As insurers weigh their options for customer relationship management investments, it's become apparent that carriers are redefining what CRM strategies can-and cannot-accomplish.With the expectation bar set too high and the ability to measure results too ambiguous, insurers have learned several valuable lessons about CRM and now approach investments with a far more cautious attitude than they did as recently as two years ago.

Once epitomized as ambitious, enterprisewide projects-perceived by many as magic bullets to cure all that ails an operation-CRM projects were put on the back burner at many insurance companies, particularly after the economic downturn forced insurers to re-evaluate their e-business spending priorities. CRM programs that weren't shelved entirely were scaled back to target the most significant "pain point" areas of an organization.

"It was very stylish to be in the non-CRM camp for awhile," says Ron Young, general manager, Siebel Insurance, Siebel Systems Inc., a San Mateo, Calif.-based provider of multichannel e-business applications software.

However, Young notes that a host of insurers continue to support CRM strategies without realizing it. "When we've approached insurers about how much they're investing in CRM, several tell us that they're not investing a great deal," he says. "One might tell us they're investing in e-business projects that touch sales and customer service, another marketing and agents. Well, all these investments fall within the parameters of CRM."

In fact, almost any automation project that an insurer embarks upon could easily fall under the umbrella of CRM, explains Chris Yaldezian, director, financial services industry strategy and marketing for PeopleSoft, a Pleasanton, Calif.-based e-business solutions provider.

"CRM was a buzzword created a couple years ago. It was thought to consist only of mega-projects where an insurer would spend $25 million on CRM software in hopes of yielding a major competitive advantage," he states.

From a semantics standpoint, whatever insurers wish to label it-CRM or even Partner Relationship Management (PRM)-a large percentage of carriers are judiciously allocating e-business spending dollars, targeting specific components within their organization that have underperformed or need to be streamlined. This small-scale, components-based approach to CRM is a departure from past strategies, which were enterprise in scale and scope.

Pinpointing pain

"CRM produces the best bang for the buck when performed within an overall corporate strategy, and most particularly when carried out to address short-term 'pain points' within the operation," explains Siebel's Young.

At a time when insurers' profit margins are narrowing, CEOs "won't think about CRM as an over-arching project that pervades the entire business," adds PeopleSoft's Yaldezian.

"I have seen more insurers embark on smaller, incremental CRM projects," he explains. "Maybe CRM today means a lead-generating program for agents, or simplifying workflow for a customer service representative (CSR) working at a call center. CSRs often function from five separate workflow applications. There's a premium on solutions that unify all these applications onto one platform."

As insurers become more focused in their approach to CRM, they also have been beneficiaries of external e-business developments, particularly the advent of open, service-oriented architecture platforms, industry experts say.

"Two to three years ago, CRM projects were built on client/server platforms-not on an open architecture. Today, object-oriented, open-architected systems are the norm," says Denis Pombriant, vice president and managing director, CRM, at Boston-based Aberdeen Group.

Another development is better flexibility. In the past, insurers felt obligated to acquire "the whole enchilada" of a CRM solution, Pombriant explains, yet thye might only use half of the total solution package.

"Vendors approached insurers very aggressively, and some insurers invested in much more than they bargained for," he says.

When insurers explore CRM solutions for a variety of subjective reasons, industry observers note that many carriers have identified agent workflow optimization as a pain point. So their investments revolve around agents in what Siebel's Young regards as partner relationship management.

"Agent portals linked to a carrier's back-office system to quote and rate a policy-and to obtain policy and commission status-are receiving a great deal of traction," Young states. "There's been much activity in building capabilities for the sales channel: analytical tools to drive channel efficiency. The agent isn't the only carrier affiliate benefiting from PRM. There have been several 'forgotten groups' in the CRM equation, such as territory managers and field underwriters."

There's a growing emphasis, Young says, on a concept he calls "analytics everywhere." This provides compelling data to all front-line affiliates.

"These analytics enable front-line people, from a field adjuster to a claims agent at a call center, to proactively make decisions that historically were made by a supervisor. But this wasted time and undermined efficiency," he explains.

The ultimate result of these efforts is to better serve customers but also obtain a single and consolidated customer record. "Using a single, integrated profile of each customer's policy information and transaction history enables us to enhance cross-selling and up-selling capabilities," says Aine Cassidy, senior manager, Irish Life & Permanent, Dublin, Ireland, which places an emphasis on direct selling through call centers.

Supporting agents

Most insurers rely on captive or independent agents to drive sales and maintain customer relationships. Therefore, CRM solutions that place an emphasis on agent workflow optimization are receiving the lion's share of attention, observers say.

Scouting for the right CRM solution is particularly crucial for independent agents, who opt to partner with insurance companies that provide the best service and selling tools. Through the implementation of basic CRM solutions, carriers can feed an agent cross-selling opportunities based on segmentation, says Kimberly Harris, senior analyst with Durham, N.C.-based Gartner Inc.

This is of the utmost value to agents, many who lack the marketing analytics to interpret data for consumer behavior patterns or to determine demographic trends. They depend on carriers to provide these tools, Harris says.

But insurers with captive agents are mobilizing to find the best CRM automation tools to serve their needs, too. With a network of more than 12,000 "exclusive" agents, Los Angeles-based Farmers Insurance Group assessed its priorities for CRM-related projects, and found that agents' role was at the heart of the expansion.

"We tell our agent force that Plan A at Farmers is to conduct business through agents, and that we have no Plan B," says Riko Metzroth, vice president, business and technology integration, Farmers Insurance Group.

"We realized that putting dynamic tools in the hands of our exclusive agents would ultimately enable us to establish a single enterprise-wide view of customers," he says.

Farmers has 10 million households in its customer base. When it decided to expand its insurance offerings to become a full-service provider of multiple insurance lines, "we had to find a way to take the households that had multiple contracts with us, drill down and pull the data together to create a single view," Metzroth explains.

To support the effort, Farmers in 2002 purchased a new Dell PCs for all its agents. "We put the tools in agents' hands to enable them to ramp up their electronic competencies, replacing outdated green-screen AS400 technology with automation that could optimize agents' efficiencies," Metzroth says.

Agency Dashboard

The new PCs enabled Farmers agents to participate in a branded program called Agency Dashboard, which enables agents to obtain ongoing insights on customers, sift for cross-selling and up-selling opportunities, notify them of overdue premiums, flag important events in their lives and craft personal greetings (see "Dashboard keeps agents attuned to customers' needs," page 29).

First introduced three years ago, Agency Dashboard began to reap dividends over this past year. With the program hitting on most cylinders, Farmers agents have been able to identify and target selling opportunities, quickly configure new services, including proposals and price quotes, and match service levels to customer value.

"The thing about Dashboard is that agents can customize their individual portals to best suit their needs," Metzroth explains. "This provides them with tremendous latitude to keep their fingers on the pulse of all their customers."

Challenges remain

Despite the success stories, validating the efficacy of CRM can still be difficult. One question reflexively asked about CRM is, does it yield results and how can these results be measured? Another question (or dilemma, actually) is, should CRM solutions be implemented to reduce operational costs first and generate revenue second or the other way around?

The pendulum continues to sway back and forth on the priorities. CRM may begin as a mission to improve productivity, which might not directly enhance the customer experience. But CRM solutions that remove costs from an operation, such as at a call center, can ultimately enable a provider to invest the savings back into initiatives that enhance the customer experience in other ways, such as customer loyalty programs and establishing lifetime value analysis.

Insurers can use a variety of ROI metrics, including customer satisfaction, customer loyalty (retention and relationship duration), customer profitability (calculating the lifetime value potential and using it to identify the most profitable customers), market share and wallet share (measuring how much business via cross-selling a financial services provider can secure through an individual customer).

Metzroth of Farmers was not able to readily provide hard numbers on CRM's return-even though it has come to fruition, he says, via Agency Dashboard. Cassidy of Irish Life says the company has experienced significant and measurable cost savings and market share efficiencies. The insurer, which has more than 1 million customers throughout Ireland, deploys Siebel's insurance solution across its life and pensions sales force, contact center and bank branches.

Last year, Irish Life notched a 52% increase in annual life assurance revenues in its branch-based business. A customer-centric sales, marketing, and service strategy has enabled Irish Life to increase direct business annual revenues by 15% and grow overall life assurance market share by 1%. Irish Life's call center is also securing an additional 1,200 customer appointments each week for the company's direct sales channel.

"To maximize revenues and enhance customer satisfaction, we needed a system to support seamless, high-quality sales and service across multiple lines of business, multiple products lines, and multiple channels of communication," Cassidy explains.

Overall, Pombriant believes that CRM, for all its adverse criticism, has been far more successful than people give it credit for. "I think it's an urban myth that CRM is categorized as failed initiative. The majority of CRM users are pleased with their investment, finding that the majority of them have been implemented on time and on budget," he adds.

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