Is the demise of customer relationship management (CRM) software greatly exaggerated? Insurance Networking News asked Leo Schneider, senior vice president for insurance SAP AG, Walldorf, Germany, to explain his philosophy of why CRM, on the surface, appears to be an enterprisewide moving target.INN: What is the current perception of CRM?

LS: When I talk to insurance customers worldwide, I seldom use the term CRM. I see a lot of changes happening on the channel side worldwide, even more in Europe and especially in the U.K. Insurers are asking for an effectual system to support them in their sales, their channel management and their sales performance management.

INN: Then, how do you define CRM?

LS: CRM is a highly integrated process. It could start in a CRM call center, but it has to be embedded into the claims process. You start with the first notice of loss-for instance, when a customer reports that his or her car was stolen. It finally ends where a payment is settled to an account or to an individual customer. So, we see CRM embedded in core insurance processes, either sales processes, business processes or planning processes, in service processes or claims processes.

INN: What type of platform is most appropriate for CRM in an organization whose data is segregated into separate silos?

LS: Many insurers have a complex system landscape. There are lots of legacy systems, many of them siloed. On the other hand, there's no chance to have a complete replacement of their business units, even if you reduce to a few areas. Few insurers worldwide do that. Most insurers bring new processes into an existing landscape.

That being said, you can't work with monolithic applications. You need more granular applications, more modular ones. You need some applications for defining new products, some for testing and simulating them.

You also need applications that are flexible, so that you can do business process redesign by configuration rather than by coding. Most of the current systems coded the business logic and the business rules in any programming language that was available, be it COBOL or Java. You have to be able to change faster. This can only happen if you configure and compose applications rather than hard-code them.

The final element is that it must follow a service-oriented architecture (SOA).

INN: So is SOA a prerequisite for proper CRM integration?

LS: You need open systems that cross system boundaries to drive cross-selling. In this complex landscape, an open architecture, which has end-to-end processes in mind, without providing them in a monolithic system architecture, is essential.

I don't believe you should build an insurance landscape with 10,000 granular Web services. Rather, insurance companies should look at the SOA concept in cases where you have the right granularity. If you have too much granularity, you have too much complexity and you can't guarantee consistency, which is essential for insurance. If you have SOA, you can more easily convert some areas of your siloed systems than if you don't.

INN: Given the evolving nature of the insurance industry, where can CRM do the most good for a carrier?

LS: The insurance game is changing. If you look back five or 10 years, the primary insurer was in the middle of all insurance processes. Now, we have things that increase competition, and there are tougher regulations in the United States, in Europe and other countries as well. New players, such as so-called claims factories that focus on one specific process, are coming into the market.

The most dramatic change is that, as competition arises on the distribution side and on the sales side, new channels are becoming more important. That's where CRM could do a lot for carriers.

INN: Are customer expectations impacting the rate of CRM adoption among carriers?

LS: Customers want three things at once. The first is more convenience, because they are used to it from other areas. Second, they want more complex, tailored products. Third, they want a lower price, which is cyclical in the insurance market.

So, you have to be faster defining new products. You have to provide the products in a more convenient way. You have to rely on simple processes.

It's not just customer expectations. As new players, such as banks and retailers, come into the market, they increase the pressure and change the way insurers do business. Insurers have to react to these new channel trends.

INN: So how are carriers responding to these new challenges?

LS: They try to do that in different ways. They try to bring products to the market in advance of their competitors. They try to partner and buy insurance products from other companies. And, they try to partner with other agencies or distribution channels. There is a trend toward the "networked" insurer. To provide the full value chain to your customers, you have to partner and cooperate.

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