CASE STUDY 3
Case Study 3 The C-Direct- Insurance Company
Developed by Peter Race, Henley Management College
Call centres have fast become one of the most important channels for organizations and their customers to interact. There are around 4,000 call centres in the UK today,employing over 400,000 people. The direct sell insurance industry is increasingly using call centres to access and service its market. The C-Direct -Insurance Company has its call centre in Newcastle, England. The company itself is just 6 years old and specialises in selling automobile insurance policies direct to customers.
Advertising and promotion initiatives attract customers’ interest and generate enquiries to the CD Call Centre. These lead to the provision of quotations for personal car insurance. In order to provide the quotation, CD operators need to collect the customer’s personal and vehicle related data (in total 17 items) and input them to the computer. The process is as follows:
Customers call the CDCall Centre (the focus of this case) by a freephone telephone number and submit the required information. This is entered directly into a computer terminal during the call, their questions answered, and quotation provided within 12 minutes. Customers can pay by credit card and receive immediate insurance cover. Customers receive their personal insurance offer confirmed in writing by mail, about 23 days after initial contact.
Mr Small, the Operations Manager, is responsible for all operations in the Call Centre. The Call Centre employs 105 people in three shifts over a core day between the hours of 0800 and 2000. The resources for the Call Centre are:
· its facilities – for example the buildings and the staff’s workspace/workstations · the equipment – for example, computers/systems
· the People who use them.
Car insurance is compulsory in the UK, so customers are price sensitive and tend to shop around to compare the company’s offer with those of competitors. Only about 17% of CD’s offers are converted into policies. The operations management strategies of scheduling, capacity and quality management were reactive rather than proactive; for example, poor forecasting of demand resulted in excess manpower being under utilised. Staffs were inflexible and showed little sympathy or understanding to frustrated and angry customers. The interfaces with support functions such as Marketing or Information Systems Department tended to be confrontational rather than supportive. Fortunately, in the early days, competition was not very tough and Mr Small had no special performance targets or formal control mechanisms – he was literally his own boss.
The policy change
After five years of high growth, over the last twelve months sales have only grown by 3% and the company is beginning to struggle with diminishing profits. The main reasons for the slowdown have been identified:
· New Entrants: 15 companies in the last 2 years, producing a wave of ‘direct insurance startups’. These companies have targeted the same customer segment as CD, the market for which has remained stagnant. · Customers are more price sensitive and new entrants offer extremely low prices. · Substitute Products are unchanged – customers still require car insurance.
The new situation has forced management to review business policy options to provide a competitive advantage. Research has shown that for direct selling insurance products, the key market drivers are to: · Offer a wider range of insurance products, so minimising the need for customers to deal with many suppliers.
· Offer low prices
· Provide excellent service.
A recent internal report showed that the CD Call Centre still had potential to improve service levels and cost efficiency. The decision was therefore taken to extend the product range and improve service by addressing:
CD will respond to customer’s demand...