Customer Insight A Key Competitive Advantage

It can be hard for insurers to quantify the specific financial benefits of investments in customer analytics. But the competitive advantages enabled by improved customer insight are countless.

When anthony abbattista, Allstate's vice president of enterprise technology strategy and planning, refers to "secret sauce," he's not talking about lunch. Rather, this is how Abbattista describes the advantages that Northbrook, Ill.-based Allstate is gaining from its use of customer analytics to differentiate itself from other carriers. The degree to which an insurer uses customer analytics -- and the effectiveness of those efforts -- Abbattista continues, provides the foundation for understanding the customer and enhancing the customer experience throughout the enterprise. "Understanding our customers is an absolutely critical part of our business," he says. "It does and will continue to differentiate us."

But it is difficult to calculate an exact return on investment for customer analytics, as it typically is only one ingredient in a mixing bowl of enterprise technologies employed in any number of processes, including underwriting, product development, marketing, customer service and distribution, Abbattista relates. Customer analytics involves the use of predictive modeling and customer relationship management (CRM) technologies to gain insight into consumers' behavior and to understand their needs -- all in order to better manage client relationships and identify high-value prospects.

Like many carriers, Allstate ($156 billion in total assets) does not calculate analytics' ROI value in a dollar amount because they are embedded throughout the entire enterprise, Abbattista relates. Instead, the ROI of customer analytics is determined by how the technology contributes to business growth, revenue targets, and fraud detection and compliance goals, he explains. "Customer analytics is an integral part of a better customer experience and supports goals in our business metrics perspective, including retention, cross-selling, up-selling, policies in force, profitable growth, flagging customers' life stages, pricing accuracy, product innovation, fraud prevention and claims analysis," says Abbattista.

Industry observers, including Karen Pauli of Needham, Mass.-based consultancy TowerGroup, believe that to demonstrate some kind of ROI, customer analytics must be integrated throughout the entire enterprise, as Allstate has done. "It is a common mistake for carriers to focus on only one area of the business," she says. "When carriers undertake customer analytics, it needs to be an enterprisewide application if you are to maximize ROI."

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