Unnati commenced in early October 2010, Max Life identified more than 1.5 million individuals whose poli-cies had lapsed, and thus were at risk of being lost as customers. Such a large number of deeply lapsed policies carried a potential revenue loss exceeding $50 million.

The team first created a charter, which specifically outlined a project goal of increasing the average collection rate of active agents from 0.90 percent, which company leaders admitted was very low, to 1.50 percent.

The team used three months of data to arrive at a project CTQ tree. Using SIPOC (suppliers, inputs, processes, outputs, and customers), a top-down chart, and a functional deployment chart, team members identified in detail the suppliers, customers, input, output, and involvement of cross-functional units to understand the entire process flow.

Another important task for the Executive Committee (members identified below) and quality leadership within Max Life was to pinpoint the improvement project’s goals. The following were the four objectives:

• Improve collection percentage• Sustain conservation ratio• Increase customer satisfaction• Increase distributor satisfaction

Next, leaders charted the potential stakeholders who could be affected by changes made to improve customer retention, and came up with the following list:

• Executive Committee (chief executive officer, chief financial officer, and operations head)

• Renewals and retention (vice president of renewals)• Distribution partners (active agents and sales managers)• Policyholder• Quality and business excellence (senior manager,

quality leader, and head of quality)

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though the company reserves the right to accept or reject the revival, or revive the policy on modified terms. Max Life fol-lows a process of revival that depends on the period elapsed since the date of FUP, and also based on the health conditions of the life assured at the time of revival.

Despite the fact that renewing customers comprised a major por-tion of the company’s revenue stream, Max Life leaders still saw millions of dollars being squandered every year to lapsed policies.

Identifying Opportunities for Improvement

As part of Max Life’s ongoing commitment to excellence, lead-ers undertake an annual exercise to identify organizational improvement opportunities. Factors used to identify the improve-ment opportunities include customer and distributor satisfaction survey data and Max Life’s six strategic pillars (as seen below).

Max Life’s Six Strategic Pillars

1. Transform current agency to “Platinum Standard”2. Build a robust multichannel distribution architecture3. Realign product strategy4. Improve persistency5. Focus on cost management6. Shape the regulatory agenda

Multiple quality tools were used during the project identification process to help determine the greatest organizational need with best possible outcomes, including process mapping, SWOT anal-ysis, and critical to quality (CTQ) trees. Using Pareto analysis, company leaders zeroed in on lapse recovery, which achieved an impact evaluation of 71 points (as seen in Figure 1), as the high-est priority improvement project opportunity. Leaders called it Project Unnati, an Indian term meaning progress.

Figure 1 — Max Life Pareto of potential improvement projects

Coun

t

Perc

ent

Pareto chart of potential project

Laps

e rec

overy

E2E T

AT

Mission

clea

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Strea

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POS

GO inpu

t qua

lity

Servi

ce to

sales

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yee e

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emen

t

Axis lin

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Quality

of re

solut

ion

Surre

nder

reten

tion

Other

100

80

60

40

20

0

400

300

200

100

0

Potentialproject

The Max Life Insurance sales model is “agency-based,” wherein the company hires agents on a commission basis. Agents are initially classified as Active Agents; however, agents who have stopped sourcing business for any reason, health or otherwise, are termed as Inactive Agents and are not eligible for any further commissions.

Difference Between Active Agent and Inactive Agent

Count 71 51 50 49 45 35 34 23 23 21 14 Percent 17.1 12.3 12.0 11.8 10.8 8.4 8.2 5.5 5.5 5.0 3.4 Cum % 17.1 29.3 41.3 53.1 63.9 72.4 80.5 86.1 91.6 96.6 100

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included data quality, low agent engagement, poor incentives, and service issues. Subject matter experts and Max Life customers provided stakeholder feedback during the root cause identifica-tion stage. The team received the feedback through focus group meetings, customer call listening analysis, and complaint trends.

About 500 customers were sampled, with the individuals sharing a variety of reasons why their policies had lapsed, including:

• “I am not satisfied with the product sold to me.”• “My agent has not got in touch with me after I bought the policy.”• “Your process is too complicated. I don’t want to pay for

medicals.”

Project team members went back to the drawing board using quality tools like Pareto diagrams and failure modes and effects analysis to whittle down the possible root causes. The team paired down the lengthy list to seven final root causes with the help of cause and effect matrix, as seen in Figure 3.

By brainstorming and benchmarking, which included site vis-its to other organizations within the industry, team members generated 23 possible solutions to the seven root causes (see Table 1 on p. 4). The team, as with all quality improvement projects within Max Life, used four selection criteria to trim the solutions list: (i) CTQ impact and (ii) Cost impact, both of which were mandatory, and (iii) Time and (iv) Ease, both of which were optional criteria. If a solution failed to meet either

Project participants used an impact matrix to rate the positive and negative ramifications each stakeholder group could experi-ence as a result of this project. Members detected a very high positive impact on the Executive Committee and renewals head due to improvements within the company’s organizational goals, but a negative high impact was detected for the company’s dis-tribution partners due to a fear of change in the current process.

To understand why the company was struggling with its cus-tomer retention rate, the Six Sigma process improvement method was initiated, first to analyze and baseline the project, and then to identify possible root causes.

Using a fishbone diagram (see Figure 2), the team brainstormed 57 possible root causes for the high-lapse data. Potential causes

Figure 2 — Fishbone diagram for potential root causes

Cohort

Zone

Persistency

Product

No �agging

Data

quality

Noncontractable

base

Dynamic changes in

allocation logic

Huge wrong

Party contract

Mis-selling

Low fund

value

No funds

Mutual funds

Obligation sales

No R&R

Less visibility

Poor incentive

Service issu

es

No

targets

Cross-

selling

Mis-guidanceIncorrect revivalprocess updatePoor data contactabilityNo MIS/no awardsNot aware ofrequirement

Better products/

NO SPOCs formanaging agentsDelay in touch

Mis-guidanceNO agent/GO meetDisinterest of agentNo extra commissionPoor data qualityof agentNo targets to agents

Selling newpoliciesUpdate own/DNC numberAgent denydirect contact

Issue yearPoor serviceby agent

Agent self-sourcing policyNo action on agent own policy

High allocation chargeIneffective scripts

Lowcollection

Policy holder data Business partner

CRE

Single and

multiple policies

Low agentengagement

Agent type

Premium

Disposition codes

Geography

Policy tenure

Distribution partners

People Process

Figure 3 — Seven final root causes

Agent type

Premiumamount

Dispositioncodes

Diversi�edgeography

Low agentengagement

Single andmultiple policy

Policy tenure

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of the mandatory criteria, it would be immedi-ately discarded.

The improvement team scored each solution against the criteria, on a scale of one to 10, to ensure only viable solutions were chosen. Fifteen solutions made the final cut. Solutions that scored higher than 550 on the Solution Selection Priority Number (SSPN) scale were selected for implementation.

In Table 2, each of the final solutions is briefly explained. For example, solution 6.5 (agent engage-ment program) led to the creation of the agent engagement drive, “Get Your Customers Back to Life.” Through the drive, agents were encouraged to revive their existing customer-lapsed base.

No Project Is Perfect

Even with positive steps achieved by the improve-ment team, resistance could, and did, take place among all stakeholder groups (see Table 3 on p. 5).

For example, as company leaders had predicted, some distribution partners resisted change after having become used to doing business a certain way for so long. As a means to help remedy the situation, project team members met with the dis-tributors and created a value stream map of their entire process to eliminate or combine 36 percent of their work steps. The effort resulted in a win-win situ-ation as the partners agreed to the recommendations with no additional costs.

Results

There were numerous posi-tive improvements achieved through Project Unnati (which can be seen in fur-ther detail in Table 4 on p. 5), but likely none more important than the com-pany’s improved collection rate. The team surpassed expectations by improving the rate from 0.90 percent to 2.54 percent.

Max Life Insurance broke its own records by

Table 1 — Solution selection matrix

Final solutions CTQ TIME COST EASE ORG GOAL

SSPN

1.1 Send >50K premium data to agents 9 8 8 8 5 589

1.2 Send complete lapsed data to MDRT 10 8 8 8 5 653

1.3 Campaigns within zones 7 8 7 6 5 403

1.4 Send SMS to <10K premium 9 9 9 8 5 742

2.1 Awareness session through agent meet’s 9 6 9 10 5 501

2.2 Concalis with CRE heads on performance 7 8 7 10 5 407

2.3 Publish regular MIS to zone heads 8 9 8 10 5 591

2.4 Campaigns within zones 10 7 9 6 5 641

3.1 Involve agents by personal calling 7 9 7 4 5 450

3.2 Calling prioritization 8 9 9 6 5 659

3.3 Allocation prioritization on policies 9 9 9 8 5 742

4.1 Flagging of active agent base in BP’s calling 9 9 9 10 5 744

4.2 Sensitize business partners 8 9 7 6 5 515

4.3 Top location prioritization 9 9 6 8 5 499

6.1 Certification 9 9 9 10 5 744

6.2 Contest 8 8 9 10 5 591

6.3 Pro-active sending data with proper flagging 7 7 8 8 5 405

6.4 MIS/Performance board 9 9 7 10 5 582

6.5 Agent engagement program 9 8 9 10 5 663

7.1 Scripts revision 9 10 8 8 5 733

7.2 Objection handling training 8 9 9 6 5 659

7.3 Contest 9 9 9 10 5 744

7.4 Special focus on positive disposition codes 9 9 8 8 5 390

Table 2 — List of final solutions

Root causes Final solutions Brief explanation

Premium 1.1 Send >50K premium data to agents Make the lapsed data available to all active agents

1.2 Send complete lapsed data to MDRT

Make the customized lapsed data available to all active agents

1.4 Send SMS to <10K premium Send communication weekly to all customers whose premium is less than 10K

Geography 2.3 Publish regular MIS to zone heads Send regular updated to four zone heads

2.4 Campaigns within zones Initiate contest within zone to participate and results best in collection activities

Premium tenure 3.2 Calling prioritization Advise distribution partners to monitor calling as per prioritization matrix like call high premium and positive disposition people first

3.3 Allocation prioritization on policies Allocate base to distribution partners, with a prioritization like policy type, tenure wise, etc.

Single and multiple policies

4.1 Flagging of active agent base in BP’s calling

Flag the active agent base, so that agent should call them first

Agent type 6.1 Certification Provide YB/GB certification to those people, who were engaged via projects

6.2 Contest Initiate activities for motivating agents, GO, employees to participate in collection activities

6.4 MIS/Performance board Publish regular dashboard for key stake holder on fortnightly basis

6.5 Agent engagement program Engage agents to work on their lapsed portfolio to earn more commission and new business

Disposition codes

7.1 Scripts revision Revision of calling script at call center

7.2 Objection handling training Increase the scenarios in objection handling script

7.3 Contest Initiate activities for motivating calling agents to meet their target

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generating more than $8.6 million in revenue via Project Unnati, while also becoming best in industry with a conservation ratio of 84 percent (source: Insurance Regulatory and Development Authority), a key measure tracked within the Indian insurance industry that indicates conservation/lapsation of old business.

“We were able to achieve all of our internal targets,” said Divya Tuteja, senior manager at Max Life. “We saw a surge in cus-tomer satisfaction scores as we saw the Top 2 box score increase

from 46 to 51, with a significant drop in Bottom 2 box. Other parameters like ease of paying, call quality scores, and CTQ scores also showed encouraging results.”

Project Unnati has won multiple accolades, including the Project of the Year Award 2012 as part of Max Life Insurance Business Excellence annual award, which is recognized by Max Life CEO Rajesh Sud. The project has also won the “League of Honor Award” from the chairman of Max India, Analjeet Singh, and also received a prestigious national recognition from the QCI-DL Shah Quality Award and Qimpro.

As of December 2012, more than a year after the improvement project ended, Max Life had maintained a high collection per-centage of 2.14.

But even beyond the tangible improvements were the intangible benefits resulting from Project Unnati, including instituting a quality-based work culture. As with all quality improvement ini-tiatives, positively affecting culture is a key aspect to long-term success, and nowhere in the company was it more important to make positive gains than with the agents, as they deal most directly with customers on a day-to-day basis. Recognizing this, Max Life launched its “Renew a Smile” program, which asked agents to sign a pledge promising to make a difference in key pain areas faced by customers. The pledge states the internal stakeholders will:

• Ensure accurate and reliable renewal communication• Improve call quality on renewals• Offer easy and self-pay premium payment options

“Project Unnati helped make our processes robust and effective in terms of recovering the premium from our deep-lapsed portfolio,” Tuteja said. “We are now taking a proactive approach by engag-ing our agents to help them realize how bringing the customers back benefits them monetarily, and moreover, how important it is to meet your existing customer’s expectations, rather them making the effort to sell to a prospective customer.”

For More Information

• To learn more about Max Life Insurance and its services, visit the company’s website at www.maxlifeinsurance.com.

• For questions about Project Unnati, contact Divya Tuteja at divya.tuteja@maxlifeinsurance.com.

• For details on the International Team Excellence Award Process, visit wcqi.asq.org/team-award/.

• To read more examples of successful quality improvement initiatives, visit the ASQ Knowledge Center Case Studies landing page at asq.org/knowledge-center/case-studies.

About the Author

Adam Wise is an ASQ staff writer.

Table 4 — Project Unnati results

Tangible benefits Metrics Baseline Achieved

Project CTQ % of customer revived

.90% 2.54%

Revenue enhancement $ MM $2.2 MM $8.6 MM

Call quality score Percentage 64% 81%

Reduction in cost per policy MM .01 .008

Survey scores T2B and B2B T2B-<46 B2B>16

T2B-<51 B2B>10

Table 3 — Stakeholder resistance action plan

Stakeholders Types Resistance Action taken Why

Executive committee

Internal 1) Decision on holy cows2) Time share vs. mind share3) Conflicting priorities

• Steering Committee reviews and toll gate reviews

• Integrating our project reviews with weekly office reviews

• Substantiating expenses with comprehensive CBAs

• For sharing achievements in the project journey and keeping them engaged on project implementations and results

Head – renewals and retention

Internal Bang for the buckCompeting prioritiesNow vs. then

• Periodic meetings

• Morning breakfast meetings

• For sharing achievements in the project journey and keeping them engaged on project implementations and results

Distribution partners

Internal Resistance to new changes in processes

• Team engagement and building exercise

• For motivating and engaging team

Quality and business excellence

Internal Competing priorities

• Dedicated quality resource

Policyholders External Could refuse to pay premiumCould raise very high expectation with agent

• Communication plan

• Calling strategies

• Renew a smile theme

• To remain connected with them and keep them posted on simplified processes and nature of benefit they would get once they remain insured