BCWorldWideWorkshopIndustryBreak-OutSessionClientSimulationCaseStudyBackgroundTheFirmhasrecentlyreceivedaverybroadRequestForProposal(RFP)fromtheChiefExecutiveOfficer(CEO)ofthenewlyformedColossalInsuranceCompany(enclosed).ColossalwascreatedthroughahighlypublicizedmergerbetweenBedrockInsuranceCompanyandAvantGuardInsuranceInternational.Themergerisofhistoricproportionsintheinsuranceindustry,creatingaglobalenterprisecapableofcompetingequallywithleadinginsurersinallmajormarkets.BasedonpubliclyavailableinformationaswellasFirmintelligence,weknowthefollowing:ÞBedrockInsuranceCompanyAninternationallifeandhealthinsurer,BedrockisbasedintheUnitedStates,withincreasingpresenceintheEuropeanmarkets.Bedrockhasbuiltitsreputationbyfocusingonthelargecaselifeandhealthinsurancemarket,providingvirtuallyalllinesofproducts.Ithasgrownovertheyearsbyacquiringnumeroussmallercompaniesandblocksofbusiness.Thishascreatedastrongbusinessintheannuity,largecaseindividuallifeandgroupemployeebenefitsbusinessdistributedthroughalargenetworkofGeneralAgents.Althoughthecompanyadvertisesits“World-Class”high-qualityservice,whenaskedfordetail,thecompanywasunabletoprovideanymeaningfulcustomerservicecostsorperformancelevels.Thecompanyhasdonerelativelywellonexpensecontrolgivenitsservicestrategy,butcurrentexpenselevelsstillrunabout4%higherthanindustryaverages.Revenueincreasesweredramaticinthelate80sandearly90s,buthavebeen15%belowplaninthelast3years.Bedrockwasapproached2yearsagobyArthurAndersentoparticipateinanindustrybenchmarkingstudy,butwasunabletoprovidethedetailedcostinformationrequiredforthestudy.Althoughthecompanyisprofitable,baseduponourpreviouscontactswiththiscompanyaswellastheinclusionofaprofitabilitystudyinthisBCWorldWideWorkshopPage1InsuranceBreak-OutSessionDecember12,1996RFP,wesuspectthatthecompanymaynothaveagoodunderstandingoftheirprofitsources.Bedrockunderstandsthatsavingsandefficienciescouldbegainedthroughsystemintegration,butisunsurehowtoproceed.WeknowthattheyarecurrentlyoperatingwithseveralsystemswhicharelegaciesofpreviousacquisitionsandhaveconcernsabouttheimplicationsofthemergerwithAvantGuard.OneofourArthurAndersenConsultantsspokewithBedrock’sInformationTechnologyVicePresidentatarecentindustryseminarandknowsthattheyareespeciallyconcernedaboutthecontrolsintheircurrentsystem.ÞAvantGuardInsuranceInternationalWithofficesinLosAngelesandTokyo,AvantGuardhasconsiderableshareofboththeUSandAsia/Pacificpropertyandcasualtymarkets.Althoughitssuccesswasinitiallyinpersonallines,thecompanyhasgrownitscommerciallinesoverthelast5yearsbyprovidingacommodityproductatcompetitiverates.Virtuallyalllinesofcoveragearenowoffered,withentrancetotheworkers’compensationarenamadepossiblethroughtheacquisitionofaspecialtycarrier24monthsago.Productsaregenerallyofferedthroughindependentagents,althoughsometestmarketingofdirectsalesisbeingconducted.ElectronicsalesthroughtheInternetisbeingexplored,butnoactionhasbeentakentodate.Overalloperatingexpensesareinlinewithindustryaverages,althoughhigherthanaverageintheworkers’compensationdivision.Companyrevenueshaveshownsteadygrowth,butmostgrowthcanbeattributedtothenewercommerciallines.Combinedlossratioshavebeenslightlyhigherthanindustrynormsforthepast2years.Assimilationoftheworkers’compensationcarrierhasnotbeensmooth.Itissuspectedthatarecentexodusofkeyexecutiveswillbefollowedbyhighturnoverthroughoutthedivision.Delaysinclaimprocessingtimehasalreadyresultedinseveralfinesbystateregulatorsanddeteriorationofthecustomerbaseisfeared.AvantGuardwasoneofthefirstinsurerstomovefromamainframetoaclientserverenvironmentandhasinvestedheavilyintechnologyovertheyears.TheirlargeInformationTechnologyorganizationhasprideditselfonitsprogrammingtalentandisnotknowntoutilizeoutsideconsultants.BCWorldWideWorkshopPage2InsuranceBreak-OutSessionDecember12,1996InstructionsUsingtheinformationandtoolsprovided,yourgroupshouldformulateaplanofresponsetothisclient.Discussionsshouldinclude,butarenotlimitedtothefollowing:¨Whatarethekeyissuesforthisclient?Whatisthemagnitudeandbreadthofchange?(Refertotoolkit)¨Whatservicesshouldthisclientseekfromabusinessconsultant?Whatarethebenefitstotheclientfromtheseservices?HowisthisdifferentfromtheRFP?¨WhatservicescouldArthurAndersenprovide?¨Whatserviceshavewetypicallyprovidedtoclientsinsimilarsituations?Doesthisdifferfromregiontoregion?Ifso,why?¨WhatobstaclesdoesArthurAndersenfaceinprovidingservicestothisclient?Howcouldthesebeovercome?¨HowshouldwepositionourresponsetotheRFP?Youwillhaveuntil12:15toprepareyourresponse.Bepreparedtopresentthehighlightsofyourplantothegroupatthattime.Youwillhaveapproximately5minutesforthispresentation.Attachments1.RFPletter2.MagnitudeofChangetoolkitBCWorldWideWorkshopPage3InsuranceBreak-OutSessionDecember12,1996
