The Insurance Industry: A New Customer Policy

As with most industries, in the world of insurance, whoever controls the customer relationship controls the marketplace. It's a simple maxim. Yet in few industries is the customer so easily ignored.

The cause of this neglect is red tape. Although the customer ultimately is a private individual or a business purchasing property and casualty, life or health insurance, the relationship with that customer is often scattered across layers of agents, brokers and call center representatives. Moreover, state and federal regulations place complex conditions and restrictions on how these products can be positioned or sold to the end consumer. According to Mark O'Connor, director, enterprise knowledge management at the Yankee Group in Boston, "The result is poor service. Probably the worst service that anybody gets in any industry is in the insurance industry."

Much of the blame, O'Connor admits, rests with regulators. "In Massachusetts, for example, insurance companies are not allowed to bundle a homeowner's and auto policy," he explains. "Anybody who has four cars gets four different insurance policies."

still, the insurance carriers have aggravated matters. Over the last 15 years, there's been a huge push toward having the companies send the bills out rather than the agents. Under direct billing, customers who paid for all their policies with one agent years ago are now getting multiple bills from multiple companies. "So the customer relationship management capabilities of the industry have actually gone downhill," says O'Connor.

Recently, however, insurance carriers have begun to re-examine their practices in light of potential competition from other financial institutions as a result of the 1999 Gramm-Leach-Bliley Act, which enables banks and securities firms to enter the insurance market.

"Insurance carriers have been refining their ideas of the customer relationship and what it means," notes Kathleen Khirallah, senior research analyst for the Tower Group specializing in insurance and CRM. "They've picked up this two-tier definition of the customer: agents and actual consumers. And for the past year or so, we've heard them saying they're going to support their agents and consumers."

The carriers' goal is to cultivate the relationship with the consumer over the long term- -a fresh approach for many carriers, who have often emphasized the agent side of the sales equation. In their efforts to bring balance to these relationships (and profits to their bottom lines), many carriers are turning to CRM technologies to expand and exploit customer knowledge and to enhance customer interaction.

The Challenge of Change
Just as bureaucracy impedes improvements in service and sales, carriers' legacy information systems have proven an impediment to adopting newer, leaner technologies like CRM.

"In general the insurance industry is characterized by a lot of legacy applications that they've built themselves for underwriting and other types of highly vertical processes," observes Steve Waters, vice president of marketing for FirePond, a provider of e-business and sales solutions. "They've only brought CRM to the forefront in the last couple of years."

Insurance carriers have struggled to integrate these vertical policy-management systems with next-generation applications that are much more focused on business intelligence and transactions. These systems tend to be siloed within the specific business units, which own and maintain those systems. Communication seldom occurs between the systems that manage, for instance, auto and homeowner policies, making it difficult for carriers or agents to gain a comprehensive view of the single customer and his or her value to the company.

Another difficulty is getting this information to the actual point of customer contact, which varies from company to company. There are three sales models within the industry: agents, brokers and direct writers. Independent agents deal primarily in personal lines of insurance to individual consumers and usually deal on the local level with anywhere from 2 to 10 carriers. Brokers- -which can themselves be very large organizations- -handle commercial clients and deal with numerous carriers. Direct writers handle both commercial and personal policies and sell directly to the customer, whether a business or private individual. How a particular carrier markets to its policy owners profoundly impacts the type of customer relationship management application that carrier will deploy.

Getting to Know the Customer
While insurance carriers have mastered the mathematical aspects of underwriting, they do a poor job of applying the information gathered in that process to up-selling or cross-selling their policy holders. Similarly, in the course of a claims investigation, carriers often alienate a customer who holds other valuable policies with their other divisions.

"In a CRM environment, the organization needs to look at the whole relationship with the customer," says Tower Group's Khirallah. "Insurance carriers don't leverage their customer information. In a very large organization, there could be a claim on auto, and yet that company will try to deal with that claim on the auto side without taking into consideration that customer's overall value."

Realizing this overall value was the impetus behind Beneficial Life's re-engineering of its customer call center. In assessing its business processes, the Salt Lake City, Utah-based carrier decided to automate the call-tracking process using Oracle's CRM Customer Care module. In the course of the Oracle roll out, its disparate policy management systems were integrated, offering representatives a snapshot of the customer's entire relationship with Beneficial Life.

"Historically, if a client or policy owner would call up, we would focus on what that particular individual's isolated problem might be and move on," reflects Mike Morris, senior manager, strategic Projects for Beneficial Life. "We wanted to place that particular transaction in the context of our overall history with that client- -a view of all of their holdings or policies or financial products with us."

The Oracle solution provides a comprehensive list of all transactions involving a policy holder. Representatives have the ability to record notes with each interaction and have an easy-to-read record of not only when a customer called, but also of what the call concerned- -whether it was 60 days, 90 days or 5 years ago.

Beneficial's call center also provides representatives with detailed tools to help answer calls. Originally, says Morris, Beneficial had identified pop-up FAQs as a requirement of the system; however, as the company examined the questions customers most often asked, it became clear that simple FAQs were inadequate.

"If a policy owner calls and says, ‘How much cash can I get out of my policy?' a number of different issues are involved in the answer we might give," Morris explains. "It depends on the particular product, how long they've had the policy, specific provisions, any loans or riders on the policy and so on. The questions we were dealing with were very complex."

To resolve this difficulty, Beneficial developed a set of business rules based on FAQs and coded them into the system, along with the information contained in the comprehensive customer profiles. When a customer calls to ask how much money she can get out of her policy, the representative can look at that particular field of the system and give the customer an accurate quote 100 percent of the time.

Managing Multiple B2B Channels
Allianz Life Insurance of North America has extended this idea of the integrated customer profile to multiple contact points in a B2B environment. One of the country's top 50 life insurers, Allianz is a wholesaler whose customers are the brokers, banks and financial planners who retail their annuity products. As part of its new sales/marketing initiative, Allianz introduced a nationwide mobile wholesaler network, an internal office-based sales force and a new marketing department. This initiative required a tool that would allow the company to integrate, analyze and distribute information across the home office and to the remote sales force, while at the same time achieving compatibility with the existing data warehouse and corporate-licensing platforms. Allianz chose Point System's TeamPOINT and MobilePOINT solutions for their combined flexibility in supporting the field force, home office sales representatives, adjusters and partners.

The ability to view their entire history with individual clients enables Allianz's wholesalers to apply feedback from a variety of contact points to hone their sales efforts, according to Shawn Spott, project manager for Allianz. "When you line up a whole bunch of annuities, they're pretty much the same," he says. "What really differentiates a lot of the products out there is the service that you can provide. To establish some of that service, we wanted to take information from all of our back-office systems and data warehouse and tie it together within the CRM solution to do trend analysis and complicated campaigns to support our wholesalers in the field."

Allianz's marketing team can now guide the sales force's activities in the field by centralizing sales information, conducting analysis and placing results-based action items on the sales reps' to-do list. For example, marketing can create a campaign that calls for an initial mailing to a target group. Those who respond are targeted by a specific campaign, while another campaign focuses on those who do not respond. If, after two iterations of a campaign, sales begin to increase, the company continues the campaign to a third or fourth iteration.

"With the CRM solution and the data warehouse integrated, we can tell immediately who is selling and when, what they're selling, and what campaigns we've hit them with," says Spott. "So it's given us a real strategic advantage, because we can immediately start to see the results of our efforts."

Agent Intelligence
In comparison to the large commercial brokers and direct writers, the independent agent channel is much less advanced from a customer service perspective. In general, CRM solutions for agents consist of rate-quote engines for personal lines of insurance and contact managers. Customer intelligence in the strategic sense is practically non-existent.

Blue Cross/Blue Shield of Minnesota, a 2 million member healthcare insurance plan, recognized in its agents' lack of resources an opportunity to strengthen these relationships while, at the same time, centralizing customer information. The CRM solution developed by FirePond provided an interactive selling tool to agents that made it easy to do business with Blue Cross, making the company the default plan of choice for the nearly 500 agents currently online, most of whom handle small to midsized accounts.

Previously, an agent dealing with a small business first had to conduct a census of that company to determine the ages, individual health profiles and the company's price-sensitivity in terms of coverage. Once the paperwork was completed, multiple departments within Blue Cross would process the information while the agent conferred back and forth with the carrier to identify the appropriate plan for the company.

This complex cycle, which often took hours, can now be completed in as little as 15 minutes. Agents input information on the customer's needs and behaviors, variables about their lives and their businesses, and the system delivers rules-driven recommendations on plans for pricing that are far more targeted and individualized than the off-the-shelf applications on which most agents rely.

In addition to improving agent relationships, Blue Edge also gives Blue Cross a centralized, single platform that allows it to roll all of its channels- -whether call center, agents or the Web- -into one platform that frames a single repository of customer information. "The ultimate goal was to make it easier for agents to do business with us, and for us to do business with them," explains Sandy Shapiro, director of sales and marketing for Blue Cross/Blue Shield of Minnesota. "Because most of these independent agents also represent our competitors, and frankly we needed an edge in such a competitive market."

Where Next?
While CRM solutions have helped to balance the scales in favor of the carrier in the struggle with agents for ownership of the customer relationship, the lifting of restrictions on the ability of banks and other financial institutions to sell insurance products will tip the scales once again.

"The banking people have the earliest access to the customers when they're buying a car or a house," notes Yankee Group's O'Connor. "Many of these companies may add insurance to the products they're already selling, because they're no longer excluded from doing so."

O'Connor foresees an increase of mergers like that between Travelers Group and Citibank, in which insurance and financial services companies combine to deliver end-to-end financial service offerings. These unions will give rise to whole new systems for marketing and maintaining a new generation of financial services products.

The Internet, certainly, is a medium that offers promise for new channels. Although insurance carriers have been notoriously slow to adopt the Web as a channel to customers- -recognizing the Web's tendency to commoditize products- -the fact that the industry evolved from thinking of customers merely in terms of revenue can be seen as a possible step toward the Web-based world of self-service. Even so, regulatory and compliance issues will very likely limit the Web's use as a direct channel.

What is certain for insurance buyers is the fact that they, the people who purchase policies, have at last become the targets of long-term relationship building- -and improved service. "The industry has finally decided that it must manage and massage that relationship with the end consumer if it's going to have long-term relationship," Tower Group's Khirallah reflects. "And that's not to denigrate the importance of the agent. But it's to elevate the importance of the end consumer."