Customer experience

When Farmers Insurance Group conducted testing on a Web-based customer self-service program, the Los Angeles- based property/casualty insurer considered implementing a capability that would enable customers to make changes to their policies.Farmers executives recognized the value of self-service capabilities. After all, enabling a customer to instantaneously make a change to their auto or homeowners policy represents the spirit of customer self-service. But earlier this year, as Farmers executives examined the concept further, they uncovered a flaw with the concept: Giving customer unfettered access to make changes was considered an affront to Farmers' agents.

The nation's largest insurers together received a mediocre score for online customer respect. But the good news is: The banking and securities sector, as well as Fortune 100 firms overall, didn't ace the test either.This assessment comes from The Customer Respect Group Inc., a Bellevue, Wash.-based research company that studies the Web sites of Fortune 100 and Fortune 1000 companies. The group gave insurers among the Fortune 1000 a 6.8 overall customer respect index (CRI) for their Web sites, while financial services firms scored 6.7 and Fortune 100 firms scored 7.0.

With trading volume reportedly far below management's expectations, Web-based reinsurance risk-trading hub inreon was terminated in early May, leaving two players to service the global online reinsurance risk-trading market.London-based inreon was launched in December 2000 as a partnership between global reinsurers Munich Re, its U.S. subsidiary American Re, and Swiss Re. But according to industry sources, the decision to close inreon down came when the reinsurance giants concluded that the service would have a difficult time turning a profit-both short- and long-term.

Blue Cross Blue Shield of South Carolina (BCBSSC) in January introduced a new program that many believe could revolutionize the Web-based self-service model.The program, known as Blue-By-Design, is a consumer- driven health plan (CDHP) that gives members the power to make their own healthcare decisions, says Terry Povey, director of Web business development, market research and statistics, for the Columbia, S.C.-based health insurer.

The self-service economy isn't a new phenomenon. It started with ATMs to avoid teller lines at banks. Then, it expanded to pay-at-the-pump gas station service, and now can even be found at department store check-outs and airline ticket counters. The era of self-service has arrived, and the benefits are clear. Self-service is fast, convenient and economical.Customer self-service is also being embraced via the Internet, which today provides companies with an information infrastructure that continues to grow in functionality and bandwidth.

When the economy cools down as it has in the last few years, small businesses typically are the first commercial entities to reduce costs, with many scaling back expenses such as comprehensive business owners insurance.These tactics might help foster cost-containment, but it's a negative development for insurers, agents and third-party providers of small-business insurance that want to build new business. But low demand isn't the only challenge that they're encountering in the small-business market. One chronic dilemma has been an inability to precisely pinpoint insurance needs of small businesses, many of whom are fitted with either too much or too little coverage.

In an effort to become comprehensive financial service providers, some large insurers have taken an aggressive approach by forming their own banks.Banks, on the other hand, have carried out insurance expansion more conservatively-mainly through the acquisition of large agencies to drive insurance-product distribution through the bank branch.

For many consumer-goods providers, one-stop shopping has long been regarded as the pinnacle of customer relationship management (CRM). But some have learned that offering one-stop shopping-as all encompassing as it can be-comes equipped with complications.In their zeal to become all things to all people, a host of consumer-goods providers lost their overall focus, and in turn alienated customers. Insurance companies that have established a bank over the past four years have found this dilemma to be more imagined than real.

Although insurers may be tempted to offer the full gamut of banking products and services, there are a finite number of products and services that consumers will acquire-with confidence-from insurance companies, industry observers say."A certificate of deposit (CD) with a locally available rate is very attractive," says Mark Walker, group vice president, financial services business team leader, at Walker Information Inc., an Indianapolis-based firm specializing in customer loyalty.

If Lee Gaudette, a third-generation independent agent based in Worcester, Mass., had a nickel for all the good reasons he doesn't sell banking products to his customers, he could probably open his own bank.Gaudette's sentiments are motivated by several factors, among them tradition, geography and competition. That's why Gaudette uses Insurebanc, a Farmington, Conn.-based federal savings bank established jointly by the Independent Insurance Agents & Brokers of America (IIABA) and W.R. Berkley Corp., for his own cash management purposes and for various loan products.