Carriers' product-centric business focus, and the continued belief that CRM is a packaged technology, is hindering customer relationship management initiatives.As a business strategy, customer relationship management is fairly straightforward: apply customer knowledge consistently across all delivery channels to support customer service and marketing efforts.

But the lofty goals associated with most CRM initiatives-identifying cross-selling opportunities, retaining profitable customers and improving customer service-largely have remained out of insurers' reach.

There are a handful of reasons why the insurance industry has so few CRM success stories. For starters, carriers' business strategies traditionally have centered on developing, marketing and servicing products. As a result, they developed IT infrastructures that support policies instead of policyholders.

Carriers' CRM initiatives also have been hampered by confusion over who ultimately controls the relationship with policyholders-the agent or the company.

The fact that insurance companies only recently began embracing the concepts of CRM underscores another reason why CRM success has been difficult to achieve. Most carriers, industry experts say, are rushing to purchase technologies to support their CRM initiatives without taking the time to specifically define what they are trying to achieve.

"Insurers that spend their money on CRM technologies without first understanding how they will develop a customer-centric business strategy are throwing their money away," says Bill Bradway, a research director in the CRM practice at Meridien Research Inc., Newton, Mass.

Defining CRM

The success of a CRM initiative starts with a basic fact that industry observers say many insurance executives still don't fully understand: CRM is not technology that can magically improve customer service, revenue generation and customer retention.

"A lot of insurance companies fall into the trap of thinking of CRM as a call center solution or data mining tools, and they implement these technologies because others are doing it," says Tom Tynan, a partner in Andersen Consulting's global financial services practice who specializes in CRM. "And that's doing CRM for all the wrong reasons."

Insurance executives who understand first and foremost that CRM is a business strategy still have to wrestle with the fact that the concepts of CRM do not fit well with the industry's traditional product-centric business model.

Moreover, carriers have relied on their captive agents to personalize the relationship with customers, but until recently, they did not provide agents with comprehensive customer data.

"Organizations that have captive agent forces have put all of their effort to support their agents, and in those environments, the question becomes who is the customer-the agent or policyholder," says Kathleen Khirallah, a senior research analyst specializing in CRM for The Tower Group, Needham, Mass.

"That philosophical question has been an inhibitor of CRM in the insurance industry," Meridien's Bradway concurs. "The agent-based distribution model does not provide the proper incentives for agents to think about gaining a greater share of a customer's wallet."

Executives with Nationwide Insurance Co. recognized in the mid-1990s that the organization had to change its business strategy. "We started our drive toward CRM in 1995 because we wanted to shift from a product-centric view to a client-centric view," says Glenn Watson, an officer of Columbus, Ohio-based Nationwide Insurance who is working on the company's National technology platform. "At the time, we could not tell if a client with a homeowners policy also had an auto or life product with us."

In 1997, Nationwide Insurance began an ambitious project to consolidate customer information that Watson describes was stored in stove-piped legacy systems supporting auto, whole life and annuities, homeowners and commerical insurance.

"We mechanically matched the information from these systems and consolidated it under an account or a household," he explains. "We had to first produce reports and then manually determine who we thought belonged in a household. Once we had that information, we stored it in our client management system. It is the starting point of all activities for our agents and call center representatives."

Make it a point

One reason why insurance companies are lagging behind other financial service firms with CRM, experts say, is because of the limited number of interactions with their policyholders.

"Insurance is about asking a company to underwrite the cost associated with a risk that a customer may or may not incur," say John Alexander, president and CEO of FJA Finansys Inc., a New York-based actuarial consulting and software development firm. "At most, there might be a dozen touchpoints in a lifetime-marriage, college, having a family, losing your job-where you need additional coverage."

Each touchpoint represents an opportunity to increase its share of a customer's wallet. Given the limited number of opportunities to market additional products and services, it's crucial for carriers to increase their frequency of interactions with policyholders.

"A number of life insurance companies are trying to move out of being a product producer to become a financial advisor, which puts them in the position of having more frequent interactions with customers," says Andersen Consulting's Tynan.

Buyer beware

Although more software companies are developing packaged solutions that cover many aspects of CRM, such as campaign management, predictive modeling, profitability analysis and data manipulation, industry observers say carriers should be careful when they begin shopping for technology to support their CRM initiatives.

The reason why there are only a handful of true integrated CRM solutions, TowerGroup's Khirallah says, is because of the complexity of CRM and the amount of different components that must be integrated. "The technologies required to execute a CRM business strategy are myriad and highly specialized," Khirallah writes in a report, "Integrated Solutions For CRM: What's Available Today?"

For example, in the category of customer knowledge, which includes marketing and decision-support systems, Khirallah identifies four categories of technologies-data warehousing, data manipulation, decision support and specialized marketing-each of which has a host of underlying technologies.

"Some vendors have actively acquired specialize software vendors in the attempt build a more complete solution," she adds.

A good example of this business strategy is Siebel Systems Inc. The San Mateo, Calif.-based company in September announced it was acquiring Toronto-based Janna Systems Inc., a provider of "eBusiness" management software, for $975 million. In 1998, Siebel acquired Scopus Technology Inc., a provider of customer service, field service and call center applications. That acquisition enabled Siebel to develop its unified sales, marketing and customer service system.

One of the most important aspects of a CRM initiative is providing the same customer information across the three primary insurance delivery channels-agents, call centers and the Web.

"A lot of organizations think CRM is claims management in the call center, and that's taking a very narrow view of CRM," Khirallah says. "Insurance companies have to consider their channel layout-call centers, the Internet and agents-and strive to provide customer information consistently across all their distribution channels."

Nationwide, for example, implemented in 1998 the Siebel Insurance front-office application. The product provides comprehensive customer, product and service management across multiple business lines, and feeds that information to multiple delivery channels.

The components of the system include quoting and binding services for auto insurance on Nationwide's Web site,, and insurance-specific sales and marketing information for agents and call center representatives. "It's all the same data and business logic from a technical perspective," Watson explains.

Nationwide has rolled out its integrated Auto National Platform, which also provides online quoting and binding, in eight states, and plans to complete the program by the end of 2001. Starting next year, Nationwide will begin to roll out a similar program for its property insurance, and expects to complete the implementation in 2002.

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