Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


02:32 PM
Connect Directly

The Elusive Prize: Effective Cross-Selling

Though every insurer would like to capitalize on existing customer relationships to increase sales - and the technologies to enable enterprisewide data sharing are available - only a minority of insurers succeed in crossing lines of business to increase customer wallet share effectively.

Though every insurer would like to capitalize on existing customer relationships to increase sales - and the technologies to enable enterprisewide data sharing are available - only a minority of insurers succeed in crossing lines of business to increase customer wallet share effectively.


Insurance companies are naturals for cross-selling - most have multiple product offerings and many offer the full gamut of protection and asset accumulation products, either by themselves or through strategic partnerships. Of course, the internal diversity of insurance companies also has served as a barrier to cross-selling - systems traditionally correspond to lines of business, as do the processes by which insurance and related products are sold and administered.

However, technologies that enable enterprisewide sharing and processing of data now are sufficiently mature to break customer information out of line-of-business siloes, and Web-based and analytic technologies can leverage that information into targeted action. Moreover, companies report larger technology spending budgets than they've had in years, and the buzz across the industry is that technology investment has turned a corner from maintenance and cost reduction to a focus on growth and revenue generation. Taking these factors together, one might be tempted to conclude that the era of successful cross-selling of insurance is upon us.

Regrettably, that is not the case, according to Craig Weber, a Boston-based analyst with Celent. "Cross-selling is one of those 'apple pie' issues - everybody wants to do it, it's hard to argue against it, but there are surprisingly few success stories," he comments. "One would like to think that if you can identify likely targets in your existing book of business, then you have a good shot at selling them something else. But that's not necessarily the case."

One problem is the differing perceptions of the institution between management and customers. For example, a bank may attempt to brand itself as a purveyor of a broad range of products and services, including insurance. "But customers don't think of banks first and foremost when they need insurance - they think of an insurance agent," Weber says. "Successful cross-selling means changing consumer behavior - making them think of you when they normally would think of someone else."

Another barrier to effective cross-selling is the "stark reality of bad data quality," Weber notes. In most cases, insurance carriers don't know much more than their customers' names and dates of birth - and, given how often insurance purchases are triggered by life events, companies are ill equipped to present timely offers. "To get that information, you typically need 'feet on the street' - and that's the agents," Weber observes.

Along with better data collection and storage, data analytics can help marketers understand their customers and anticipate their needs better. The good news is that insurers are getting more sophisticated in how they compile, aggregate and analyze such data. "That's a good substitute for feet on the street, if done well," Weber says. However, he cautions, "It requires a huge investment in technology, training and process - how insurers handle customer data has to change for that data to be useful."

The likelihood of insurers making that investment is less than many industry optimists might believe. "Everyone is giving lip service to growing revenue," says Gartner (Stamford, Conn.) analyst Kimberly Harris-Ferrante. "But more companies are still focusing on operational efficiency than are pursuing hard strategies and investment in growth-type initiatives."

Data Hurdles

As much as companies might want to pursue successful cross-selling, most still are struggling with the source systems that house customer data, Harris-Ferrante adds. The first hurdle they face is extracting the data from their systems, which is challenge enough. The second and more difficult step is using it to create what has come to be called the "360-degree" profile of a customer, featuring all relevant information, including products associated with the customer and detailed transaction history.

To date, the industry's performance on this score has been less than stellar. A Gartner study conducted in December 2004, focusing on a random sample of U.S. insurers with at least $100 million in premium, showed that only 25 percent of life insurance companies and only 23 percent of P&C companies had created customer profiles for use in cross-selling and related marketing efforts (see chart, page 33). "After four years of talking about the cross-selling trend, less than a quarter of insurance companies have actually been successful," Harris-Ferrante laments.

Those who have succeeded are taking the further steps of leveraging customer profiles for profitability analysis, customer segmentation and predictive modeling, according to Gartner. "Once they get past the barrier of being able to pull the data together, companies then move ahead quickly in getting better use out of it," Harris-Ferrante notes.

But success is certain to elude companies that lack committed business strategies that match the technology efforts required to arrive at the systems and data integration necessary to achieve a 360-degree customer view. In the absence of such a commitment from the business, opines Gary Scholten, senior vice president and CIO of Des Moines-based Principal Financial Group ($187 billion in assets under management), "It may not be worth the investment to try to get there."

Principal's focus on providing benefits to a well-defined customer niche - small to medium-size businesses - helped drive a business strategy aimed at developing a technology-enabled common customer experience, according to Scholten. Also, since the company specializes in retirement products and services, customer retention is a high priority. Scholten attributes Principal's success to a methodical and incremental development approach - avoiding attempts at "big bang" CRM initiatives - and a corporate commitment to business and technology alignment at an enterprise level, which has facilitated business unit executives' willingness to make operational concessions at important junctures.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

1 of 5
Register for Insurance & Technology Newsletters