Connecting With the Customer

As the applications and technologies used to organize and analyze customer information mature, IT executives, analysts and vendors are tackling some tough issues - how to take customer knowledge and make it actionable; how to measure return on investment tangibly from new and existing customer relationship initiatives; and how to leverage existing IT infrastructure and investments with new customer-facing applications.

What is becoming apparent is that customer relationship management (CRM) is no longer a discrete application area, but an integral part of business process management. According to Sheryl Kingstone, program manager at Yankee Group, a Boston-based research and consulting firm, "There are two major trends in customer service applications - first, a focus on STP [straight-through processing] to eliminate manual processing and integrate and share data across the enterprise, and, second, self-service initiatives."

The good news for insurers is that the lessons learned about CRM in other sectors of the financial services industry are allowing them to focus on the creation of usable, tactical and cost-efficient applications. According to Sean O'Neill, senior analyst of Chicago-based consultancy Bridge Strategy Group, "In the past, customer relationship initiatives have failed because of an overemphasis on technology. The focus was placed on implementation, not on the customer. The real richness of customer management is what you actually do with that information" - delivering the right information at the right time and using it to change business processes and respond to customer needs.

Customer Segmentation

More and more, insurers are taking a closer look at whom the customer really is, and segmenting their customer base to maximize value and cut costs. Thinking strategically not only about which customers provide the highest value, but also how to leverage those relationships to grow revenue, many insurers are placing a renewed focus on business and distribution partners as the most-critical channels through which they can interact with existing and potential policyholders. Some of the most innovative customer applications being launched are targeted at agents and brokers, who not only receive real-time information about clients from insurers but - at least for those generating a higher percentage of new business - can themselves expect higher levels of customer service from the insurer.

At Mayfield Village, Ohio-based Drive Insurance from Progressive ($1.4 billion in premium revenue), new Web and call center applications are delivering to agents the real-time information they now require to offer the best customer service to their clients. ForAgentsOnly.com (FAO) is Drive's agent-dedicated, password-protected Web site. Developed in the late 1990s primarily as a vehicle to communicate company and industry news and product information to agents, FAO has evolved to include quoting functions, as well as the ability to make policy changes and payments, submit billing inquiries, review claims status, and access agency commission statements and personalized production reports.

Chris Garson, Drive Insurance IT director, estimates that the portal has handled 2 million endorsements this year. "In terms of cost-effectiveness," Garson explains, "if each transaction costs 'X' dollars, that's a lot less than it cost to build; plus, it has taken a lot of transactions out of the call center, which was a major goal for the application."

Built in-house using Microsoft (Redmond, Wash.) development tools, the FAO application uses IBM's (Armonk, N.Y.) MQ Series to connect to back-office mainframe applications and Microsoft SQL Server to access server-based applications, according to Garson. Although engaged in a multiyear project to move away from batch system processing and transform its legacy code base, Progressive, in the meantime, continues to mine data from a variety of back-end systems and push it to front-end applications.

In addition to the aggregated, real-time data being delivered through the FAO Web site, Drive also has been developing call center applications that route client calls from the Progressive corporate call center directly to the agent. This call center application, also developed in-house, allows customers to have only one contact number for the insurer while still receiving the kind of individualized service they expect from their agents.

For those agents generating a higher percentage of new business and spending more time prospecting rather than servicing clients, Drive plans to develop additional tool sets to help streamline the exchange of data. "Part of the sales strategy for Drive," says Garson, "is to work with agents based on our relationship with them. We are a very new-business-oriented company, and 75 percent of new business is coming from agencies that have made an investment in agency management systems."

CSC's (Austin, Texas) recently launched Customer Service Accelerator platform also keys into many of the same issues - making do with existing back-end systems, providing aggregated data to multiple locations, and focusing on those customers and partners who are most important to business growth. "We've done a lot of customer segmentation studies," says Tim Kennedy, director of research and development, enterprise architecture, with CSC's life and annuities division. "Delivering different value to different customers is key, but so is increasing productivity and cutting costs as systems are streamlined."

Built using Java-based tools and with a focus on an open architecture based on ACORD (Pearl River, N.Y.) standards, Customer Service Accelerator provides a common front end to perform transactions across multiple systems and gives users - whether in the front office, back office or remotely, via the Web - immediate access to customer and policy information contained in multiple, often disparate, administration systems.

Business Value and ROI

While measuring hard ROI on customer relationship initiatives always has been challenging, analysts and industry experts believe that as applications become more targeted at business problems, measuring their cost-effectiveness also is becoming more concrete. "Organizations are finding it more difficult to get customer-focused projects approved based on revenue lift as opposed to cost reduction," according to Seth Montgomery, Minneapolis-based principal at Deloitte Consulting. "Right now, we're doing work around predictive modeling to help organizations better assess the risk particular customers represent to help them improve their pricing and underwriting practices, and ultimately help improve their loss ratios."

CSC's Kennedy also sees cost cutting and productivity gains as key to measuring the success of customer service initiatives. "Insurers don't do benefit analysis around customer retention and cross-selling - it is about the tangible payback of customer service," he says. "If you can cut operating costs by 25 percent and improve retention and provide better service, then that makes sense."

John Burke, vice president and general manager of San Mateo, Calif.-based Siebel Systems' insurance group, believes that "in this ecosystem, customer relationship projects don't get off the ground unless there is ROI." He points to Massachusetts Mutual Life Insurance Co. (Springfield, Mass.; $350 billion in assets under management) as an example. "The company was able to improve customer retention by 15 percent by providing the right tools and information to users," he says.

Access to New Markets

At MetLife ( New York; $320 billion in assets), the ability to interact with employee members via the Web has allowed the insurer to reach a new customer base. Having first launched MetLink, a Web-based benefits administration tool targeted at employer groups, MetLife has since built MyBenefits, an integrated information, management and transaction portal for employees.

Sachin Shah, vice president, workplace solutions, MetLife, explains that "MyBenefits was less about cost avoidance and more about growing relationships with a new customer segment." In 2005, MetLife projects that 100,000 enrollment transactions, representing close to $100 million in revenue, will be completed via the Web by employees purchasing term life, universal, long-term care and critical illness insurance. With 13 million to 14 million employees having access to the MyBenefits portal and 1 million already registered, the move to self-service applications was absolutely essential for the company to adjust to new market conditions. According to Shah, giving employees the ability to handle and manage their own insurance plans "would not have been economically feasible without self-service technology."

Deployed in tandem with call center applications, MyBenefits continues to experience significant growth in usage. Over the past three years, the number of individuals registered with MyBenefits has grown by more than 100 percent each year. Shah attributes the rapid adoption of the project to changes in demographics and internal project planning. "More and more people are going online to educate themselves and do research, as well as to buy products. But we also build things that customers will use; our goal is to build things not just for the sake of building them, but to build things that will make doing business with us easier."

Although the success of Metlink and MyBenefits has resulted in cost savings and process efficiencies for both employers and the insurer, Shah insists that online applications do not simply subtract cost, but add value to the service equation. "The big deal is not only what these applications allow us to do online," he explains, "but what they allow us to do that we cannot do via paper or telephone." Examples include the ability for employees to receive real-time updates on claims via e-mail, and the capability for benefit administrators to review and update their bill prior to paying it.

Moving Forward

Despite the success of recent customer relationship initiatives, Bridge Strategy Group's O'Neill still believes there will be more on the horizon. "The customer is being educated at a faster rate than the company can respond to," he says. O'Neill foresees customer demand for "a product, price and service tailored to their needs."

"Insurers have to figure out how to be more innovative with their products, tailoring products to customer behavior," according to O'Neill. He points to a highly specific level of understanding that could result, for instance, in possibly offering lower rates to drivers who don't speed or never visit certain areas.

Siebel's Burke also sees more customer-centric applications being launched in the future. "The customer sets the bar," he says. "Quoting should be done in hours, not in days; claims should be settled in days, not weeks; and settlements must happen quickly."