By Frank Siderio, financial services industry strategist, PeopleSoft, Inc.
Insurance is a complex product where personalized serviceachieved through an intimate knowledge of customers and their histories with an insurance companyis critical to making sales. As insurance options broaden and products grow more complex, customers seek superior, personalized service more than ever. With the repeal of the Glass-Steagal Act in 1999, insurance companies face increased competition from banks and brokerages. With the enactment of the Patriot Act, insurance companies need to ensure that they "know their customers." The situation grows even more urgent when one considers the bad economy that hurts investment income; as well as the extremely narrow window of time wherein an insurance call center representative, agent or broker holds a customer's attentionand a valuable opportunity to cross-sell or upsell. It is at this precise moment that these individuals have the chance to maximize these fleeting sales opportunities.
To maintain competitive edge and viability, insurance companies are focusing intently on delivering superior customer service. A comprehensive customer relationship management (CRM) strategy addresses three imperatives: Sum providing a unified enterprise customer view; Sum retaining customers with great services; and Sum controlling costs as the insurance company in question expands.
These three imperatives form a unique interplay that maximizes sales while reducing operational coststhe equation for improved revenue growth and profitability.
Gain a Unified Enterprise View of Customers
Within many insurance companies, there is a wealth of valuable information about individual customers: you know who they are and what insurance products and services they buy. You know their history of claims and the status of their accounts. You may even know about their opinions and preferences, or whether promotions have attracted their response. But can you unify all these fragments into a complete portrait of this most important asset: your customer?
For insurance companies, "know thy customer" can be a challenging imperative. Customer data may be divided among product lines, or among legacy claims, policy and billing systems. If an insurance company has expanded its customer base through mergers or acquisitions, its information may be even more fragmented.
CRM in insurance starts with a single, complete, real-time enterprise view, so that call center representatives, agents and brokers can understand and serve every facet of individual customers. This level of holistic, personalized service can be the differentiating factor that retains good customers and reduces churnan important goal, given that customer retention is profitable and new customer acquisition can be expensive.
Retain Customers With Great Service
Most insurance companies understand the virtues of a single, complete, real-time enterprise view of individual customers, and they have made great progress towards providing this view at customer touch-points throughout the enterprise. But it's critical to note that this view should not be regarded as an end in and of itselfrather, it is a rich foundation to be used as a basis for a deeper, more advanced level of customer understanding.
Consider how foolish it would be to try to sell automobile insurance to someone who doesn't own a car. Without customer analysis and behavior prediction, this is exactly the quagmire that call center representatives, agents and brokers find themselves in every day. This advanced level of understanding is needed to help insurance companies predict customer behavior and align marketing, cross-selling and upselling efforts accordingly. By making customer analysis and behavior prediction data immediately accessible at the desktop, sales efforts are optimized and customer loyalty is strengthened, as individual customers feel that their needs are understood and met in a way that is fast and convenient.
Predicting customer behavior for improved sales efforts is a three-step process:
Sum Profiling: Insurance companies first build a profile of information about customers who have previously exhibited a targeted behavior. Profiling requires rich customer data, including enterprise-wide transactional and behavioral data such as call center and account holdings information. Other data sources include key performance indicators and third-party demographics. An example of profiling might be building a profile for customers who bought new homeowners' insurance policies in the past two years. The goal is to determine characteristics to look for in future buyers.
Sum Modeling: By using data mining on the profile information, analytics can uncover the most relevant characteristics of the customer segment being analyzed. For example, the most significant attributes of customers who bought homeowners' insurance are gleaned from the profile via the data mining application. Such characteristics comprise the model of customers most likely to purchase homeowners' insurance in the future.
Sum Scoring: Insurance companies use predictive analytics to score existing customers by comparing them to the model. Those most closely matching the characteristics included in the model are most likely to exhibit the targeted behavior. Given the example above, an insurance company can rate its customers numerically to indicate how closely they match the model of the person most likely to buy homeowners' insurance.
Once customers are scored and the analysis pinpoints customers most strongly correlating with the model, an insurance company can address those customers, especially the top prospects. Customers scoring a nine or above might receive a special promotion for homeowners' insurance, while a separate, incentive-based offer might entice those scoring seven and above.
Customer analysis and behavior prediction can also be used to identify life events and/or extended relationships, which can be highly useful in improving profitability from individual customers. For example, life events often trigger changes in insurance coverage that can be anticipated and leveraged with targeted offerings. You might identify health insurance policyholders who have recently had new children and offer them an attractive life insurance policy. Using a single, complete, real-time enterprise view coupled with customer analysis and behavior prediction, you may be able to identify good drivers among your auto policyholders who have children turning sixteen. It's time for a targeted offer to add the family's new driver to the policy.
As with many industries, the more products you can sell to a given customer, the less apt he/she is to migrate to another provider. Furthermore, as policy holders tend to stick with you, the ratio of premiums paid to the cost of claims increases in favor of the former. Lastly, statistics show that the longer a policyholder remains a customer, the less frequently he/she submits a claim. All of these factors contribute to improved profitability.
Control Costs While You Expand Business expansion presents many positive opportunities to insurance companies, including increased assets and broader geographic reach to new customers.
So how does an insurance company grow without sacrificing profitability? The company at hand must offer the same level of superior service that its customers have come to expectwhile minimizing operational costs that, paradoxically, have the potential to spiral out of control, as the company begins to serve an augmented and growing customer base.
The first key is to enable your agents, representatives and brokers to identify and spend the right amount on each opportunity. A high-value, low-risk customer, who carries policies over a long period and makes relatively low claims, is an ideal subject for marketing and sales efforts targeted at extending his or her portfolio. Call center representatives, agents and brokers need real-time access to this business intelligence, so they will know where to concentrate their efforts in the limited amount of time they have the customer's attention.
The second key is to use the most cost-effective channels without sacrificing a high level of customer service. Call center, agents, email, phone and self-service portalshow can your employees determine which channels are the most efficient and cost-effective for different target audiences and desired behaviors? Again, using customer analysis and behavior prediction, call center representatives, agents and brokers can target marketing and sales efforts through different channels depending on the target audience in question.
Going one step further, new and advanced email response, Web chat and self-service portal tools are drawing more and more customers to the Web each day, enabling a consistently high level of customer service while "pulling" customers to a communications medium which is much more cost-efficient than the phone. Particularly valuable are Web-based self-service portals, which can function as a first and last point of contact and eliminate valuable time spent assisting a customer who can just as well assist him or herself. Finally, Web-based interactions tend to deliver on the holy grail of customer servicespeed and convenience.
The third key is automation of the more mundane insurance business processes. Given the myriad systems in the insurance worldclaims, billing and policy systems, not to mention automobile, home, life and health insurance subsystems for each oneCRM systems in insurance will only add another layer of complexity, labor and expense if they are not pre-built to connect with legacy systems and automate the mundane work of keeping these systems updated. Automated, multi-step workflow capabilities are critical to minimizing these and other potential bottlenecks, such as the processing of trailing documents supporting a policy applicationdocuments like expert appraisals, doctor's statements and/or proof of student status. By automating mundane processes and removing the paper trail, call center agents, representatives and brokers are freed up to focus on the more strategic activitieslike servicing customers.
Today's insurance companies certainly face a daunting challenge in maintaining and increasing their competitive edge. But by focusing on three key imperativesgaining a unified enterprise view of customers, retaining customers with great service and controlling costs while expandinginsurance companies can turn challenges into strategic competitive advantage and enhance their long-term viability and profitability.