Insurance industry executives are wrestling with the complexities of customer relationship management (CRM), trying to understand what it can mean for their organizations and how to proceed to adopt appropriate CRM solutions.

Combined with challenging economic conditions and continued stiff competition from many directions, the insurance industry can no longer operate under a policy-based model. Instead, it must adopt a new client-centric approach to better meet the needs of its customers.

Meridien Research Inc. has been following the insurance industry's CRM journey for more than five years. During this time, successes have required smart decisions and excellent implementation skills-a combination that can be elusive for some insurance companies.

Unfortunately, disappointing results have been recorded more frequently than insurance companies and their vendors would like. However, the journey itself continues, and progress is being made by more insurance companies.

A viable CRM Strategy

The CRM journey will not fade into oblivion. A number of key business objectives are driving those insurance companies that have a viable CRM strategy and a good understanding of how technology solutions can, if well implemented, build a competitive advantage.

The relevant CRM technology solutions for this journey extend from the customer across all of the channels (agent, call center, Internet) and into the back office of the insurance company. The key CRM-related business initiatives (in order of importance) addressed by leading insurers are:

* Value added services and support for channel participants.

* Multichannel delivery with integrated CRM to improve delivery (systems integration).

* Service enhancements and investments to improve customer retention and acquisition.

* Enterprise integration of business processes along with more effective automation.

* Effectively integrating mergers and acquisitions: keep the customers, cut the costs.

* Implementing metrics that measure ROI and business results with recurring precision.

Spending on CRM solutions, like other strategic IT initiatives, has not provided a guaranteed ticket to the "promised land." However, the realization that a strategic IT initiative such as CRM is like Pandora's box-once opened it can never be closed-has led a growing number of financial institutions to realize that there is no turning back.

In 2003, Meridien projects that the global insurance industry will spend more than $1.6 billion on CRM technology (see chart, page 60). By 2005, that figure will grow to more than $2.1 billion. These CRM spending estimates are based on a global pool of firms, oversampled with larger insurers, that consists of 10,000 life, property/casualty insurers and large insurance brokers.

Customer information systems are the blood of the strategic knowledge factories. The level of spending on some of these initiatives is so high and the downstream need for sales and service requirements so great that management turnover is imminent if results come up short.

For CRM initiatives, the complexity of implementing new technology and simultaneously modifying business process and staff skill sets has led to a significant level of missed expectations or disappointing results. These results generally reflect an underestimation of the difficulty of managing complex projects and organizational culture change.

Looking Ahead

Ironically, those insurance executives that more or less ignored the flurry of strategic CRM technology initiatives over the last two or three years by doing nothing or very little are beginning to realize that no action may have only been a temporary respite-their jobs are more on the line now than ever before.

CRM solution providers-whether software vendors or systems integrators-that help to enable their insurance client's CRM strategy and ability to execute have and will continue to succeed above those providers focused on closing deals.

Market results continue to confirm that fast time-to-market is not always effective; rather, execution excellence produces fast time-to-benefit. Implementing a rational framework to measure and manage in this dynamic environment will require a long-term commitment from strong, visionary top management. The abundance or lack thereof is our best indicator of industry progress.

Bill Bradway is president and co-founder of Meridien Research Inc., a Newton, Mass.-based firm. Tom Richards is research director for Meridien's CRM practice.

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