What do insurance, consumer goods, retail and manufacturing companies have in common? Each relies on a complex value chain of partners engaged in collaborative business processes in order to develop relationships and deliver goods or services to customers. This is true for B2B insurance companies such as Health Net Inc., Woodland Hills, Calif., and Delta Dental Plans Assoc., Oak Brook, Ill., consumer-focused organizations such as Galveston, Texas-based American National Insurance Co. (ANICO), which offers a broad line of insurance products and services, including life insurance, annuities, health, property/casualty and credit insurance and Service Masters' American Home Shield (AHS), or American Insurance Group Inc. (AIG), which serves commercial, institutional and individual customers.Whether providing individual policies direct to consumers or a range of portfolio products to commercial or business customers on behalf of employee members, insurance companies operate within complex, process-driven environments.
The single commonality among all types of insurance companies, say experts, is their drive to reduce costs while maintaining and/or improving customer service levels.
R&R: REGULATIONS, REDUCING COSTS
These commonalities, along with insurers' ability to adhere to ever-changing regulations, lend themselves to increasing competitive pressures. According to a CRM survey conducted in 2007 by Chicago-based American Marketing Assoc., 42% of insurance companies and/or their producers (i.e. agents and brokers) use call center technology such as interactive voice response (IVR), speech analytics and hybrid click-to-call. Building processes around these three types of interaction technologies requires configuration of business rules or decision trees that facilitate sourcing the right resource quickly.
Properly utilized, automation increases productivity and customer service levels while optimizing agent time by transitioning members to a live person when necessary. Health Net was better able to service clients who requested basic information about their policies such as claims status, change in premium amounts or renewal dates through IVR with built-in speech recognition capabilities. "This allowed agents to spend more time with clients on complex questions," says Remus Siclovan, systems analyst for Health Net. "We serviced 50% of callers this way and were able to reduce both resolution time and costs."
When ANICO absorbed 200,000 new consumer customers, each with individual policies, the company was challenged with increased call volume, velocity, change in customer diversity and additional product lines. As the majority of ANICO's customers are consumers, (95%) the insurer focused on selecting a solution that could provide agents with the data necessary to service this influx. Its goal was to increase service levels while reducing costs-mainly through self-service automation (online and 1-800 call center), reduced agent training time and fewer employees.
"Due to industry regulations there is not a lot of margin to play with," says Zeb Miller, AVP, Health Administration and part of the team involved in CRM assessment at ANICO.
Compliance with regulations such as the Health Insurance Portability and Accountability Act of 1996 (HIPAA), California State Bill SB168, which in 2002 required organizations to thwart identify theft by limiting access to Social Security numbers and credit reports, and development of National Provider Identifier (NPI) numbers required as of May of 2007, are just some of the reasons Health Net decided to deploy and manage an on-premise application. "Professional services are costly and time-consuming," Siclovan claims. Modifications such as changing Social Security numbers over to unique personal identification numbers (PIN) or assigning NPI's can be handled more cost-effectively and rapidly in-house, he adds.
Moreover, process improvements to the IVR, such as changing the menu so customers can more quickly order popular self-service items such as ID cards resulted in an increase of 75% more ID cards ordered when this option was presented to customers on the main menu instead of on a secondary menu. In addition to reducing call resolution times, use of the IVR for basic services allows the agent to focus on providing customers with higher value services.
SHOW ME THE MONEY
"Insurers should have a CRM capability for both their policyholders and their producers," suggests Barry Rabkin, senior research analyst at Financial Insights, Framingham, Mass. "However, then there's that pesky need to demonstrate ROI. A CRM investment really demands that insurers look to their future sales (up-selling, cross-selling and ever more targeted marketing) and insurance executives are too busy with today to have time for tomorrow," adds Rabkin.
Health Net realized approximately $1M in ROI from cost reductions over a 12 month period-mainly due to service automation and workforce optimization. ANICO maintained customer service levels and attained 18% in savings over a 3-4 year period, also through staff reductions. Several companies cited indirect benefits such as increased staff productivity resulting from less time (roughly 10-30%) spent on coverage verification or other basic questions, however, not all companies have seen tangible benefits from CRM usage.
This may well explain why nearly one-half (48%) (See chart, below) of insurance companies have not deployed CRM systems and have instead selected customer-facing point solutions such as call center (36.5%), salesforce automation (24.5%), marketing automation (17%) or no solution (22%).
"Many insurers that distribute exclusively via agents have little to no direct relationship with their customers and little need to manage this type (CRM) of information on a daily basis," points out Matthew Josefowicz, managing director of the insurance practice at Boston-based Celent LLC. "As a result, insurers have invested in online self-service and customer data consolidation and analysis, but often outside the bounds of a typical CRM software package."
ON-PREMISE OR ON-DEMAND?
Insurance carriers are naturally risk-averse and reluctant to give up control, say experts. This cultural reticence plays heavily in decisions involving technology investments.
"If they consider giving up control, then the insurance company expects to pay less to an on-demand CRM provider," says Rabkin. "Moreover, CRM software as a service (SaaS) needs data to flow into and out of it as well as into the other insurance carrier's systems-no easy task."
When ANICO needed to integrate operations into its corporate headquarters for its Galveston, Texas-based Standard Life and Accident Insurance Co. subsidiary, which was inclusive of workforce and customer absorption, the company only assessed on-premise CRM solutions. "We did not consider Web-based CRM solutions at the time...it was still at the early stage and unproven...and we were not comfortable from a security and maintenance perspective," says Miller.
Delta Dental overcame its security concerns about storing customer information outside its firewall by deploying on-demand CRM solely for sales force automation capabilities. At present, the SFA/CRM application does not integrate with any back-end systems, call center or marketing applications. Transfer of customer information is managed through monthly back-end updates that push members' data to and from the CRM system.
Overseeing sales administration for 5.5 million consumers in Michigan, Ohio, Tennessee and Indiana, Delta Dental's Kevin Edelmann provided a contrarian point of view. "We went with on-demand even though on-premise is cheaper initially, but all of the 'extras' such as time, hardware and hard-coded workflows added to the cost. It would have been a nightmare to maintain while working through IS/IT for every change requested."
Edelmann maintains that dashboarding is key, "and real-time is essential," he says. "I can plan my days and weeks having better insight into how sales representatives, who interface with agents, brokers and small businesses, are doing. We are now looking to add more robust marketing functionality to the system."
LESSONS LEARNED
CRM technology can be applied toward automating business processes and facilitating relationships with customers, partners and internal stakeholders. This is especially true in complex environments, where organizations need to assess requirements, configure specific workflow scenarios and integrate customer data with interaction processes. But because this complexity is both time-consuming and difficult, several insurance firms suggest starting with a small deployment such as sales force automation rather than a comprehensive call center in order to learn how to build and develop rules-based workflows.
Quick wins that deliver proof-points are crucial in gaining credibility throughout the organization, says one insurer.
Organizations should also weigh short-term needs against long-term growth strategies. One B2C insurance provider started with 250-plus licenses for an on-demand SFA/CRM application that interfaced with a proprietary in-house financial accounting system. Growth required them to evolve their business processes toward a more customer-centric rather than contract-centric focus. Realizing its current system is inadequate for future expansion, the carrier is now assessing several enterprise-level on-premise CRM systems with the goal of transitioning before year's end.
Leslie Ament is an industry analyst and tech writer based in Lexington, Mass.
