ABCs of CRM in the Insurance Industry

By Ed Fenwick
Vice President, Insurance Practice

Did you decide to read this article because you keep hearing more and more about customer relationship management (CRM) in the insurance industry and you want to understand exactly what it is? Have you found it difficult to find two articles on CRM that describe the same thing? If you answered "yes" to both questions, then you're experiencing the confusing state of an emerging trend for our industry.

Time will tell what impact CRM will have on the insurance industry, so let's skip the discussion of whether CRM will be an "industry transforming" event or not. Instead, I'll offer a simple, conceptual framework of CRM from the perspective of your business strategy.

The concept of CRM is relatively simple and familiar to insurers. The two points of the concept are:

Pretty simple so far. You read the two points and say, "Hey, we've been doing that for years. What's new?" Well, what are new are some supporting strategies that implement these concepts to yield significantly greater results and a true competitive advantage.

These supporting strategies generally fall into three groupings: analytical, marketing and operational. The analytical path focuses on mining the data you have on your existing customers, and marrying that data with external data when possible to develop a scoring index. This index can then be reliably applied to individual customers to indicate their level of profitability, tendency to remain a customer, and propensity to acquire other products and services. At its simplest level this analysis might move your view of existing customers into one of four following segments:

The second supporting strategy centers around marketing and the design of effective programs that will enhance your customer relationships based on their unique requirements. In many companies, this strategy represents a different marketing focus than the traditional one of new customer acquisition. A plan for the High Profit/High Retention customers, for example, might focus on retaining customers, cross-selling them specific services and insulating them from competition. In contrast, a plan for the Low Profit/Low Retention customers might be low maintenance with heavy emphasis on self-service.

The third supporting strategy is operational. The focus here is to develop the capabilities needed to execute the marketing plans. Recognize that this is where most CRM initiatives have failed. Solid analysis and well-designed plans cannot overcome the need to execute effectively across a range of customer contact points. It also is important to realize that developing an effective CRM operational capability is not about technology alone. Success requires a tight integration of People, Process and Technology.

So that is it -- our primer on CRM. How does such a simple concept get confused? Easily! There is a gaggle of technology vendors labeling whatever they have to offer as the "CRM solution." They are hoping the trend wave-riders will sign the purchase order and ask questions later. To prevent your organization from being caught in this wave, be sure you have a solid CRM business strategy that first integrates analysis, marketing and operations. Then demand that there be near-term benefit with real ROIs for each project approved under that strategy.

Here are some cautions based on lessons learned from the banking segment of the financial services industry, which has been working hard on CRM for the past five years: