Analysis of Sagicor Insurance Company

Introduction

Insurance companies are operating in a fast-moving global marketplace characterized by technological advancement, global communications, and the ever-changing needs of demanding customers. These drivers increase competition among insurance providers and require careful consideration for organizations to be successfully positioned for creating or maintaining customer value. Organizations are therefore challenged to parallel their business processes with enhancing customer value. The foundation of a customer value-based theory of the firm was laid years ago by several theorists including Drucker (1973).

From a quality perspective, Drucker developed a traditional emphasis on the financial return where he viewed business as an organization that “adds value and creates wealth;” where value is created for customers, and wealth is generated for owners. The concept of customer value is multi-dimensional and therefore creating, maintaining, or enhancing its delivery requires a multi-pronged approach that includes sound management, benchmarking, innovative products, and motivated staff. The success of organizations in a dynamic environment requires the right organizational climate and the coordinated efforts of the various divisions for their success.

It is for this reason that the consulting firm of WADAD Inc. sought to conduct research on Sagicor Life Jamaica’s Individual Line Division with the intent of identifying opportunities for enhancing customer value and making its recommendations.

Customer Value

BusinessDictionary.com defines Customer Value as the difference between what a customer gets from a product, and what he or she has to give in order to get it. One of the earlier theorists on customer value, Peter F. Drucker (1973), theorized that management should manage for results, do the right thing right, and make serving the customer the center of everything.

One of his theories was quality focused on his view of a business benefitting both the owner and the customer and not just for the company to make a big bottom line. Drucker theorized that business processes should create value for customers while generating wealth for owners. This holistic approach is crucial in a dynamic market where customers are price sensitive and fully aware of their bargaining power as buyers. This environment makes the delivery of customer value challenging and requires a concerted effort of the business leadership, operations, marketing, and all other divisions of the organization.

Customers perceive value in several dimensions that can be illustrated as a three-dimensional pyramid of Brand, Product, and Relationship Values.

Brand Value

The value the customer associates with owning or using a product or service from a company as the brand signifies reputation, promises, and reliability and can be trusted. Product Value This is the value of a product’s quality and features that the company delivers to the customer for its price making good on its promise to garner customer loyalty and increase customer capital.

Relationship Value Relationship value is even more important because it can be measured and managed and by doing so Brand and Product Values are measured and managed. This is the value of the customer’s experience and relationships with the company, with the staff who makes and delivers on the promise of the product or service. It includes the person who answers the phone, the sales process, fulfillment, technical support to the executive who thanks to the customer for the referral.

Aims and Objectives

This paper is an exploratory study into the operations of the Individual Line Division of Sagicor Life Jamaica; with specific emphasis on the Customer Service unit to determine the possible means of adding value to the customer experience. The objectives are to confirm the proposition that:

1. The turnaround time of a new insurance contract and the wait time to complete the encashment process are critical components of customer value and customer service delivery.
2. Identify areas of the operations within other units which detract from the delivery of customer value
3. Make recommendations that will address the deficiencies identified.

Individual Line

The Individual Line Division has two (2) primary service functions. 1) Selling of various life insurance products such as Term Life, Investment, and Critical Illness policies which are done through the New Business Unit 2) Providing ensuing benefits from their policy contracts. These include disbursement of claims for death, critical illnesses, and encashment. The encashment process is delivered through the Individual Line Customer Service Unit. Encashment is converting to cash the units accrued to specific insurance products. Encashment is converting to cash the units accrued to specific insurance products.

Problem Statement

Sagicor Life Jamaica is the industry leader, having strong brand equity within the industry posting positive financial performance over the years. Like many service organizations operating in Jamaica, the Company is faced with the issue of customer value and customer service delivery within one of their strongest performing units, the Individual Line Division.

This Division has been the leading contributor of revenue for the past three (3) years; the performance of which is critical to the overall success of the organization. Failure to improve on the operations of the Individual Line Division could likely have a negative impact on customer value delivery and weaken Sagicor’s Life Jamaica’s competitive advantage and ultimately their market leadership position.

The Research Questions

1. 1. Is the Individual Line Division and the Customer Service Department meeting Sagicor’s customer’s perception of value?
2. How can the Individual Line Division process be improved to meet/ exceed customer value perception?
3. What can be implemented to improve the process?

Socio-Economic Environment

Deregulation worldwide is encouraging the emergence of universal financial services organizations to replace insurers and brokerage houses. It is also enabling new and non-traditional players to enter the market. Overall, this promises to be a new test for bankassurance models. This trend is already affecting Asia where the Malaysian and Singapore industries are classic industries of the deregulatory forces at work.

The traditional view of the insurance business as a provider of fully integrated service delivery is becoming obsolete. Distribution, underwriting, and administration are becoming increasingly disaggregated. As companies seek to meet customer needs, they will need to place emphasis on multiple channels and multiple relationships rather than providing all the products and services themselves also in one location. Distributors will seek to provide customer convenience and greater value by bringing together a range of products for themselves and others as one offering design to deliver greater customer and wealth creation.

Overview of the Insurance Industry in Jamaica

In recent times, the industry has been plagued by an increase in cash disbursements from policies. Additionally, the life insurance companies in Jamaica are paying out increasing amounts as policyholders turn in their plans for cash – another indication of a tough economy. According to Orville Johnson (Gleaner article – April 17, 2011), provisional figures so far show that for the year 2010, life insurance companies paid out more than $13. 2 billion in benefits to policyholders, representing an increase of 20 percent more than the $11 billion paid out in 2009.

The industry has seen a steady increase in premium income and policies sold over the years. The disbursement trend is also reflective of an industry that in recent years has been transformed from one mainly providing resources in the event of death; to a business focused on the mobilization of medium to long-term funds for financial goals, such as higher education and retirement income. This is to satisfy the growing demand from clients for living benefits. There has been a shift in the industry whereby a few years ago, whole-life insurance represented 70% of the policies sold. Today, these policies represent approximately 4%.

Whole-life insurance policies combine a term policy, that is, one that provides life coverage only, with an investment component.

Background of Sagicor Life Jamaica (SLJ) Vision Statement

To be a great company committed to improving the lives of people in the communities in which they operate. Mission Statement Sagicor is committed to providing financial services that create value for their customers, excellent returns to their stakeholders, the highest quality of work, life, and opportunity for the personal and professional development of their staff and Financial Advisors. They will be an outstanding corporate citizen wherever they operate Sagicor Life Jamaica Limited (SJL) is a giant among the Insurance industry and within the last five (5) years has acquired Blue Cross Jamaica Limited, a major group health insurance provider and majority shares in Pan Caribbean Financial Services Jamaica Limited, a leader in the Jamaican investment market. The Company operates through five (5) segments: Individual Life; Employee Benefits; Pension Services; Banking and Asset Management; Investments including Real Estate and Property Services, with a portfolio of over J$26 Billion under management.

Sagicor has a staff complement of approximately 1,300 workers and an experienced and competent twelve (12) member Board of Directors. The Company was formerly known as Life of Jamaica Limited (LOJ). In June 2008, LOJ was re-branded to Sagicor Life Jamaica Limited (SLJ). SLJ has not only maintained its market share but has established itself as a technology pacesetter, innovator, and strong leader in the Caribbean Life Insurance Industry. The Company which is a subsidiary of the Sagicor Financial Corporation has its headquarters in Kingston, Jamaica, and twelve (twelve (12) Branches island-wide.

Due to the increasing demands from its customers, the Company has expanded six (6) of its major outlet’s Spanish Town, Ocho Rios, Mandeville, Montego Bay, Savanna-la-mar, and Kingston Business Centre (Trafalgar Road) into full-service centers.

Research Design

Key Assumptions

To ascertain if our objectives were accomplished, we required 100% participation of thirty (30) persons for each questionnaire administered. In collecting the data, three (3) assumptions were made:

• Customers that participated were clients for more than one year. The responses from our audience, both staff and customers, were unbiased.
• The research focuses on the encashment and new business processes of the Individual Line Division in Sagicor Jamaica Limited and therefore, our recommendations should not be generalized to any other Division.

Methodology

The Descriptive method employs both qualitative and quantitative methodologies within the same study but primarily describes the nature of the situation as it is at the time of the exploration. Three (3) types of questionnaires were developed and administered to:

• Administrative Staff employed to Sagicor Life Jamaica.
• Financial Advisors contracted to Sagicor Life Jamaica
• Sagicor’s Customers using both the New Business unit and the encashment services.

The questionnaires relating to the Administrative Staff and Financial Advisors were administered electronically at the twelve (12) branches across the island. The questionnaire relating to customers was administered within the customer service areas of the seven full (7) Sagicor Service Centres island-wide, including its headquarters.

Additionally, through a series of interviews with the New Business and Customer Service Managers, we were able to ascertain the process flow and timing within both units.

Sampling Method

Sagicor Life Jamaica has approximately 750 administrative staff and 540 Financial Advisors spread across the island. The customer population is approximately 800,000. Based on the size of the population for all the relevant groups stated above, samples of 30 questionnaires were completed for each group.

Data Collection

The primary data collection instrument was questionnaires developed to satisfy the research objectives. The questionnaires were structured to capture only information that was relevant to the study. The questionnaires were divided into five (5) main categories:

1. Demographic
2. Products
3. Service Quality
4. Satisfaction
5. Referrals

Questionnaires for staff and Financial Advisors were administered via company mailboxes using random selection. Questionnaires for customers were administered in the customer service areas. These were handed out to and completed by customers while they waited to be served.

Secondary data was also collected from the organization as it relates to their key performance indicators and internal benchmark standards for the Individual Line Division with emphasis on the New Business and Customer Service units involved in the study over a period of 10 weeks. Interviews were also conducted with key personnel in the Division.

Key Deliverables

1. Analysis of the Individual Line Division process with emphasis on the Encashment unit.
2. Identification of deficiencies
3. Recommendations to address bottlenecks and improve efficiencies so that customer value and service delivery can be enhanced.

Constraints

A complete and proper analysis of the situation was restricted to the information available from Sagicor. Significant issues affecting analysis accuracy include:

Accessibility of Financial Advisors during the workday to participate in surveys * Availability of group members to get time off to conduct interviews and surveys when there is a shift in original time * Reluctance of the Company to share confidential information * Inability to gain accurate competitive data

Process Analysis

Significance of the Individual Business Line Process

The sustainable delivery of customer value is dependent on the management of the entire Individual Line business. This will allow SLJ to perform extremely well against its competitors in the various dimensions with regard to products and services. According to theory, the outcome of a process will always be the same unless there is continuous process improvement, taking into consideration employee involvement and customer satisfaction. Well, known theorists, Krajewski et al 2010 posited that “the process that produces the product or service is judged when customers evaluate the quality of the service or product they received”.

The process must meet certain implicit performance standards which can relate to consistent quality and on-time delivery.

Overview of SLJ’s Individual Line Division

An analysis of the Individual Line business process was crucial for identifying gaps that would ultimately lead to recommendations for improving the overall operational performance of the process. The assessment of the process was made possible from information gathered through consultations with several Department Heads and Financial Advisors.

The outcomes of such consultations were the development of an Individual Line business activity schedule and a flowchart (Illus. 1 & 2). Both the schedule and the flowchart revealed an established sequence and length of time associated with each activity, the basis by which the Individual Line process was managed.

The value chain is a series of activities that create, build, and deliver unique value, contributed by each activity, to the end-user (Wikipedia). The Individual line range of products is produced by a set of processes arranged in sequential order, easily modifiable to facilitate different policy types based on customer preferences. The benefit of the value chain analysis is that the Individual Line division can quickly break down the different functions of the into individual activities, analyze the components, capture inefficiencies, and identify areas for process optimizations.

All this in an effort to make sure enough is being done to guarantee customer satisfaction.

From our understanding of the data, we have drawn our conclusions and made some recommendations that we feel could enhance the Divisions customer value delivery process. The primary branch (horizontal) in the diagram represents the main challenge identified in the Division while the diagonal branches represent processes, practices, or functions that contribute to the main problem. 6. 1 Personnel The staff questionnaire revealed that there was a shortage of branch resources which causes the delay in the processing of new applications. This will affect the turnaround time of policy contracts. 6. Management/Policies Based on information gathered from the staff questionnaire, there is an inadequacy in the dissemination of critical information from management to staff. The challenges have been that limited communication from management creates misinterpretation of targets and benchmark standards.

Manpower/People

The information obtained suggested that there was some amount of dissatisfaction among the staff as the overall staff satisfaction of the Individual Line Division is averaged at 64. 3%. There was also a shortage of staff identified in the Customer Service area.

Material/Inputs

There was a small percentage of the staff who felt that the organization could introduce a computerized screening process to facilitate the automation of the new application. This would allow faster processing of new applications, as well as, improve the product lines’ relevance.

Method/Process

Staff survey suggested that there was a limited number of workstations that contribute to the delay in processing applications on a timely basis. 6. 6 Other/Culture The greatest contributor to the Individual Line Division’s inefficiencies was found to be that of cultural practices.

The hoarding of policies to be submitted at the end of the month has caused major challenges for the Division as the policies turnaround time is below the desired time. This practice could result in dissatisfied customers and needs to be addressed. Cultural practices, such as communication barriers between departments, the untimely addressing of staff concerns, and the ineffective dissemination of information have resulted in some dissatisfied staff and this could result in de-motivation and hamper productivity.

Data Presentation

Our analysis of the responses received through the questionnaires and interviews from staff and customers are illustrated below. These are demonstrated by the use of pie charts and histograms to represent their demographics, opinions, and perceptions about how they view the existing operations and processes. A total of 90 persons participated in response to three (3) distinct questionnaires conveying a population of thirty per questionnaire for this study.

In an effort to ascertain the level of satisfaction of customer value and service delivery of the Individual Line Division, a survey was conducted by administering 30 questionnaires for a normal distribution in the gathering of the data. The following are the interpretations of the responses received.

Administrative Staff Demographic Information

Thirty employees comprising of eleven males and nineteen females participated in the exercise.

The ages of the participants varied with sixteen individuals falling in the group of eighteen to thirty, twelve in the thirty-one to forty-nine categories and two fell in the fifty to sixty categories. On the question regarding training – 80% of the participants indicated that they were trained for their current position; 70% thought that they were adequately trained; 70% thought the purpose and goal of the training were achieved and 77% were able to implement the knowledge and skills acquired from their training.

The average of these responses indicated a 74. 3% level of satisfaction for training. On the question of productivity and products 57% felt they had the necessary resources needed to enhance productivity; 67% thought the product line was adequate and 70% thought enough is being done to renew and refresh product offerings to ensure relevance and attractiveness to their customers. These responses averaged 64. 7% for staff satisfaction for productivity and products

On the question regarding the organization’s culture, 53% of the staff felt Sagicor’s culture encouraged freedom of speech; 40% felt that staff concerns were addressed in a timely manner; 53% thought the information was effectively disseminated among staff and 70% felt there were barriers to communication between departments. These responses averaged 54% satisfaction for the organization.

Financial Advisors

Of the thirty financial advisors polled for this study, 25 indicated that the training time was adequate, 20 indicated that the training was relevant and necessary and all respondents stated that the training received met the set objective. On the matter of products and productivity, all the financial advisors polled thought that they had adequate resources to enhance productivity. They also indicated that the number of products and the renewal of products to provide value to their customers were adequate.

On the question of culture financial advisor respondents indicated that the culture of the organization facilitated enhanced customer service delivery as concerns were promptly addressed. 23 of the respondents stated that the information was effectively disseminated. As in most organizations, the advisor indicated that communication barriers existed, and this at time affected customer delivery as communication between departments was affected.

Customers Demographics

The customers polled were split 45% female and55% male.

The age demographic was represented as follows 12 % in the 18-30, 69% in the 31-49, 12% in the 50-60, and 6% in the 60 and over. Of the thirty-three customers interviewed about the delivery of service from the Individual Line, twenty-five indicated that they received their insurance policy contract in a timely manner, twenty-five also thought the encashment process was fast and efficient, thirty-two indicated that they were satisfied with the products and services offered and twenty-six said the policy payment options were adequate and convenient.

It must be pointed out that persons did not state a time frame for the encashment and the delivery of policy contracts although asked. On the matter of customer satisfaction, of the thirty-three customers polled, all indicated that they were satisfied with both the product offerings and the service offered by the Individual Line Division. The business of the individual line is driven to a large extent on the basis of referrals. Customers polled indicated that they thought their financial advisors gave sound advice.

Based on the level of advice and the products offered by the Individual Line approximately 31 of the 33 customers polled were inclined to refer to family and friends. On the matter of products, there was general satisfaction with the products offered by the Division, however, the new products rolled out in the past year have not yet gained traction in the market based on the responses garnered from the customer surveys, where 66% stated that they had not purchased any of the new products. 8. Analysis and Findings of the Individual Line Division

Key Performance Indicators

The assessment of the Individual Line took into account key performance indicators such as throughput time, labour productivity, theoretical minimum, and efficiency, all of which are critical to the functioning of the process.

Throughput Time

The throughput time is the total elapsed time from the interview to application submission and policy delivery to a customer. The latter would amount to 705 hours or approximately 3 months. This process excludes the time recorded for those applications that are held up for verification reasons.

Labor Productivity

The productivity of the Individual Line symbolizes the on-time delivery of service within each of its units. This Division targets the processing of 1,600 policies per forty-hour workweek using a total workforce of 20 persons. The labor productivity for the line was calculated to be approximately two policy units per hour.

Theoretical Minimum

The theoretical minimum sets the benchmark for the smallest number of work stations possible within the business line that will contribute to maximizing worker productivity.

Update CAPSIL System with dispatch date Update CAPSIL System with dispatch date 1. Assemble contracts for dispatched 2. Assemble contracts for dispatched Prepare welcome letters and send to the mailroom for dispatch Prepare welcome letters and send to the mailroom for dispatch System is updated with the date the application.

The cash is made available to policyholders. The removal of the cash from policies is termed encashment. The client may elect to visit the Individual Line Division Customer Service Department to withdraw some of the funds by completing and signing a prescribed form and submitting the policy contract as well as proper identification to the Customer Service agent. The Customer Service Representative upon receipt of the form will verify on the system the client’s signature, as well as, the requested sum with what is on record and confirm the amount that is being requested.

There is a waiting time of twenty minutes for clients requesting cheques. There are two (2) ways from which the client may choose to collect the proceeds. They can either request a cheque or an electronic fund transfer (EFT), where monies can be deposited directly into their commercial bank account. The other way is by sourcing a form by hand or downloading it from the Company’s website. In the latter case, however, the policyholder is required to have the form witnessed by a Justice of the Peace.

The analysis of the Encashment unit of Individual Line was crucial for identifying the activities within the process and in so doing to highlight that activity which took the longest time, 20 minutes. Station 2 (Customers directed to Customer Service Represented or attended to by desk clerk) was identified as the bottleneck within the process. The desired number of customers that are targeted for processing per week is approximately 1,400 as against the actual that averages 1, 265. Individual Line Division: Encashment Process Flow Chart

Conclusions

Based on the data presented, the analysis, and subsequent findings, WADAD Consultants has concluded that the Sagicor Life Individual Line Division is the most important contributor to the Company’s revenue and with improvements in its customer value and service delivery chain, this position of being the top contributor can be enhanced. Notwithstanding, there are a number of challenges that the Division will need to address such as: Eliminate the manual process activity of customer encashment.

Remove the manual process of application screening within the branch operations.

Implement measures to attain and surpass the LOMA benchmark and internal Key Performance Indicators (KPI’s) for customer service delivery.

Manage the bottleneck activities to improve overall efficiency.

Address the cultural issues faced with agents in the processing of new business at the end of the month to improve overall efficiency in the Underwriting process.

Recommendations

The sustainable delivery of customer value will be dependent on the management of the entire Individual Line business so that it outrivals all competitors in the various dimensions with regards to products and services that are of importance to the customer. The Directors of the Division must be cognizant of the significance of continuous improvement to the business line process, employee involvement, and customer satisfaction, all of which are critical to SLJ maintaining its competitive advantage within the life insurance industry. The managers of the business line must be committed to reducing the throughput time for the processing of policies. Such can be achieved by addressing the turn-around time at the sales and new business work stations. The use of relevant technology must be applied to the execution of activities at both work stations in question. A redesign of the process is also required to decentralize the functions of the New Business Department. In replicating the functions of this Department, in outstations that are strategically located, problems with regards to turn-around time should be addressed. Sagicor is the market leader in the insurance industry and the Individual Line is their major profit center.

We are recommending that the Company make further investment in the use of technology to iron out process inefficiencies in both the encashment and underwriting areas. 12. 1 Redesign of the application processing It is proposed to have agents connecting to CAPSIL remotely via USB modem (Internet Card) upload policy information, engage a wireless printer to print the policy specification, beneficiary, trustee, policy acknowledgment, and free look pages and deliver to client. Policy applications uploaded to the CAPSIL system will be settled the same day the first premium is paid.

The project will achieve the following:

1. Provide more efficient contract delivery service to policyholders
2. Improve turnaround of Ordinary Life Contract of total issues
3. Reduce Agent/Policyholder queries on contract delivery for coupon policies
4. Increase Agents efficiency and reduce the business cost to the agent

One of the key components in communicating these benefits is training, and also in choosing the right persons who should be entirely sold and are influencers in their circles. Instant Application processing Implementing Changes

Underwriting Process

1. The company should consider outsourcing the application screening process within the branch operations to eliminate bottlenecks and reduce costs.
2. Implementing bar-coding technology to screen and fast track application processing.
3. Change the mindset of the agents through education and administer strong sanctions for breach of the procedure to eliminate month-end bulk submission. We recommend options 2 and 3 as a priority and suggest that further analysis of option 1 be pursued on the basis that sensitive customer information may be compromised.

Encashment Process

1. Examine the feasibility of implementing kiosks (a standalone machine like an ATM) to facilitate customer applications for encashment and cheque delivery.
2. Development of strategic partnerships with payment agencies such as Paymaster and Bill Express.
3. Increase the awareness of the Electronic Funds Transfer system and expand the payment options to include strategic partners such as Paymaster, as well as, Commercial Banks.

Customer Service

1. Drive awareness of Individual Line customer service standards to staff through communication, internal newsletter, staff forums, department meetings etc.
2. Consistent training and retraining of staff in the customer service areas. The above recommendations will provide an improvement in the customer value and service delivery of the Division allowing for the maintenance of the market leadership position.

References

1. Campbell, A., Manager, Human Resources Department Chisholm, M., Vice President, Sagicor Individual Line Division.
2. Krajewski, L. J., Ritzman, L. P., & Malhotra, M. K. (2010). Operations Management, Processes and Supply Chains. Prentice Hall, New Jersey 07458.
3. www.ucstrategies.com/BackOffice_NextCompetitiveBattlefield
4. Lee, K. J., Larry, R. P., Malhotra, M. K. (2010). Operations Management Process and Supply Chains. (9th ed. ). New Jersey: Prentice-Hall.
5. Phillip, K., Kevin, K. L. (2009). Marketing Management. (13rd ed. ). New Jersey: Pearson.
6. http://statinja.gov.jm/
7. http://www.sagicorjamaica.com/
8. http://www.sagicor.com/downloads/Annual_Reports/2010_Annual_Report. pdf