[In the first article in this series, Cognizant's Michael Kim and Agil Francis discuss how insurers can identify better, lower-risk customers: Using Marketing Analysis To Get To The Right Customer]
Here's a scenario from inside a typical auto and home personal-lines insurance company: The Marketing team needs a complex build-out from IT. The project has been approved and put into the following year's budget. IT has provisioned for it and business requirements are completed. But several months later, IT -- likely trying to respond to the urgent requirements of what it perceives as key customers such as Underwriting and Claims, and prioritizing what it perceives as the more pressing business need -- still hasn't delivered for Marketing. Marketing therefore turns to local vendors and outsources its new system, which gets completed, albeit in a simpler form. IT is not pleased because they've been sidestepped and Marketing has brought in a capability that may be in violation of the company's enterprise IT architecture rules.
Does this sound familiar?
In most insurance companies, there's a struggle between the Marketing and IT departments. Marketing believes IT to be slow, glacial even. The reality is that IT is answering to other areas within the organization, and thus has to prioritize. The twin programming behemoths within insurance companies that have taken most of IT's time are Underwriting and Claims. These two areas, requiring heavy-duty construction, have more "big systems" of a legacy nature that need to be dealt with, along with the complexity of integrating them and having them all to talk to each other. Make a change in one area, and you have to make it work everywhere. In the process of being developed, these essential capabilities gobble up the lion's share of IT's attention.
But guess what? Marketing is taking on an increasingly critical role within the company. In the world of insurance, the capabilities of Underwriting and Claims have become largely similar across insurance companies. Products, especially in the auto insurance space, are becoming commoditized, and differentiation is about price wars -- a race to see which insurer can provide the same product for less. Today, all insurers essentially perform the underwriting and claims functions the same way, and there's no need to reinvent those systems. If a customer has an accident, the way the claim is processed and dealt with will likely not differ much from one insurer to another, from the time that the customer makes the claim to the time the check appears in the customer's mailbox.
In terms of one insurer differentiating itself from another, therefore, what this means is that Marketing is going to be increasingly important in creating that perception (or even help the company move toward the reality) of a differentiated company with differentiated products. In other words, Marketing could be the critical function that becomes IT's next priority to support with new capabilities. So for the sake of creating the best outcome for the company as a whole, it would behoove IT and Marketing to sit at the table together and figure out how they can collaborate.
Can Marketing Analytics Help Bridge The Gap?
Can this organizational dysfunction be fixed? And if so, how? We believe that a capability called marketing analytics, new to the insurance industry, may help to break the ice. While it may not be the panacea for permanently improving the dynamics between IT and Marketing, it'll at least get the two working together.
Here's why we believe this can happen. While a robust marketing analytics function is going to require expertise to build, between the database, the reporting layers over it, the user interface and its navigation, it is not as heavy or complex as a policy administration system or a claims system, nor does it have big processes that have to be coded. Hence, it affords IT the opportunity to build it and get it up and running quickly. What Marketing gets out of this is a program that will answer the questions pointing to key performance indicators for marketing effectiveness and efficiency, such as average marketing spend for each new lead, customer, and referral -- and what it puts into it is data obtained from both within and outside the company. It's always easier to talk when there is a common project to focus on, and marketing analytics is more likely to keep the customer satisfied.
Once Marketing and IT are talking, other good things may start to happen. Maybe a separate marketing analytics function will be set up. It might become clear that their collaboration is actually gaining the company a lot of new, low-risk customers -- the kinds of customers the company really wants, and the ability to better understand, through the analytics function, what special product features and services customers want. The reality is that although Marketing and IT may seem to be functionally quite different in an insurance company, what they share is much greater than what divides them -- they are both engaged in a creative process that's critical to moving the company up to its next level.
Michael Kim is Vice President, Insurance Consulting, and Agil Francis is Senior Manager, Insurance Consulting, at Cognizant.