About the company
AAMI is one of Australia?s leading insurance companies in the motor vehicle, home and compulsory third party (CTP) insurance markets. Operating in all Australian states except Western Australia, AAMI employs more than 1,200 people in over 50 offices, branches and customer service centers. A leader in innovation business and marketing strategies, AAMI has an excellent reputation for direct customer service in the insurance industry.

Incorporated in Victoria in 1969, AAMI commenced business on 1 January 1970 as an underwriter of motor vehicle insurance offering a major independent alternative to government-owned or motor club-owned motor insurers.

AAMI?s business has continued to grow and develop so that today home insurance and CTP insurance are integral parts of AAMI?s business, making increasingly important contributions to the company?s results. The general insurance business is immensely competitive. In such an environment a failure to demonstrate a high commitment to customer service will inevitably impact upon the success of the business. As you will see, AAMI has found a unique tool to improve customer service.

In July 1996, Professor Alan Fels, Chairman of the Australian Competition and Consumer Commission, created history when he launched Australia?s first ?Customer Charter? in the private, non-utility sector. In his address, Professor Fels acknowledged the value of AAMI?s work:
?This Charter is the first to my knowledge that offers real measurable benefits rather than vague un-measureable ?feel good? promises. It is also the first time a charter a charter has been used as one of the principle weapons of competition in the private sector. I have been an advocate of Charters, particularly in the public and privatized utility sectors, because in those areas the supplier of services is in a monopoly position. Now it has been demonstrated that Charters can set quality service standards consumers may come to expect in current competitive markets.

?One of its attractive features is that in a seamless way it has combined compliance with fair trading laws, state-of-the art quality customer service features and a competitive tool in the marketplace.?

The AAMI Customer Charter sets the company apart as a unique provider of customer service in Australia. The company has been recognized for its dedication to service, winning the 1996 Fair Trader of the Year Award from the Victorian Government. 1997 Australian Customer Service Award in the Large Business category and the 1998 Edmund Rice Award for business ethics, professional responsibility, ethical decision-making and providing a duty of care in business, profession or industry. The Charter has been central to everything AAMI does and plays a key role in the phenomenal growth of business.

AAMI Customer Charter
The AAMI Customer Charter (see Figure 1.) is central to AAMI?s approach to the service it provides. Because of the uniqueness of the Charter concept in the Australian private sector, it is important to understand what a Customer Charter is and how AAMI developed its ?living document?. Simon Smith, General Manager, Consumer Issues and Charter Office, explains the history of Charters:
?The United Kingdom is regarded as the birthplace of modern Charters. In 1991, the John Major Government launched its proposal for Citizen?s Charters. It was very much a private sector development designed, in the context of ongoing privatization, to make providers of public services responsive to their clients ? the general public.

?In the Australian public sector, the concept of Charter is beginning to emerge. In Victoria, the recently corporatized water companies have published documents called Charters and the Australian Tax Office has circulated a Tax Payers Charter. Since the Prime Minister issued a directive to government departments regarding the formulation of Charters there are now around 100 Public Sector Charters.

?It is important to recognize the difference between a Charter and a Service Guarantee. A Charter publishes service standards which customers are entitled to expect from across the whole organization promoting the Charter. Service Guarantees focus more narrowly on a specific part of service delivery. For example, the ANZ Bank has a ?$5.00 Five-Minute Teller Queue Guarantee?. Service guarantees make no claim to set a full range of service standard throughout the entire business.?

Why was AAMI the first in the Australian private sector to establish a Charter? Michael Kay, Executive Chairman, Corporate Affairs, provides the answer: ?AAMI has always been a market leaders in the insurance industry. It was the first insurer to introduce Lifetime Rating One, Lifetime Guarantee of Repairs, Use of Genuine Parts and the unique Valet Repair Service. The introduction of the AAMI Customer Charter again leads the way by raising the bar on what are appropriate standards of practice and service in the insurance industry. The public accountability mechanisms of penalty for failure and annual public audit provide AAMI with a fresh competitive edge in an intensely competitive market. The penalties and audit drive internal behavior and give the charter external credibility.?

At AAMI it is the rigor of the Charter process that promotes on going customer service improvements across the corporation. The first AAMI Customer Charter took 15 months of exhaustive (and on-going) consultations before it was launched. The Charter provides a new model for continuous improvement of products and services. This is because the Charter focuses on outcomes for the customer and not the process itself. There are four core ingredients to any Customer Charter. They are:

The obligation to consult.
The obligation to inform and be accessible.
The obligation to be accountable.

The obligation to provide redress
These obligations derive from the United Nations Rights of the Consumer resolutions advocated by President John F. Kennedy in 1961.

The Charter ?obligation to consult? places great emphasis on employee participation in the on-going development of a Customer Charter. Staff are a key stakeholder and have been crucial in the development of the AAMI Customer Charter. Important staging posts for employee participation in the Charter have been:

Figure 1

AAMI

Customer Charter

ACCESSIBILITY
1. We will be on call 24 hours a day, 7 days a week and at all times have a decision maker available to respond to your needs. For example, alternative accommodation for your family in an emergency household claim such as a house fire. Simply call us on 13 22 44. (Please remember timed charges apply from mobile phones).
2. We will provide our documentation in Plain Language.
3. We will respond in detail to all written customer enquiries within 5 working days.

PERSONAL INFORMATION ? PRIVACY, ACCESS AND CORRECTION
4. We will value the personal information you give us and will take all reasonable precautions to prevent unauthorized access to that information.
5. We will not give your personal information to any other organization for their marketing purposes.
6. We will, with your help, keep your personal information accurate, complete and up to date. We guarantee to correct any error we make on your renewal notice that you bring to our attention.
7. You have the right to inspect the personal information we hold about you and request corrections. This right is subject to some exceptions relating to information given in confidence and claims investigations. Please ask for our brochure ?AAMI and Your Personal Information?.

CLAIMS SERVICE GUARANTEES
8. We will nominate a person to take responsibility for assisting you with your claim.
9. When your home is broken into we will:

Provide immediate advice and assistance such as securing your property and arranging emergency glazing.
Arrange any necessary emergency accommodation.
Fully explain the arrangements for settling your claim and confirm them in writing.
Regularly contact you during the process of your claim to ensure all repairs and replacement items have been completed and supplied to your satisfaction.
At your request arrange trauma counselling for you and your family up to $250.
10. The quality of the workmanship and the materials authorized in the repair of your car will be guaranteed for the life of the car.
11. We will post a bank cheque within three working days of agreeing to settle your motor vehicle total loss.
12. When you use our Valet Service for your car claim, for no extra cost we will:

Pay your taxi home or to your work after you deliver your car to our nearest Customer Service Center.
Make all the necessary repair arrangements for you.
Keep you fully informed of the progress of those repairs.
Pay your return taxi fare to our Customer Service Center so that you may collect your repaired car.
Before you drive away, inspect your car with you to ensure you are satisfied with the repairs.

PREMIUMS
13. We will reward long term claim free driving by giving eligible policyholders a Maximum No Claim Bonus Rating for life. For a full explanation of the reward system please ask for our brochure ?How Lucky Can You Get??
. 14. We will reward eligible claim free household policyholders with a progressive No Claim Bonus. For a full explanation of the reward system please ask for our brochure ?How Lucky Can You Get??.

PENALTIES
15. Our commitment to quality service standards is reinforced by our promise to pay a $25 penalty if we fail to meet these standards. You have the right to request a penalty payment whenever you believe we have failed to meet any of the standards outlined in this Customer Charter.

REDRESS
16. We will maintain a free and accessible Internal Dispute Resolution process. In addition, we are a member of the independent external Insurance Enquiries and Complaints Claims Review Panel System. For assistance simply ring 13 22 44 or ask for our brochure ?How we make sure a small misunderstanding does not become a big problem?.

CONSULTATION, ACCOUNTABILITY AND AUDIT
17. We will report publicly and annually regarding our compliance with this Charter. Our report will be independently audited by KPMG.
18. This Charter will be reviewed annually.

Charter ?Pools of Knowledge?
The ?Pools of Knowledge? are groups which represent the various operational divisions of the corporation. Each team comprises a blend of experienced and new staff drawn from each state. Working to a tight timetable these groups develop charter promises for testing, conduct research within and outside the company, and make recommendations on their findings. The teams provide opportunities for leadership, development of research skills, introduction to different aspects of the business and encourage esprit de corps.

The Annual Charter Conference
This two-day conference brings together all the members of the ?Pools of Knowledge? as well as senior management and selected guests from government and consumer sectors. The ?Pools? deliver their research findings and recommendations upon which there is spirited discussion. This enables enormous sharing of knowledge amongst staff from all over Australia.

Regular monitoring of Charter Performance
A third-party audit by the chartered accounting firm KPMG is conducted on an annual basis and tests to ensure that each of the Charter promises are being kept. The rigor of this public accountability encourages attention to detail and delivery of optimum service.

Furthermore, the introduction of the AAMI Customer Charter has led to many system improvements to support people delivering service. The system improvements include:
1. Formulization and refinement of operating procedures. The insurance industry is a very telephone based industry. The need to ensure consistency in the Delivery of Charter standards has led to a significant formulization and refinement of operating procedures. These refinements are documented in training and operational manuals.
2. Introduction of tighter monitoring processes to ensure standards are maintained. For example, random telephone checking by all branches to ensure the telephone system is accessible in support of Charter Promise 1.
3. Introduction of mobile phone registers to ensure duty managers are available to enable 24 hour, 7 days a week customer access to a decision maker. Customer surveys found that people didn?t just want the phone answered 24 hours a day but wanted access to someone who could make a decision straight away. Few companies understand this distinction!

To develop the Charter, much thought was given to the principles it was to be based on. The guiding principles behind the Charter can be summed up in the core values shown in Figure 2:

Figure 2. AAMI?s Core Values
Quality through Continuous Improvement
Each of us will be accountable for continuous improvement and creating value. We will strive to get it right first time. We will work to be the best.

Honesty and Integrity
We will be open and honest. We will honor our obligations and commitments to our customer, the people we do business with, each other and the community at large. We will be fair and objective. We will protect the confidentiality of business information.

Respect for the individua
We will treat each other with respect and dignity as individuals who want the opportunity to contribute, learn and succeed in a positive, safe and secure environment. Recognition and reward will be based on performance. AAMI will be a place where people want to work.

Value the Customer
We provide customer satisfaction over time, that is of value and exceeds the customer?s expectations ? thereby gaining trust and loyalty.

Sense of Urgency
Urgency and action comes from the drive and energy of the people, not events. We will vigorously pursue all tasks including the most difficult ones. We are doers and not observers or commentators.

High Standards of Customer Service
By systematically aligning all practices, processes and systems with the core values (see Figure 2), AAMI endeavors to generate and reinforce high standards of customer service. These core values are consistent with the service needs of customers as discerned through the regular Charter Consultation process. These standards are transparent and reinforced by a penalties audit and the annual reporting of whether the Charter promises are adding value to the customer.

Clearly, it is integral to the AAMI Customer Charter to continually consult all stakeholders. These include staff, consumer advocates, government and regulators. Consultation and research takes place on such issues as:

What products should be offered and at what price?
What targets or standards of service should be set?
What aspects of service should be guaranteed?
What should happen if the service standard is not met, i.e. what penalties for failure?
Is a written apology sufficient or should it be money?
What procedure is there for dealing with complaints?

Particular emphasis is placed on consultation and research obtained from existing, potential and lapsed customers. Here, qualitative and quantitative research is conducted by leading Australian researchers Brian Sweeny and Associates. Features of this service research, obtained via quarterly tracking studies, are:

Image and performance of the major insurers in each market on market share awareness, advertising recall, propensity to buy and imagery.
A Customer Satisfaction Index (CSI) to measure car and home claims service delivery. Each quarter AAMI monitors customer satisfaction by sending out 1,000 questionnaires to policyholders who have claimed with AAMI. Customers are asked questions such as would they recommend AAMI to a friend. In the fourth quarter of 1996, 90 per cent of respondents answered in the affirmative.
In addition AAMI also undertakes quarterly studies of 900 motorists around Australia in which AAMI and its competitors are assessed on claims handling performance.
A phantom shopper survey to measure telephone sales delivery of the major insurers in each market.
Focus groups to evaluate creative concepts.

Customer needs and requirements differ depending on the stage at which they interact with the business. Two common interactions are sales and claims. In addition to the customer service research methods identified above, other customer service initiatives designed to identify customers? requirements at the sale and claim stages include:

24-hour, seven days a week toll free access: 13 22 44. All telephone operators are empowered to make decisions.
Coordinated system of duty managers to enhance 24-hour, seven-days-a-week decision making access (Charter Promise 1).

Publication of the specific service standards consumers can expect (AAMI Customer Charter). This is provided to all new customers and continuing customers upon renewal.
Five-day response to correspondence standard (Charter Promise 3) designed to provide customers with certainty and a prompt reply to their concerns. It is important to note that AAMI believes a mere acknowledgement is insufficient; the company takes time to respond in detail within five working days.
Unique valet claims service (Charter Promise 12) designed to make the claims process as hassle free as possible.

Visible and accessible penalty system for breaches of service standards ($25) (Charter Promise 15).
Comprehensive privacy provisions (Charter Promises 4 and 5) to protect confidential customer information.
Lifetime guarantee of all car repairs designed to reinforce confidence in the quality of repairs (Charter Promise 10).

The final important component of the consultation/research process is the many unsolicited customer suggestions obtained through various AAMI access points. These include the Customer Comment Line, customer testimonials and internet contacts.

Training & Incentives
To fulfil the promise of the Charter, staff must be given incentives and training. AAMI?s training and development programs are designed to integrate personal development of staff with continuous operational improvement focused on delivering excellent customer service.

Through the systematic alignment of all practices, processes and systems with the company?s core values AAMI is able to generate and reinforce high standards of customer service. These core values are consistent with the service needs of customers discerned through the regular consultation process. In summary the key training and development programs are:
Induction: All staff participate in a five day induction training course when they first join AAMI. This program, apart from an introduction to AAMI, develops both service skills and starts the process of values alignment.
On The Job Training: Through systematic on job training and coaching by managers, supervisors and peer coaches, staff develop both the technical and service skills required to provide high standards of service. This is supplemented by off- job service training as appropriate, e.g. letter writing courses.
Annual Charter Training: Each staff member is required to go through annual training focusing on the Charter Promises to update their knowledge and focus on the better delivery of products and services.
Performance Management: Formal reviews at 1,3, 6 and 12 months of service and annually thereafter are supported by three days of training in day-to-day performance management for all supervisors and managers. These reviews focus not just on results (Key Performance Indicators, or KPIs) but the behavior (dimensions) required to perform successfully, e.g. customer sensitivity.
The Salary Review Process: This process includes a structured approach to evaluate customer service skills, as well as measuring additional contributions to AAMI/Customers. These contributions are then reflected in the level of salary increase.
Individual Management Initiatives: These provide non-financial rewards and recognition. These include ?Service Person of the Month?, theatre tickets and other in-kind recognition. These vary from office to office depending on the size and dynamics of the local region.

Clearly staff are trained to provide exceptional service in any situation but ongoing improvement requires feedback from customers and the ability for the organization to respond to changing customer requirements. AAMI listens and responds to its stakeholders in a variety of ways. Some of these include:

Commissioning focus groups to survey existing customer views as well as potential customer?s views. These take place on a regular basis in different parts of Australia.
Consulting with all levels of staff. It is staff who are ultimately responsible for providing the products and services and they are in a unique position to know whether the organizational systems are robust enough to meet AAMI?s service standards. Recent examples of consultation have been:
(i) The 1996 Enterprise Agreement provided a multi-level forum to identify issues affecting organizational performance, e.g., the most appropriate ways of meeting customer demands for service access at different times of the day was considered by a work group which then consulted with every member of staff to identify effective work patterns. The Enterprise Agreement process is an ongoing one.
(ii) In 1997, a Culture Survey was piloted to identify the balance between shareholder, customers and employee needs as well as areas for improvement.

The other core issue of responsiveness concerns a firm?s ability to recover from mistakes and rectify customer?s problems. In the case of AAMI both the General Insurance Code of Practice and the AAMI Customer Charter give high priority to the provision of a formalized Internal Disputes Resolution System (IDR). This means that customers who are disappointed with an AAMI decision can have it elevated through the company to the Consumer Affairs Councilor for a final decision. AAMI is the only company to publish its IDR figures, further evidence of the company?s desire to be accountable and transparent in its dealings. Beyond this process customers can have access to the Insurance Enquiries and Complaints Claims Review Panel (IEC) or the traditional legal system through the courts or the Small Claims Tribunal. These processes are free and bind AAMI but not the customer, who retains their legal rights.

At the same time Promise 1 of the AAMI Customer Charter makes the public commitment to customers that ?We will be on call 24 hours a day, 7 days a week and at all times have a decision maker available to respond to your needs. Simply call us on 13 22 44.?

Both the commitment in respect of an Internal Dispute Resolution process (Promise 16) and accessible decision maker (Promise 1) are supported by extensive operational guidelines and training. All staff are empowered to make decisions within the limits of their authority and to elevate any customer concerns as quickly as possible to ensure a satisfactory outcome for the customer.

Innovation
Listening to and consulting with its stakeholders has given AAMI the inspiration to develop a number of innovative products and services. As the Charter process itself is a significant innovation, the following specific examples should be seen in the context of the overall Charter environment rather than as stand alone ideas:

The refinement of the Valet Claims service through the Charter process. This has led to a better
defined product and enhanced service delivery (see Promise 12). The valet service is a key differentiator and is unique to AAMI. Other insurance companies simply pay for the repair and let the customer deal with the repairer. AAMI, particularly through Valet, takes full responsibility for the claim and repair outcomes and it tops it off with a Lifetime Guarantee. This has created a culture of responsibility and ownership throughout the company.
Implementation of pre-completed New Business and Renewal forms to assist customers in the finalization of their insurance agreement.
?Pay by the month? home premium scheme designed to help consumers budget for their insurance commitments.
Development of business simplification ?hassle free claims process?. This initiative is designed to encourage the use of the mainframe computer system so that at any point in time customers can be brought up-to-date with the status of their transactions. This means no double handling, no call-backs, no re-works, but simple, efficient cost effective processes.

When considering the effort and resources AAMI has put into its Customer Charter, the question has to be asked: Does it work? At the end of the day do shareholders see the returns on the company?s investment in Customer Service? The answer lies in the company?s results.

The Results
In the context of Australian General Insurers, AAMI is a relative newcomer. Since its incorporation in 1969 the history of the corporation has been characterized by innovation in products and services, and a focus on delivering excellent claims service and steady growth. This is all in a section of the insurance industry which is intensely competitive. Significant milestones include:

Steady growth in premium income. In 1997 premium increased by 15 per cent to $460 million. This followed a 38 per cent increase in premium income in 1996 to $401 million. Market share rose in all areas of business.
An Average of 25 per cent return on shareholders funds over the past ten years and a regular underwriting profit. The company does not believe that any competitor has matched these achievements.

There are also a number of indicators of customer satisfaction with the services provided by AAMI. They include:

Significant recent increases in the size of the portfolio. In 1997 AAMI had 1.6 million customers: in 1995 it had 1.04 million customers. This is a 20 per cent increase. It follows a 15.6 per cent increase from 1994.
AAMI has an increasing share of the national insurance market. Research by Brian Sweeny in 1996 showed a 15 per cent national share compared to a 14 per cent share the previous year. It continues to rise at a significant rate.

Excellent Internal Dispute Resolution figures. In 1996/97, 408 customers took their dispute to the AAMI Consumer Affairs Councilor. 50 (12.3%) of these claims matters were resolved in the consumer?s favor. A further 90 appealed to the free external Insurance Inquiries and Complaints Claims Review Panel where the AAMI decision was confirmed in 48 (53.3%) of cases. These claims dispute figures are in context of an average 150,000 claims that AAMI handles for customers each year ? a minute percentage of claims.
Small number of Charter Penalty payments. As at the end of the 11th month of 1996 Customer Charter (31 May 1997), there had been 107 $25 penalty payments. This is in the context of 150,000 claims per annum. These payments have indicated systematic weaknesses which have enabled operational processes to be modified and enhanced. Lastly, AAMI receives a significant number of unsolicited customer testimonials in relation to its claims service. Figure 3 reproduces a letter typical of the many received. It was sent by one of AAMI?s customers from Melbourne?s outer suburbs who wrote to the Chief Executive.

Figure3.

?During the recent long weekend, we discovered several leaks in the roof of our three month old house. As we were unable to locate the builder or persuade the home warranty insurer (who suggested that we call State Emergency Services!) to carry out emergency repairs, we rang AAMI, out of desperation, for some advice.

?We got more than expected. Without the slightest fuss. ?Joanne? then arranged for Mr H from X Company to attend to our problem within an hour of our one and only telephone call to AAMI (at approximately 11.00 pm). As it was still drizzling, nothing much could be done on that night, apart from an inspection. However, Mr H returned at 8.00 am the following morning (Sunday) to carry out temporary repairs.

?In the following days, we were contracted by Mr G of AAMI and Ms Cox of X company following up on the progress of the repair.

?We commend and thank you for your high quality of service and assistance.?

The final word comes from Brian Keane, AAMI?s Chief Executive Officer: ?Business is no longer the sole arbiter of the level of service, or quality of products necessary to deliver customer satisfaction. More than ever before, customers seek to exercise control over their destiny and actively demand to set the agenda for the delivery of services.

?Today?s consumer is supported by a range of government and community bodies committed to ensuring that there is a balance in the business relationship between purchaser and provider. If AAMI is to convince customers to choose it, we must be able to clearly distinguish our product, our delivery, our service and image from the balance of the market ? and that difference must be truly noteworthy.

?The AAMI Customer Charter is an initiative that clearly sets out the service standards we guarantee to our customers. But standards against which our performance will be reported on publicly and annually.

?The Charter provides a means of communicating in a very open way, just what AAMI is all about. Its honesty, its penalties for failure and requirements for accountability is our public declaration of self-belief. We can do that because AAMI is not a logo, but 1200 dedicated people of all ages, backgrounds and denominations doing their best. I am very proud of them and believe they do their job better and with more dedication than our competitors.?