Customer experience

The nation's largest insurers together received a mediocre score for online customer respect. But the good news is: The banking and securities sector, as well as Fortune 100 firms overall, didn't ace the test either.This assessment comes from The Customer Respect Group Inc., a Bellevue, Wash.-based research company that studies the Web sites of Fortune 100 and Fortune 1000 companies. The group gave insurers among the Fortune 1000 a 6.8 overall customer respect index (CRI) for their Web sites, while financial services firms scored 6.7 and Fortune 100 firms scored 7.0.

With trading volume reportedly far below management's expectations, Web-based reinsurance risk-trading hub inreon was terminated in early May, leaving two players to service the global online reinsurance risk-trading market.London-based inreon was launched in December 2000 as a partnership between global reinsurers Munich Re, its U.S. subsidiary American Re, and Swiss Re. But according to industry sources, the decision to close inreon down came when the reinsurance giants concluded that the service would have a difficult time turning a profit-both short- and long-term.

Blue Cross Blue Shield of South Carolina (BCBSSC) in January introduced a new program that many believe could revolutionize the Web-based self-service model.The program, known as Blue-By-Design, is a consumer- driven health plan (CDHP) that gives members the power to make their own healthcare decisions, says Terry Povey, director of Web business development, market research and statistics, for the Columbia, S.C.-based health insurer.

The self-service economy isn't a new phenomenon. It started with ATMs to avoid teller lines at banks. Then, it expanded to pay-at-the-pump gas station service, and now can even be found at department store check-outs and airline ticket counters. The era of self-service has arrived, and the benefits are clear. Self-service is fast, convenient and economical.Customer self-service is also being embraced via the Internet, which today provides companies with an information infrastructure that continues to grow in functionality and bandwidth.

When the economy cools down as it has in the last few years, small businesses typically are the first commercial entities to reduce costs, with many scaling back expenses such as comprehensive business owners insurance.These tactics might help foster cost-containment, but it's a negative development for insurers, agents and third-party providers of small-business insurance that want to build new business. But low demand isn't the only challenge that they're encountering in the small-business market. One chronic dilemma has been an inability to precisely pinpoint insurance needs of small businesses, many of whom are fitted with either too much or too little coverage.

In an effort to become comprehensive financial service providers, some large insurers have taken an aggressive approach by forming their own banks.Banks, on the other hand, have carried out insurance expansion more conservatively-mainly through the acquisition of large agencies to drive insurance-product distribution through the bank branch.

For many consumer-goods providers, one-stop shopping has long been regarded as the pinnacle of customer relationship management (CRM). But some have learned that offering one-stop shopping-as all encompassing as it can be-comes equipped with complications.In their zeal to become all things to all people, a host of consumer-goods providers lost their overall focus, and in turn alienated customers. Insurance companies that have established a bank over the past four years have found this dilemma to be more imagined than real.

Although insurers may be tempted to offer the full gamut of banking products and services, there are a finite number of products and services that consumers will acquire-with confidence-from insurance companies, industry observers say."A certificate of deposit (CD) with a locally available rate is very attractive," says Mark Walker, group vice president, financial services business team leader, at Walker Information Inc., an Indianapolis-based firm specializing in customer loyalty.

If Lee Gaudette, a third-generation independent agent based in Worcester, Mass., had a nickel for all the good reasons he doesn't sell banking products to his customers, he could probably open his own bank.Gaudette's sentiments are motivated by several factors, among them tradition, geography and competition. That's why Gaudette uses Insurebanc, a Farmington, Conn.-based federal savings bank established jointly by the Independent Insurance Agents & Brokers of America (IIABA) and W.R. Berkley Corp., for his own cash management purposes and for various loan products.

Although many insurers are taking the necessary steps internally to grow their books of business, many realize that they need to look outward and align with third-party distribution channels that have developed their own internal IT competencies.The impetus to raise the stakes on small-business insurance marketing is significant because no single carrier has more than 3%-4% share of market, says Ed Gillman, president and CEO of AgentSecure, an Atlanta-based insurance agency serving the small-business market.

In May 2001, eWausau.com, the Web property serving small-business customers developed by Wausau, Wis.-based Wausau Insurance, was shut down after executives at the company realized that small-business owners were reluctant to use the Web to research and shop for insurance.The company shut down on the heels of consummating a strategic alliance with Atlanta-based InsureZone, a partnership that would expose eWausau to even greater distribution opportunities than it could muster alone. But eWausau is now gone, and InsureZone-a startup provider at the time-carries on the legacy.

For years, Hispanic consumers have had to settle for "Americanized" versions of a wide variety of consumer goods-financial services products included. But as the Hispanic population in the U.S. rapidly ascends, industry experts insist that insurers must adopt new selling strategies to fully capitalize on a ripe opportunity.By the year 2025, Latinos are expected to represent the largest minority group in the United States. And, as this growth emerges, some insurers have begun to customize products to meet the needs of this burgeoning ethnic demographic group.

Using Global Positioning Satellite (GPS) and cellular communications technology to gather information about when and where a motorist is driving, United Kingdom-based insurer Norwich Union is launching a pilot study this summer that could play a role in transforming the way auto insurers underwrite policies.Called "Pay As You Drive," the two-year study will involve retrofitting the cars of 5,000 Norwich Union policyholders with a "black box" that will gather and transmit vehicle and driving data to the insurer's back-end systems. Norwich Union statisticians will then analyze the data to determine which variables affect risk and claims, and those results will be used to calculate usage-based premiums.

Already on the defensive about the use of credit scores for underwriting, property/casualty insurers now face another assault on one of their prime data tools in the nation's largest market for homeowners insurance.In late April, California Insurance Commissioner John Garamendi all but banned carriers' use of the main data source to underwrite and rate homeowners insurance policy. For 11 years, the Comprehensive Loss Underwriting Exchange (CLUE) has tracked claims on properties and property owners supplied by carriers of the nation's homeowners insurance policies.

Last year, for the first time, more than 50% of banks in the United States produced some sort of insurance revenue.According to a "Bank Insurance Fee Income Report" from Michael White Associates, 4,359, or 52%, of all commercial banks or federally insured savings banks in the United States generated revenues through insurance sales.

Balboa Insurance Group Inc. needed to integrate its legacy-based customer data with an enterprisewide CRM system. Executives considered a costly systems conversion project, but opted for a middleware solution instead.Balboa Insurance Group Inc. faced a modern-day information technology conundrum. It had critical customer information locked away in its siloed host applications and couldn't get it out to support new Web-enabled business processes.

The Hartford's affinity program with the AARP is a direct-marketing success story. However, the technology supporting the program is the secret to the carrier's achievement.In 1984, the American Association of Retired Persons (AARP) approached The Hartford for a third-party affinity relationship that would enable AARP members to purchase auto and home insurance from the carrier.

The potential savings for agents and carriers using real-time interfaces amounts to thousands of hours-and dollars-each day.A billing inquiry initiated through an agency management system takes two minutes, whereas the same inquiry takes eight minutes by phone, and nine minutes by carrier Web site. Those are the results of an agency workflow study conducted last year by Applied Systems Client Network (ASCnet), the user group for Applied Systems Inc., University Park, Ill.

In response to how Allstate Insurance Co. handled its employee-agents during its reorganization in 1999 and 2000-and to prevent other employers from repeating that action-the Employee Benefits Protection Act of 2003 was introduced in Congress in March.The Northbrook, Ill.-based carrier reorganized the company to reduce expenses by $600 million annually, to bring its agents under one program, and to integrate its agency force, direct response call centers, and the Internet. As part of that plan, Allstate terminated 6,400 employee-agents in June 2000, and offered them the option to convert to independent contractor status.

Most insurance e-business solutions providers have long considered investments in Web-based insurance distribution outlets as bold and risk-taking strategies to enhance their corporate fortunes.This belief didn't deter Brookfield, Wis.-based Fiserv Inc., an information management systems and services provider, from acquiring Falls Church, Va.-based ReliaQuote Inc., an Internet-based insurance agency and brokerage that dabbles in term insurance. Consummated in April, the terms of the deal were not disclosed.