CUP CORPORATION Presented by Shyam Devesh Hussain

It is one of the largest insurance company based in Europe (Germany) It enjoyed the remarkable growth rate of 25% for 10 years Form of insurance:- health, life, casualty, property, and automotive areas

After 1995 growth was flat Worsening economic climate with increasing economic downsizing Higher taxes and social welfare levies Increasing competition Area of sustained growth upto 1994

Despite the worsening market condition, the operating division of CUP were often able to gain market share. However, the squeeze of increasing clients price sensitivity led in the private insurance market to shorter contracts and more cancellation of existing contract this effect varied in intensity by product line

In response product lines and the branch offices began to pay more attention to providing a better service as a way to keep agents, brokers and existing clients satisfied There was a range of ideas and responses to the problem varying from remaking newsletter for customers to creating a “calling center”

The calling center was set up to alleviate the difficulties of reaching clerks and about the level of services they received if and when they could reach them Within decentralization structure of CUP product lines operated rather then independently, a no. of “calling centers” were created.

This centers focused on product lines Created their own central telephone centers so via this they decentralized much of their clerical work to the branches

Lapse rate (customer defection rate) No. of customers canceling contracts compared to the total amount of contracts Why it high? Dissatisfied customers price % problem with agents % bad claim processing % bureaucratic response % little information %

Lapse rate It was summarized by the image of a leaking bucket that new customers would inflow and many leaked out through big holes Consequences--?? Customers loyalty problem

Corporate problem: from V-V Cycles Vicious ? If customers had only one contract they canceled much more frequently. Replacement then led to a commission for the agent. And when this process gained enough momentum as it all did all insurance firms suffered from high lapse rates and paid high commission

Virtual cycle? Customers looked at the firm as a whole not as a product line with whom they had one contract. It turned out that the more contracts customers had the longer they remained loyal to CUP. The longer they remained with the firm the lower the commission for new products and the lower the damage rate

To induce a virtual cycle, customer retention would have to become a strategic target highly profitable group non profitable group loss generating group so how to play defensive stroke: becoming sensitive to early signals of defection -----monitoring carefully trigger events -----trying to recover “loss” contract/customer

The First step: Quick hits” and new Discoveries The CUP Vorstand (board of directors) ordered a specific study of customer loyalty for CUP b/w may 1996 to October 1996 It was anticipated that this would create ideas for “Quick hits” and begin to close “the holes in the bucket”

Project discoveries according to consultants: 1.Customers called one product but queries for others too 2.One screen do not resolve customers’ multiple policies information and therefore the pattern of defections remained hidden 3.In the case of car insurance client bought it on the weekend when insurance firms were closed so it is difficult to help clients 4.Lacking customer services (it is true for health but not for life)

The goal of CCC CUP’s private customer have one and only one telephone no. for all their question and problems. The center would be open 24 hrs and 7 days in a week. It would be able to finalize 90% of all customer inquiries in one telephone call. It would lead to a significant increase in service quality and efficiency.

Contd. CUP would benefit from a reduction in the lapse rate, specifically in case where, in the past the client enquiry was not addressed or service was unsatisfactory. Becoming a service leader in the insurance industry. Increase the no. of customers with multiple policies.

concerns Agent feels center is threat for them. Center could helps agent by contacting prospective customers. Center provide expertise for handling the special queries. EDP system

Centers design aspects The CCC would be a Greenfield solution and it would be the only center within the CUP. It would centralize all customer inquiries and be available 100% of the time and able to address effectively 90% of all question and problem. The center would be established outside the existing organizational structure of the CUP

Contd. The center would be a profit center and paid on a telephone call basis by the product lines rather than a cost center supported by corporate or the operating divisions overhead. The center would be a stand alone central service business unit with a mission to support the product lines. The product lines would supply insurance technical know- how and competent personal and interface with the product lines would be clearly organized.

Measurement of success Derrick says “a decreasing lapse rate – that part of lapse rate, connected to service quality of CUP, Other executives “ balance score card is also measurement of success.

THANK YOU Shyam Devesh Hussain