WIN Magazine - Spring 2012 - (Page 39)
FEATURE: On the Cutting Edge of Technology
APPLYING “MONEYBALL” PRINCIPLES TO GENERAL AGENCIES
How much value is trapped within the back office?
BY DAN EPSTEIN
N “MONEYBALL” WITH Brad Pitt, the GM of the Oakland Athletics builds a winning baseball team based not on a few star performers but on a scientific approach to managing the aggregate performance of the whole team. With the smallest budget in the league, the Athletics outperform all expectations, set the American League record for most consecutive wins and change the way the game is played. The same principles hold for insurance agents and brokers. Many general agency executives focus primarily on offense: building strong carrier relationships, developing competitive products and focusing on sales performance. Meanwhile, assuring widespread product expertise, proactive customer service and operations efficiency receive relatively little attention. Back office processing operations – defined here broadly as onclient-facing, administrative and policy processing functions – amount to uncharted zones of inefficiency and waste. Submissions go in and policies come out, but staff time and creativity can vanish with little trace in between. Management frequently lacks the time and resources needed to measure productivity and ensure continuous improvement. Service and processing staff feel leaders don’t truly understand what they do. In short, back office processing is necessary but unnecessarily expensive and dominates the busy work of many employees. Insureds do not value the time agency employees spend typing policies, but the average service representative spends more than 50 percent of his/her work hours performing similar routine processing tasks and less than half of that time talking directly to clients. Policy processing is not an agency differentiator – fast, responsive customer service is. CHANGING THE PERFORMANCE DYNAMICS While many recognize the virtue of efficient operations, few in the insurance industry recognize the extent to which back office operations can become a source of competitive advantage, growth and profitability. The key to back office performance lies in
optimizing the crucial relationships between people, processes and technology. Imagine the agency as a bicycle: Technology provides the frame, processes serve as the gears and people push the pedals. If the gears are not well-oiled, then even a skilled rider using the best-made frame will struggle. But a great, well-oiled gearing system, like a great back office, allows the rider to conserve energy and perform with maximum speed and efficiency. Far too many agents and brokers underutilize staff by failing to recognize their potential to create value, allowing them to spend countless hours juggling routine tasks. Management could achieve astounding results by establishing processing standards, identifying inefficient functions and streamlining workflows. Redirecting tasks and freeing producers, underwriters and staff from menial processing functions would inevitably reduce costs and improve throughput, while increasing the amount of time available for quality underwriting and value-added services. These changes would simultaneously boost retention and create new business opportunities. FINDING YOUR BACK OFFICE MOJO Most workflow efficiency programs focus on technology solutions like the introduction of new agency management systems or on revising procedure handbooks. Veteran managers understand that while IT systems projects are important, they are also costly, risky and often fail to deliver the efficiencies expected. Procedure handbooks are steps in the right direction, but unless integrated into the culture of the organization to assure compliance, can quickly become obsolete. Two approaches are being increasingly adopted by performance-savvy insurance organizations: 1) Delegating routine tasks from internal employees to proven insurance outsourcing providers; and 2) Lean process improvement to streamline workflows and eliminate sources of inefficiency permanently. THE ROLE OF BUSINESS PROCESS OUTSOURCING Outsourcing should not be seen as a tool to cut staff but as a way to elevate them – a rising >>
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Table of Contents for the Digital Edition of WIN Magazine - Spring 2012
Cover Story: The Catlin Arctic Survey: How an Insurer Decided to be in the Forefront of Environmental Research
The Year in Review: Natural Catastrophes in 2011
The Impact of Climate Change: An Interview with Ernst Rauch
Wholesale Agents & Insurers Embrace Tablets
Technology@Lloyd’s: Closing the Gap in 2012
A Unique Perspective: An Insight on the Technology Transformation
An Email Commentary: Liability Exposures and How to Prevent Them
Marketing on the Internet: New Opportunities for Wholesale Insurance Agents
Applying “Moneyball” Principles to General Agencies: How Much Value is Trapped Within the Back Office?
IN THE WIN-NER’S CIRCLE: A Discussion with Tom Kuzma
INDEX TO ADVERTISERS / ADVERTISERS.COM
WIN Magazine - Spring 2012
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