Can Customer Relationship Management (CRM) strategies put the insurer focus
directly on the policyholder?

By Sally Praskey

When Laura Johnson opened the letter from her auto insurer
she shook her head in dismay. It was a promotion inviting her husband to purchase life
insurance from the same company. There was just one problem – he had passed away a
year ago. Of course, she had notified the insurer when she cancelled his auto policy.
“It’s a classic case of the right hand not knowing what the left hand is
doing,” she says ruefully.

Another consumer, Mary Redford, recounts the tale of her
home-business insurer, who simply couldn’t get her billing right, no matter how many
times she and her broker tried to rectify the situation. Finally, in exasperation, the
broker switched her policy to another company. Not only did the first company lose her
claims-free business, but, as Michael MacDonald, a partner in professional services for
NCR Canada, points out when told this story, it probably didn’t even know it had a
problem with its billing system.

Sadly, these kinds of scenarios play themselves out all too
often in the insurance industry, laying waste to any attempt at cultivating customer loyalty.

Unlike the retail industry, where customers may conduct
multiple transactions in the course of a year, “an insurance customer only touches an
insurance firm one to two times in a year,” notes Rochelle Coleman, senior solutions
marketing manager for Microsoft Canada. “And those contacts are going to dictate the
type of perception that a customer has of that company. So it becomes very important to
get it right the first time.”

Enter Customer Relationship Management – CRM for
short. CRM is all about getting to know your customers better in order to better meet
their needs. You might say it’s just a fancy word for plain old-fashioned customer
satisfaction – with a high-tech twist. In a nutshell, it involves capturing client
data, consolidating it, integrating it, analyzing it and then putting the results into the
hands of those who can use it to respond to the needs of current and potential customers.
Mark Shea, managing director, KPMG Consulting, describes it as “the art and the
science of making customers happy.”

CRM is more a business strategy than a technology, but
technology is the tool that allows insurers and brokers to implement the strategy.
Basically, CRM provides a “360-degree” view of each policyholder and the
products they have – and, just as significantly, haven’t – purchased.

“CRM really covers the full life cycle of managing
customers, from marketing through sales through customer service,” says Tom De Rosa,
solution leader, CRM, Oracle Canada. “It’s about implementing one-to-one
relationships with your customers and being able to differentiate customers based on value.”


The payoff can be dramatic. CRM not only helps companies
and brokers acquire new customers, but it also increases customer retention, as well as
revenue from existing customers. According to Harvard Business Review, a hike in
customer retention from 10 to 15 per cent can double profits. In fact, a survey of 295
companies by Insight Technologies Group reveals that a successful CRM program can result
in up to a 42 per cent increase in revenue, 35 per cent decrease in cost of sale, 80 per
cent decrease in processing errors, 25 per cent reduction in the length of sales cycle, 2
per cent increase in margins, and 20 per cent increase in customer satisfaction ratings.

Return on investment is also impressive. Bill Carrigan,
principal, KPMG Consulting, pegs the payback at between six and 12 months, in many cases.

Small wonder that, in a study by Boston-based research and consulting firm the Aberdeen
Group, 93 per cent of CEOs ranked CRM as the top factor contributing to company success.

The foundation on which to build a CRM strategy is data
warehousing, a term that “used to be really hot six years ago,” says MacDonald,
who goes on to describe a new insurance-specific component for analyzing customer behavior
in NCR’s Teradata Warehouse. Although he understands CRM involves a broader
integration, he has seen few tangible examples of such a strategy. “I have a hard
time finding organizations that have actually taken it to that level. I would say
that’s especially true with the insurance industry.”

For example, effective cross-selling is virtually
non-existent in the insurance industry, MacDonald says. “When my car insurer sends me
my renewal, they say: ‘hey, have you ever thought of doing house insurance with
us?’ That’s probably just a standard thing they put on everybody’s renewal,
whether or not the customer already has it.” The banks, on the other hand, began to
integrate all their customer data 10 years ago, he adds, and are now “well along the
way to understanding all the products and services that their customers have.”

MacDonald also stresses the importance of tracking all
interactions with the customer – call centre, e-mail, fax, or face-to-face – in
order to measure profitability. “For example, if two customers have a $100,000
policy, most organizations would say they’re equally profitable.” However, if
one customer is serviced on the Web, while the other requires much more personal
attention, the latter is more expensive to service.


The question for many insurers today is: where to start on
a CRM strategy? Experts agree that for implementation to succeed, it should begin with a
commitment from the CEO that the organization must structure itself around the customer.

Buy-in accomplished, the first challenge, according to
MacDonald, is extracting the data that resides on the plethora of operational
“silo” systems and consolidating it into a useable format. “That’s the
hardest thing to do,” he says. “You have to map your data, then you have to move
it, transform it and clean it.”

If it all sounds overwhelming, it’s not necessary to
digest the whole CRM pie at once, says De Rosa. “The logical thing is to start with
the view of the policyholder and the broker community,” he advises. “Bring all
of your customer data together, and then you can start making use of that
information.” Smaller brokers who may not be able to afford a full-blown CRM system
can still benefit from certain aspects of the strategy, such as contact-management and
sales-force-automation systems, he says.


Although there is a scarcity of made-in-Canada CRM success
stories, that doesn’t mean they don’t exist. Mike Morris, senior manager of
strategic products, at Beneficial Life Insurance Company in Salt Lake City, Utah, faced
the challenge of developing and implementing what he calls a “customer-care
system” back in 1999. At that time, he notes, “the term CRM was largely unknown.”

Beneficial Life, a $2-billion regional insurance company
with about 1,000 independent and captive agents, sells life and annuity products, as well
as other financial services through alliances with other insurers. It used Oracle
Corporation in developing a customer-care system that went live in a mere seven months.

The company had two objectives, says Morris. The first was
to enable customer-service representatives to give accurate quote information to customers
over the phone, while the second was to have a complete view of a policyholder’s
assets, contacts and relationship with the company. “This system gives a high-level summary
of that individual’s entire relationship with the company, in a single screen,” he says.

It has also increased the company’s
“once-and-done” rate. As Morris explains, “we had a goal of getting to
about 85 per cent once-and-done. When a policyholder calls, we want to have all the
information at our customer-service representatives’ fingertips, so they could
resolve the issue on that phone call. Our numbers for once-and-done prior to this system
were about 30-35 per cent. And post this system, they were in the mid to upper 60s –
almost double. It’s a considerable cost savings.”

Beneficial provides brokers and agents with access to a
smaller, Web-enabled version of the system. Although Morris says the company has not yet
begun to “proactively process information” in order to perform more upselling
and cross-selling, that is the next step.


Like many others, Morris identifies
pulling together all the information that may reside in many different databases as the
greatest challenge in a CRM system. He advises organizations to beware of the quick
technology fix. “There’s a lot of pre-work, in terms of business process,
redesign or enhancement, that needs to be done before you can have a successful
implementation. You can’t expect technology to be the catch-all of everything.”

“There’s no best way for CRM,” says
Microsoft’s Coleman. “If someone comes in and says: ‘I’ve got the
technology for you,’ they’re missing the boat.” While Coleman agrees that
insurers are only “in the very preliminary stages in adoption of CRM
technology,” she predicts that, by 2004, “about half of the life companies and
between a quarter and half of the general insurance companies will have a thorough
enterprise CRM solution in place.”

They may have little choice if they are to remain
competitive. “Forward-thinking organizations are embracing a new vision for the
future . . . the ‘one-to-one’ enterprise,” says KPMG’s Shea.
“They target and serve their most valuable customers and they provide the customer
individualized treatment through products and services.”

Brokers also have an important role to play in this brave
new customer-centric world. While some may resist such changes for fear they will lead to
direct sales, Coleman says that is not the case. “How brokers are going to be able to
embrace this change is if they immerse themselves in it and become unique. The early
broker adopters are the ones who will succeed the most.”

She also has a message for those who believe the growing
use of the Internet, the driving force behind the CRM trend, will depersonalize the
insurance relationship. “You can still have the face to face. In fact, this business
strategy facilitates you to have more face time with your customers and to truly
understand the environment that they’re in.”

And that means everything to customers like Laura Johnson and Mary Redford.

Sally Praskey is a Toronto- and Nova Scotia-based
freelance writer, and founding partner/editor of the Web site.

Published in Canadian Insurance Magazine, May 2001 issue. Re-printed with permission.