Why cross selling in the insurance sector is highly independent on back-end technology
By Kevin Rosen
(reprinted with permission from ci Canadian Insurance Magazine, December 2001 issue)
The market for insurance and financial products has
undergone significant structural changes during the last decade. These changes have had a
profound impact on the role of insurance brokers as well as the insurance companies
themselves. One of the key issues facing the industry is the potential for cross selling a
range of insurance and investment products to an established client base. Cross selling
offers the insurance sector significant opportunities and challenges, and the upcoming
year will be critical in determining whether brokers and companies will be able to profit from this trend.
The growing importance of cross selling can be attributed
to the increased information available to consumers and the concurrent decrease in time
available for them to pro-actively research competitive offerings. The availability of
Internet research and the advent of mass advertising of financial products have led to a
better informed consumer market and one that understands the available options. At the
same time many people find that they are working longer hours with the result that they
seek to limit the amount of time they spend on shopping for insurance and financial
products. This combination of factors has led to a situation in which a knowledgeable
broker who can provide a range of insurance and investment alternatives is in an excellent
position to meet the needs of today’s consumers.
While the market may be ready for brokers who can offer
insurance and financial products simultaneously, many brokers will need to come to terms
with a shift in their role. These individuals will need to move from being insurance
brokers to being full-service financial advisors. This shift requires that brokers obtain
training in their new products and will often require that they spend additional time with
their clients, in order to market sophisticated financial products. The increased training
and time will yield the brokers important benefits including the potential to earn
commissions on a range of products, sell multiple products to a single household, and use
their broader product offering to cushion slowdowns in the economy.
The insurance companies that are beginning to offer
additional financial products face challenges even greater than those facing their
brokers. The companies must grapple with complex technical and organizational issues in
order to be able to successfully cross sell a wider range of products. One of the primary
organizational issues revolves around the fact that traditional insurance companies tend
to be product-centric organizations. While this is a viable business model for
organizations with relatively few products, it is counterproductive for a broad based
financial services organization. In product-centric organizations there is generally poor
communication between product categories and therefore little impetus to facilitate an
integrated approach. With a wider range of products being offered, these firms need to
move toward a more customer-centric model in order to be better able to market their full
range of products to their customer base.
The organizational requirement to become a more
customer-centric business in turn leads to a technical issue that must be resolved. The
new business model requires that client information be consolidated into a single view.
Currently, files are organized around products and thus if a given client were to maintain
several products they would have an equal number of files. This approach would obviously
hinder attempts at cross selling additional products, as it would be difficult to
determine what products a client already has, as well as what additional products would
make sense for that particular client. In order to rectify this situation, firms need to
consider the concept of a single customer information file that facilitates effective
relationship management, including customer service, cross selling and up-selling, and the
ability to project lifetime customer value. Once this is done they can more effectively
mine their database for leads and improve their ability to grow revenue and profits across
their client base.
At Silverline we believe that there are several things that
insurance companies can do to facilitate the cross selling of products and thus the growth
of their businesses. Internally, they can integrate their back-office systems in order to
make the creation of unified customer files possible, or they may be able to utilize newer
technologies to allow their legacy systems to communicate with each other. By breaking
down the information silos within the organization and allowing for the sharing of
customer data these companies will be able to effectively target products and services at
specific customer segments. Creating a system that can share information will also reduce
the costs associated with storing and maintaining redundant information as well as limit
the errors and discrepancies in the company’s data. Further, the integration of their
legacy back-office systems serves as an important step on the path toward a comprehensive
In order to help make their brokers more effective at cross
selling insurance companies should consider creating fully functional ‘broker portals’.
These portals would provide brokers with online functionality to directly manage their
client’s accounts. This would reduce the time and expense required to maintain customer
files, which, under the current system, the insurance company updates based on information
from the brokers. Also, by empowering brokers to manage their client’s information, the
portals will serve to increase information accuracy while improving the broker-client
relationship. Beyond providing the tools to administer client accounts, the broker portal
will provide accurate and up-to-date information on all of the company’s products and
guidance regarding which ones may be particularly attractive to a given household.
Effective broker portals will improve the brokers’ ability to sell the full range of
the company’s products, which will increase broker satisfaction and earnings potential.
Ultimately, the application of new technology combined with
the brokers’ willingness to expand their role and the insurance companies’ willingness to
move to a customer-centric organizational structure will make the cross-selling of
products easier and more lucrative for all parties. In the near-term the transition will
require the commitment of both human and financial resources as well as patience to wait
for the full benefits to be realized.
Kevin Rosen is director of insurance practice for Silverline Technologies.