Insurance

When Blue Cross Blue Shield of Massachusetts embarked on its customer relationship management (CRM) initiative four years ago, the Boston-based health insurer could find no other healthcare organization to use as a benchmark.Today, insurers thinking about implementing CRM would do well to examine Blue Cross Blue Shield of Massachusetts as a model for what can be accomplished with a customer-focused business strategy supported by sophisticated CRM technology.

With 2.4 million members, Blue Cross Blue Shield of Massachusetts has avoided the common errors of implementing customer relationship management (CRM).First and foremost, senior management decided in 1998 that the Boston-based company would adopt an enterprisewide, client-centric business strategy, which it calls Concierge Service Delivery.

The market for supplemental disability income insurance is relatively untapped. Indeed, more than 80% percent of U.S. workers either have no long-term disability coverage or coverage they feel is inadequate, according to a recent study from the Consumer Federation of America and the American Council of Life Insurers.And, a 1997 study by the Life Insurance Marketing and Research Association (LIMRA) concludes that less than half of small-business employers (10 to 49 employees) offer any kind of disability income insurance to their workers.

Most IT purchasing decisions made by insurance companies put careers on the line. Don't start a project until the costs and payback can be reasonably defined.The insurance industry has been exposed to much hype about new technologies. I believe executives should avoid this urge to jump on the next technology bandwagon.

Even though claims service provided by property/casualty insurance carriers represents a major factor in their ability to retain customers and attract new ones, insurers are not providing the level of service that is considered acceptable to corporate customers and consumers, two new studies conclude.Moreover, even well-capitalized carriers that possess the financial stability to support quality claims service appear to be dropping the ball.

Over the past few years, many financial services providers have struggled to automate their operations across the enterprise. For most, the task of extracting data that resides in antiquated legacy systems and seamlessly linking these systems across various business units has proved to be nothing short of rocket science.

Insurance companies, banks and brokerage firms are actively competing for new business on each other's turf. But financial services convergence in a true sense is progressing at a tortoise-like pace: slow and cautious.When Citicorp acquired Travelers in 1998-forming Citigroup, one of the world's largest financial services institutions-many analysts hailed the union of the insurance and banking entities as the beginning of a revolution in the financial services industry.

HNC is widely recognized as a leading developer of analytic and decision-management tools. But are carriers ready to turn their important underwriting and claims decisions over to machines?The similarities between fighting terrorism and combating insurance or credit card fraud are not very obvious. However, the Bush Administration's Homeland Security initiative is considering using some of the same technology that's now being applied to identify fraudulent transactions for more than 300 million credit cards worldwide, and by nine of the 10 largest insurance companies.

Similar to many insurance providers, Omaha, Neb.-based Jefferson Pilot Benefit Partners knows that field sales representatives were assigned their title for a reason. The emphasis on "field" provides them license to network away from the home office as often as possible.The problem: The home office is where the heavy lifting is performed from a data processing standpoint. When field reps conduct business outside the office, they often devote an equal amount of time-or more-at headquarters to ensure data they collected in the field was properly captured and processed.

After spending the past several years sitting on the sidelines, mid-size insurance companies are poised to break out of their IT spending inertia.In a report titled "Technology Market Snapshot: Mid-Size Insurance Companies," Boston-based Celent Communications Inc. estimates that mid-size insurers-those with direct written premiums between $100 million and $1 billion-will spend $1.1 billion on new technology projects over the next three to five years, primarily on Web-enabled policy administration systems and agent extranets.

Bob Lucas isn't your typical insurance company CIO. For starters, he has been with one company-The Hartford-for 30 years. What's more, he's a business administration major who was hired right out of college by the Hartford, Conn.-based financial services firm.

The stories are disconcerting. A 32-year-old secretary who always pays her premiums on time receives a renewal notice from her insurer that her rates are being raised 46% due to her credit. She discovers that her ex-husband's bankruptcy is to blame.A 65-year-old Hispanic-American man who has filed only one insurance claim in 26 years is told by his agent that his premiums are increasing 25%. Convinced that his carrier has discriminated against him, he and several other clients of the same agency file a class-action lawsuit.

The insurance industry has been noticeably quiet about its use of insurance scoring over the past few years. And its silence has raised the ire of consumers and agents who suspect insurers are using the arcane methodology to sneak around state laws that prohibit them from discriminating against minorities and people with lower incomes.In November, several people filed a lawsuit in U.S. District Court, Western District of Texas, San Antonio Division, against Allstate Insurance Co., accusing the carrier of using credit scoring to replace geographic redlining, which was forbidden years ago.

In the beginning, Corporate America created a concept known as full-service, and it was good. The epitome of full-service is gasoline marketing, where a service station attendant rolled out the red carpet to customers, who could expect to have their tank filled, windshield cleaned, oil and tires checked and the transaction processed-all without unbuckling their seat belts.

It's always been assumed that an insurance agency can find a way to provide adequate service to its existing customer policyholders while at the same time optimize its new-business opportunities.But most realize that it rarely works that way. Internal operational inefficiencies, marked by a paper-intensive communications process and antiquated data-exchange platforms, often undermines an agency's agility in generating new business.

Success in designing Web self-service capabilities does not subscribe to a "build it they will come" philosophy. The business sponsoring the Web site must first conduct diligent research to determine the specific blueprint of what Web features will be regularly accessed.BlueCross BlueShield of South Carolina was one of the first health providers in the nation to offer its members, doctors, hospitals and other health care professionals a large array of self-service transactional capabilities with real-time access to mission-critical information.

Chris Mower didn't want to spend a lot of time-or money-building a Web portal for independent agents. But those restrictions didn't prevent him and Royal & Sun Alliance's Professional & Financial Risks Division from developing a comprehensive offering that is designed to develop new revenue streams, improve productivity by eliminating manual processes and help small-business clients understand management liability exposures."The business model, which we validated with customer feedback, was to create a way to distribute products through new channels without creating channel conflict," says Mower, manager of e-business solutions for Royal & Sun Alliance's ProFin division based in St. Louis. "It was about re-inventing existing processes and taking advantage of new technologies."

In today's highly competitive environment, financial services are largely a commodity, with institutions distinguished as much by service and price as by products and product features.Web self-service can significantly improve service quality. By automating much routine service, Web self-service enables users to quickly and easily resolve most of their service needs around-the-clock More importantly, because users aren't placed in a call queue for an available agent, Web self-service is often more responsive than contact centers.

Carriers and agents have invested a significant amount of capital toward electronic interface initiatives that enable the two parties to improve their data-exchange efficiencies and overall operational competencies.But as they carry this out, consumers have been neglected, to the extent that many "lack faith in the quality of online customer service," says Madelyn Flannagan, vice president of education and research for Alexandria, Va.-based Independent Insurance Agents of America (IIAA).

Northwestern Mutual's IT philosophy is right out of Aesop's Fables. By applying the strategy of the tortoise and its slow and steady approach, this insurance giant with $92 billion in assets and annual revenues of $15.4 billion gets the most bang for its information technology buck.The Milwaukee-based company has to be careful how it uses technology because it can't jeopardize its shining reputation. This year, it was voted the "most admired" life insurance company for the 19th year in a row in a Fortune magazine survey. And, it ranks as the nation's best in customer satisfaction among all financial services studied, according to a Wall Street Journal 2001 report.