Quality Management Report On Lette Insurance Co

By Carlos Melendez

914 Cubs Landing, San Antonio TX, 78251

CM5334@Yahoo.com

(703) 728-2419

GM588 Quality Management

Instructor: Dr. Jim Flores

February 20, 2011

Quality Management Report on Lette Insurance Co

Background/Overview of Organization:

The insurance industry is intensely competitive. In addition to the pressures of

competition, insurance companies must comply with a growing, and often overlapping,

body of regulations some of which complicate their ability to respond to market changes.

Leading companies or even smaller companies are challenged to manage costs, bring new

products to market, deliver better customer service and manage underwriting risk and

fraud. Lette Insurance which is the one many insurance companies that are part of this

competitive market. Lette Insurance was first established in 1970 and it went into

business determined to offer automobile, homeowner and life insurance at reduced prices

to prime customers from Rio Grande Valley. Some of the key cliental were business

owners from Mexico establishing businesses in the Rio Grande Valley that needed to

acquire insurance for their employees and family. Lette Insurance continues to find ways

to manage its business costs in order to offer savings to customers today. This paper will

report on efficient ways that can improve Lette Insurance profits by executing a total

quality management that will help improve customer satisfaction and providing

efficiency within their organization.

Size and Scope:

Lette Insurance has more then 30 employees staffed.

Two operation facilities in Rio Grande Valley located in Brownsville and

McAllen TX.

One of the competitive insurance companies in Rio Grande Valley.

One of the few insurance companies that offer automobile coverage in Mexico.

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Quality Management Report on Lette Insurance Co

Problem Statement:

Lette Insurance Co has been losing a lot of business due to being inefficient with

customer demands. The quality of customer service is at a low peak and customers have

been complaining about unsatisfied demands. A few examples are the increase of

insurance rates without any explanation or any follow up from Lette insurance.

Customers have been complaining about the amount of time it takes Lette insurance to

respond to a question or provide a simple quote. Customers have also complained that

insurance claims have taken a longer period of time to receive funds. Last is the

inaccurate data that is provided to customers for billing and policy coverage.

The key problem to Lette Insurance is management style; the decision-making is at the

highest level. Lette Insurance must implement total quality management to operate more

effectively and efficiently by allowing managers to enhance and hone their customer

satisfaction. The present management style limits the staff’s capabilities; they are unable

to dedicate their efforts on focusing on developing the company’s mission statement. To

provide customer satisfaction with low cost insurance rates. As the competition grows,

Lette insurance has to provide great customer service in order to meet the demands of

their cliental. They must re-evaluate their organization and implement Total Quality

Management as way of life for them. The end vision for Lette Insurance is to continue to

provide insurance to customers in the Rio Grande Valley but to capitalizing on the

strengths such as customer satisfaction and to provide to their loyal customer base, which

will undoubtedly increase profits.

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Quality Management Report on Lette Insurance Co

Literature Review

The purpose of this section is to relate each quality guru theory and emphazise it towards

Lette Insurance and how it would benefit the company for using each theory. Quality

Management resulted mainly from the work of the quality gurus and their theories: the

American gurus featured in the 1950's Japan: Joseph Juran, W Edwards Deming, and

Armand Feigenbum; the Japanese quality gurus who developed and extended the early

American quality ideas and models: Kaoru Ishikawa, Genichi Taguchi, and Shigeo

Shingo; and the 1970-80's American Western gurus, notably Philip Crosby and Tom

Peters, who further extended the Quality Management concepts after the Japanese

successes (BusinessBalls).

Guru Theories:

W Edwards Deming placed great importance and responsibility on management, at both

the individual and company level, believing management to be responsible for 94% of

quality problems. He quotes “Profit in business comes from repeat customers, customers

that boast about your project or service, and that bring friends with them.” Now if Lette

Insurance was to implement Demings theory that management is responsible for quality

problems. Setting examples to their staff that quality is of great importance to their

organization. Without it Lette insurance will no longer be in business.

Dr Joseph M Juran developed the quality trilogy – quality planning, quality control and

quality improvement. Good quality management requires quality actions to be planned

out, improved and controlled. Dr Juran believed quality is associated with customer

satisfaction and dissatisfaction with the product or service, and emphasized the necessity

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Quality Management Report on Lette Insurance Co

for ongoing quality improvement through a succession of small improvement projects

carried out throughout the organizations (Mcgowan). Lette insurance to should identify

their customers by finding out their needs and work to meet those needs. They need to

create measures of quality and organize those measures consistently and relate them into

real-life conditions.

Armand V Feigenbaum was the originator of “total quality control”, often referred to as

total quality. He defined it as: “An effective system for integrating quality development,

quality maintenance and quality improvement efforts of the various groups within an

organization, so as to enable production and service at the most economical levels that

allow full customer satisfaction”. Lette insurance should implement Feigenbaum theory

and get a clear understanding of international markets and how customers buy insurances

in Mexico; second a thorough grasp of a total quality strategy that provides the business

foundation for satisfying these customers; and third, establishing goals required for

quality leadership.

Dr Kaoru Ishikawa made many contributions to quality, the most noteworthy being his

total quality viewpoint, company wide quality control, and his emphasis on the human

side of quality. Dr. Ishikawa emphasized the use of seven basic tools:

• Pareto analysis

• Cause and effect diagrams

• Stratification

• Check sheets

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Quality Management Report on Lette Insurance Co

• Histograms

• Scatter charts

• Process control chart

He believed these seven tools should be known widely, if not by everyone, in an

organization and used to analyze problems and develop improvements (Taque). Lette

insurance would benefit from the “Cause and Effect” diagram because it identifies many

possible causes for an effect or problem. It can be used to structure a brainstorming

session and immediately sort’s ideas into useful categories.

Shigeo Shingo is strongly associated with Just-in-Time manufacturing, and was the

inventor of the single minute exchange of die (SMED) system, in which set up times are

reduced from hours to minutes, and the Poka-Yoke (mistake proofing) system (Hrvinak).

He quotes “Improvement usually means doing something that we have never done

before.” He distinguished between “errors”, which are inevitable, and “defects”, which

result when an error reaches a customer, and the aim of Poka-Yoke is to stop errors

becoming defects. The theory behind Shingo about errors being reached to a customer

related to Poka-Yoke. This theory will benefit Lette insurance if they were to distinguish

any errors, prior to providing customer support to insurers.

Philip B Crosby is known for the concepts of “Quality is Free” and “Zero Defects”, and

his quality improvement process is based on his four absolutes of quality (Referenced for

Buisness):

• Quality is conformance to requirements

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Quality Management Report on Lette Insurance Co

• System of quality is prevention

• Performance standard is zero defects

• Measurement of quality is the price of non-conformance

The theory behind Philip Crosby zero defects was to make sure to do the job right the

first time. Lette insurance should implement this when working with clients and

providing them with exceptional customer service that meets their demands.

Analysis

The focus for Lette Insurance is improving processes they currently use to become more

efficient. Take for example one of many Lette insurance competition is Gieco and State

Farm. Lette Insurance should strive on quality service while exploring ways to reduce

operating costs to increase profits. To achieve this goal Lette Insurance must adhere to

total quality management for each aspect of the business. In order for the company to

expand into other markets, standardized processes and procedures must be established to

ensure quality.

One of Lette Insurance strategic goals should be to provide better customer service by

having accurate data and responding to customer requests. They need to implement a call

center that is available around the clock for customer service needs. In addition have

multiple tools to measure quality and customer satisfaction. Service is a key factor for all

businesses or organizations. When servicing a customer, the customer must be treated

fairly and respected. Lette Insurance should be able to deliver quality service to their

customers by responding to customer needs. Taking care of the customer needs will

retain and grow their customer base.

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Quality Management Report on Lette Insurance Co

Lette Insurance strategic plan for quality management and customer satisfaction is to

listen, act, and improve the company, its products, and its services. Another idea Lette

Insurance should conduct surveys that will gather information from the customer’s

comments on how to improve services and products the company offers. Then last is

customer satisfaction that is the important concept for Lette Insurance. Customer

satisfaction leads to profitability because a satisfied customer is more likely to spread the

word to others. Word-of-mouth is an important.

Recommendation:

The recommendation tool for Lette Insurance for better quality management would be

Six Sigma, which will emphasize on understanding the needs of the customers before

making any changes to business processes. This will help Lette insurance in building

customer loyalty among their policyholders, which is necessary for the long-term

success. Lette insurance can hope to increase satisfied customers and most likely be

recommended by a customer that offers quality services while advising a friend, relative

or business associate. Six Sigma will help enable managers in taking informed decisions

based on statistical data. With the use of Six Sigma tools and techniques, managers no

longer have to rely on their perceptions or gut feelings for rendering the level of services

promised to policyholders, clients, and prospects.

Six Sigma tools and techniques aim at streamlining business processes in such a way that

helps in reducing costs. This will help Lette insurance to improve their savings and avoid

drastic cost-saving measures such as downsizing, which can have a negative effect on

employee morale. It can also create doubts in the mind of policyholders and prospects as

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Quality Management Report on Lette Insurance Co

downsizing usually attracts a lot of negative publicity (Jacowski). The final

recommendation for Lette insurance that involves customer satisfaction in insurance

claims settlement. Six Sigma helps because it will enable Lette Insurance to streamline

their claims settlement process that normally comprises of various other sub-processes,

often leading to complexities and time delays. Six Sigma has started utilizing automated

tools and techniques that will make improvements in their existing claims settlement

process (Jacowski).

Reflections

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Quality Management Report on Lette Insurance Co

Source Cited:

Jacowski, Tony. Six Sigma In The Insurance Industry. [online]Available: http://ezinearticles.com/?Six-Sigma-In-The-Insurance-Industry&id=549537 January 15, 2011

Lette James. Lette Insurance Agency [online].Available: http://www.letteinsuranceagency.com/ January 15, 2011

Peterbarka, Peter. Six Sigma for Small Business [online].Available: http://www.6sigma.us/six-sigma-article-small-business.phpJanuary 15, 2011

BusinessBalls Article. Quality management history, gurus, TQM theories, process improvement, and organizational 'excellence. Available http://www.businessballs.com/qualitymanagement.htm February 20, 2011

 W. Edwards Deming quotes (American Consultant, Stastistician and Educator, 1900-1993). Available http://thinkexist.com/quotation/profit_in_business_comes_from_repeat_customers/226671.html February 20, 2011

McGowan, Geraldine. Guide to Management Theory of Joseph Juran. Availablehttp://www.work.com/management-theory-of-joseph-juran-15436/ February 20, 2011

Feigenbaum, Armand. Quality Control. Availablehttp://webarchive.nationalarchives.gov.uk/+/http://www.dti.gov.uk/mbp/bpgt/m9ja00001/m9ja000018.html February 20, 2011

Tague’s, Nancy. The Quality Toolbox, Second Edition, ASQ Quality Press, 2004, page 15. Available. http://asq.org/learn-about-quality/seven-basic-quality-tools/overview/overview.html February 20, 2011

Hrivnak, Matt. Shigeo Shingo quotes. Availablehttp://matthrivnak.com/2008/05/04/shigeo-shingo-quotes/ February 20, 2011

Reference for Business. Quality Gurus. Available http://www.referenceforbusiness.com/management/Pr-Sa/Quality-Gurus.html

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Quality Management Report on Lette Insurance Co

February 20, 2011

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