Total Insurance Inc.: Application Of ABC Management Concepts For Evaluation Of Sales Teams

Abstract

Total Insurance, Inc. (TII) is an instructional case to expand students’ understanding of potential benefits of ABC beyond traditional manufacturing applications rather than as a technical ABC application exercise. It does not require complex calculations, yet it allows instructors to discuss why companies may adopt some ABC concepts and demonstrates the process by which they create and develop the information to build the system. Jack White was the CEO of TII, a successful independent insurer. Several major insurance providers, such as Travelers, Erie, and The Hartford, rely on independent agents around the nation to sell and service their policies. The company acted like a broker between the insurance providers and the customers, but it is truly an agent of the insurance provider in each transaction. The company handled $100 million in premium volume, mostly from commercial insurance ($86 million) with very different apparent performances from their sales force teams. The teams of one or two sales producers had one to five other employees and drew differently from the common resources of the firm. He was having trouble distinguishing which of his sales teams were contributing most to his bottom line. He particularly needed this information in order to help the sales teams to improve their own productivity. White, recalling an accounting course he had taken in his Executive MBA program, decided to investigate the ability of ABC analysis, as applied in that course toward evaluating customers, to gather data on cost drivers and resource use to determine the productivity of his sales teams.