The banks are doing it, trust companies are doing it, investment companies are doing it, retail stores are doing it — using it as a competitive weapon to fight for Insurance business. We are talking about Customer Relationship Management � marketing, selling and servicing customers based on their current and potential value to an organization.
In his speech to the NBF Canadian Financial Services Conference on March 30, 2005, Gordon Nixon indicated that RBC Financial Group�s fastest growing market was P&C insurance at 21%. They are making it happen through their Customer Relationship Management capabilities.
Companies who have focused on CRM show a direct correlation between customer loyalty and profits – a 5% increase in customer loyalty boosts profits by 25% – 85% (HBR 2004)
By Cathy Lone Dawson
In this article you will learn about the 4 key areas which must be addressed to effectively implement CRM � strategy, process, organization and technology and the 13 different CRM processes which are largely absent in insurance companies but are required across the organization.
Many insurance companies now consider the development of a customer-centric focus crucial to building and retaining market share. Without a clear, articulated customer value proposition, each insurance company will be measured by its customers on lowest price. Many insurance companies are looking to be �customer-intimate� – a trusted advisor to their customers. Others, like many direct insurers, are focused on being low cost, while others, like Chubb Insurance, are focused on being a product leader. Pick your poison – be great at one and competitive on the other two, or risk competing on low cost every time.
The value proposition drives the specific customer experience and the processes required to deliver the experience. The organizational and technology requirements must all work in harmony in order to deliver the desired customer experience.
CRM encompasses all of the processes an insurance company must undertake to create and sustain profitable customer relationships: from identifying the most valuable customers, to understanding their wants and needs, to developing the relationship over time, to identifying new selling opportunities, to enhancing and repricing of products and services, and to delivering the entire customer experience.
Customer Relationship Management requires a value proposition, strategy, processes to implement the strategy and organizational and technology elements to support the business processes. A 2002 Mercer study proved that neglect of process change caused the failure, in terms of meaningful return on investment, of between 75% and 85% of CRM projects.
The customer management strategy defines:
A vision statement (what do our customers want us to be);
A mission statement (what do we need to do to accomplish the vision � our unique value proposition);
Measurements (how will we judge ourselves);
The customers segments we will serve and their unique value propositions;
The processes required to execute the strategy;
The key organizational design and technology process enablers.
The 13 CRM business processes are ones not typically found in most insurance companies. They must be integrated across the company and product lines for maximum impact and profit. Key to all of the processes is the marketing strategy or market management process. Determining most valuable customers and their treatments will impact the design of the remaining process. Implementation of the CRM processes need not increase expenses. Focusing on what your most valuable customers want ensure resources are tapped to deliver those and activities seen of little value are stopped.
CRM processes can be divided into two categories:
Planning processes which include all of the activities required to interact with customers, develop products and services and take them to market.
Implementation processes which include all of the activities required to sell, service and interact with customers.
The Planning Process
At the core of the planning process is Market Management, involving the analysis of the marketplace and customer needs. Major processes include identification of profitable customers, prioritization of segments for investment; development of segment and brand management strategies; creation of loyalty programs; and development and targeting of products and service solutions based on a sound understanding of segment requirements. An important determination is the degree brokers or agents, claims and service will cover each segment. An insurance company�s valuable customers are not those that a. have a claim, b. do not have claim. Creativity is required either as an adjunct to the pricing model, predictive behaviour or business rules.
Value Proposition Management is the set of processes involved in creating or enhancing products and services based on market and segment analysis. It includes determining the suite of products and services required by each segment and defining messages that resonate with that segment. For instance looking at the specific suite of auto, property, farm, commercial and wealth management products and coverages suited to a segment and communicating based on life stage and perceptions, tailors messages for each segment and customer.
Sales Management is the process of ensuring there is a cohesive strategy among agents/brokers, service centres and business partners to ensure appropriate coverage and specific actions to be undertaken for each segment group.
Business Partner Management is the process of extending and strengthening the core value proposition through strategic partnerships, thus gaining broader market coverage and a more attractive product and service package. The P&C insurance industry has several partners who provide auto and property repair and replacement and back-up customer service, while life insurance companies are increasingly dependent upon their partners in the distribution channels � MGA�s, Broker dealers etc. and those who provide a variety of underwriting services. Each of these groups must buy into and be paid on the same high level customer strategy undertaken by the corporation.
Campaign Management involves the creation and delivery of messages to the marketplace and specific customer segments. It requires development of a contact plan, creation of customer selection rules, delivery of messages across multiple channels, and analysis of results. Campaigns designed to recognize high value customers with token gifts, invitation for yearly portfolio reviews, potential defectors detection and cross sell have seen ROI�s of between 150% and 700%.
Marketing Shaping Management are the processes by which a company delivers an integrated mix of relevant, timely messages to the market and each customer.
Business Development is the set of processes by which an insurance company establishes and maintains business relationships with all customers (whether they are buying, have bought, or could potentially buy). It involves face-to-face selling through the agent or broker, telesales or web sales and requires understanding the customer, developing customer profiles and contact plans based on the customer�s value to the organization. High value customers may receive a yearly personal risk review and quarterly contact. Lower value customers may be serviced by the agency or broker staff.
Opportunity Management involves evaluating a customer’s desire to buy while eliciting their needs. The buying intent is validated and that information in combination with an estimate of sales potential, the probability of closure and customer profitability is used to prioritize opportunities against the market strategy.
Service and Claims Management are the processes of answering and responding to any questions, complaints, issues or requests which arrive through various channels (e.g. service centre, claims, broker�s offices). Claims management handle the first notice of loss, investigation, settlement and overall customer satisfaction.
Customer Experience Management is the process of defining the customer experience, measuring customer satisfaction, resolving complaints and driving customer input into the very fabric of the organization.
Process change must be accompanied by job descriptions, incentive plans and performance measurements to encourage each level and area within the company to adopt and champion the new customer-centric methods of operating. Changes to the senior management plans must include overall business performance and customer satisfaction.
To track performance across the enterprise, a Balanced Scorecard is created to capture all of the interdependent success measures required to deliver on the new customer experience. The balanced scorecard includes standard financial measures, as well as customer, process and internal measurements.
An organization must also build a strong information management infrastructure that captures and analyzes customer profitability, behaviour, needs and interactions in order to balance cost and effort and drive continuous improvement of customer experience.
A study by U.K. consultancy QCI of top CRM performers found that improvements in organizational structure, transaction processes and performance measurement had the greatest impact on success; that was followed by CRM strategy, value proposition, planning and analysis; technology was identified as having the least impact.
Those insurance companies that have taken a phased approach to CRM implementation are the most likely to have experienced a favorable payback. As each phase is successfully completed, they move on to the next stage of their CRM plan. Here are examples of some companies that have benefited from this approach:
A mid-size insurance company was losing market share. It identified its most valuable customers and created new campaign and telesales processes, accompanied by the necessary organizational and technology changes. It increased revenue per agent by 10% and policy renewals by 2%.
A large insurance company needed to consolidate claims handling across the organization. Within 6 months it saw a 2% increase in customer satisfaction and a 2% decrease in claims support costs. Over 2 years it saw a 16% increase in customer satisfaction (4th to 1st FSCO quartile) and a DAC penetration rate of 65%.
A large Canadian bank saw a dramatic rise in profitability while reducing costs. Operating costs as a percent of revenue remained flat over a 3 year period while incremental revenue grew over 100%
Several insurance companies established Contact Centres to increase customer satisfaction and decrease support costs. In all situations, support costs decreased by over 2% and customer satisfaction rose significantly.
For CRM to succeed and insurance companies to remain competitive, CRM must become a management focus. The changes will be transformational, however, the returns, should you decide to move forward, are significant. These changes can only be brought about by adopting and continuously streamlining marketing, sales, claims and service processes supported by organizational and technology changes in each area of the business.
Cathy Lone-Dawson is the President of CRM Matters which specializes in CRM process change management in the areas of marketing, sales and service. She can be reached at 416-526-4859 or via e-mail: email@example.com.