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Customer Relationship Management In Insurance Companies Marketing Essay

3995 words (16 pages) Essay in Marketing

5/12/16 Marketing Reference this

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Insurance is a complex product where personalized service-achieved through an intimate knowledge of customers and their histories with an insurance company-is 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 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 centre representative, agent or broker holds a customer’s attention-and a valuable opportunity to cross-sell or up sell. 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.

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 itself-rather, 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 behaviour prediction, this is exactly the quagmire that call centre representatives, agents and brokers find themselves in every day. This advanced level of understanding is needed to help insurance companies predict customer behaviour and align marketing, cross-selling and up-selling efforts accordingly. By making customer analysis and behaviour 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 behaviour 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 behaviour. Profiling requires rich customer data, including enterprise-wide transactional and behavioural 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 behaviour 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 behaviour 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 expect-while 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 portals-how 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 service-speed and convenience.

The third key is automation of the more mundane insurance business processes. Given the myriad systems in the insurance world-claims, billing and policy systems, not to mention automobile, home, life and health insurance subsystems for each one-CRM 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 application-documents 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 activities-like servicing customers.

Today’s insurance companies certainly face a daunting challenge in maintaining and increasing their competitive edge. But by focusing on three key imperatives-gaining a unified enterprise view of customers, retaining customers with great service and controlling costs while expanding-insurance companies can turn challenges into strategic competitive advantage and enhance their long-term viability and profitability. 

Benefits

These tools have been shown to help companies attain these objectives:

Streamlined sales and marketing processes

Higher sales productivity

Added cross-selling and up-selling opportunities

Improved service, loyalty, and retention

Increased call center efficiency

Higher close rates

Better profiling and targeting

Reduced expenses

Increased market share

Higher overall profitability

Marginal costing

We are now living in a very dynamic insurance environment. The implications

An average customer who used to be a non-entity in not too distant a past has become the king. In fact he is now a dictator. Dealing with him calls for new approaches, better relationship management and better understanding of his psyche. Demise of tariff means fierce competition and price-war. The challenge is to maintain a price-level which is fair to both the insurance companies and the customer. This indeed is a difficult job and a big challenge. Detariffing after all is not all about rate cutting alone.

You can not deal with the present day customer with a rigid mind-set rooted in the past. Your attitude, behaviour and conduct vis-à-vis the customer must change. The challenge is not only in selling insurance to external customer but also in selling discipline, punctuality, team-work, quality and better behaviour pattern to our internal customer. We have to see ourselves through the eyes of the others. Poor service is no longer an option.

Product development & innovation are new challenges for PSU Insurance Companies as this was a totally neglected area because of tariff regime. The private players will try to bring in the tested and tried product of their foreign partners.

Yet another challenge that has come in the wake of liberalization and de-tariffing is retaining the knowledgeable and competent people. Companies spend huge amount in training people, in upgrading their knowledge and skill. People do leave for greener pasture in a liberalized setup.

Companies may face difficulty in placing re-insurance if the direct Underwriting rate go too low because of price-war. In fact the companies have started feeling the heat.

CRM INVADES THE INSURANCE SECTOR WITH AMAZING RESULTS

The current scenario in the insurance industry is a complex and competitive environment tinged with little stability.

The major hassle the industry faces is obtaining clients. This is due to the fact that the big fish in the insurance industry dominate the sector. It has become increasingly difficult for this particular sector to gain profits while curtailing costs. Acquisitions, mergers, have all contributed to the difficulty insurance agents and other professionals from this industry face.

Long considered a job only restricted to insurance companies, selling insurance policies has now become an option for banks as well. This has resulted in a lot of increased as well as unwelcome competition. Customers tend to lose out as they are not buying from the right provider. In addition to this the Internet has increased the pressure for insurance companies in capturing the market. All this has succeeded in making the insurance world more complicated.

What is required is a comprehensive database of information about customers who hold your insurance policies. The answer? Choosing a customer centric strategy can go a long way in achieving this. CRM – Customer Relationship Management holds the key. CRM helps insurance companies to ensure that the customer is understood better.

Right now insurers can achieve excellent policy administration; good billing systems etc but fall short on the customer front. However this alone is insufficient to survive on. Insurers have now realized that CRM is essential if they want to deliver high quality services since it satisfies current customers and gains new ones. This is because policies get sold only if relationships are built. CRM solves these problems with its user-friendly, web-based CRM tools that increase sales opportunities

Insurance CRM Gains

Since most insurance companies are not adequately equipped to help their agents deal with customer centered problems CRM insurance enables insurance organizations to survive in a tough economic climate by using the data the insurance company has on the existing customers and then use it to increase the level of profitability. It manages to enhance your customer relationships based on customer’s unique requirements.

A wealth of customer data is available but insurance companies do not have it readily assessable nor is it coherent. CRM insurance software creates a holistic view of the customer which helps eliminate customer irritation experienced due to this, when they need to identify themselves repeatedly. Insurance CRM assists Customer Service Representatives when they are not able to properly access customer data. Having ample customer information on hand enables a CSR to be more confident of dealing with the client. It removes the chance of errors.

CRM enables customers themselves to do research on products, have answers to their questions etc. In addition to this policyholders or beneficiaries can check their claim status, change their account information, submit complaints etc. Insurers find that CRM is assisting them in their marketing efforts as well through a comprehensive understanding of the client base. CRM aids the insurance companies by ensuring that campaigns are more affective.

CRM Insurance Implementation – Getting it Right

Before embarking on a CRM implementation insurers need to:

Understand prospective policy holder requirements

Understand what products and services will retain them and increase profitability

It is imperative that the objective behind the implementation is clearly spelt out and understood. Without this it is almost impossible to proceed further. Clarity of objectives both CRM and general organizational goals is mandatory for Insurance CRM success. It is only against this that the actual results are marked. Goals although varying from company to company should be realistic and benefit the firm in the log run. Establishment of these goals has to be done after excessive scrutiny of company requirements. The more clearly defined objectives are the more chance your CRM implementation has of succeeding.

Organizations need to understand that the insurance CRM implementation is not merely about technology. CRM encompasses far more than mere technology and transcends to the customer as well. Organizations need to assimilate the fact that it is a combination of people, processes and technology. Obliterating this fact will surely hamper the process.

Making the customer the focal point and understanding that it is about meeting their needs will go a long way in ensuring success.

It is imperative that the entire organization realizes the importance of the implantation and endorse it. It requires approval not only from top management but individual employees as well need to give their support Staff need to accept the fact that this will do them good and willingly give off their best customer support effort.

Implementing in phases is always easier and far less time consuming as well as being cost advantageous. There are always added advantageous when the implementation is done in stages rather than as a one time plan. It facilitates the easy involvement of resources when done on a short term basis, and makes easy the constant monitoring of results so that corrective measures can be taken.

Adequate metrics need to be established if the organization wants to succeed at its CRM insurance implementation. Without this there will be no benchmark against which performance can be measured.

It is imperative to train staff adequately in order to ensure that they are equipped to deal with the CRM implementation. It is essential to have productive staff in order to better customer service. Inexperienced staff will undoubtedly give wrong responses to questions and yield wrong customer service. It is important to see that staff maintains proper customer service. Training staff is thus essential.

CRM manages to put the insurance company in a position where it is able to let staff know which customers are likely to leave and move to competitors. This helps staff take the required steps to stop this from happening and prevents the loss of valuable policy holders.

ABC OF CRM IN INSURANCE SECTOR

The second supporting strategy centres around marketing and the design of effective programs that will enhance your customer relationships based on their unique requirements. In many companies, this strategy represents a different marketing focus than the traditional one of new customer acquisition. A plan for the High Profit/High Retention customers, for example, might focus on retaining customers, cross-selling them specific services and insulating them from competition. In contrast, a plan for the Low Profit/Low Retention customers might be low maintenance with heavy emphasis on self-service.

The third supporting strategy is operational. The focus here is to develop the capabilities needed to execute the marketing plans. Recognize that this is where most CRM initiatives have failed. Solid analysis and well-designed plans cannot overcome the need to execute effectively across a range of customer contact points. It also is important to realize that developing an effective CRM operational capability is not about technology alone. Success requires a tight integration of People, Process and Technology.

So that is it — our primer on CRM. How does such a simple concept get confused? Easily! There is a gaggle of technology vendors labeling whatever they have to offer as the “CRM solution.” They are hoping the trend wave-riders will sign the purchase order and ask questions later. To prevent your organization from being caught in this wave, be sure you have a solid CRM business strategy that first integrates analysis, marketing and operations. Then demand that there be near-term benefit with real ROIs for each project approved under that strategy.

Here are some cautions based on lessons learned from the banking segment of the financial services industry, which has been working hard on CRM for the past five years:

This is a strategy for optimizing your existing customer relationships. Do not even try to match it with your strategy for acquiring new customers until you can make it work with your existing customer base. 

Your producers have a role. Be sure you understand what that is and be sure they agree with it. 

It’s about execution, and the technology piece is the easiest. Be sure you have figured out the people and process issues or else the expected ROI won’t appear.

The second supporting strategy centers around marketing and the design of effective programs that will enhance your customer relationships based on their unique requirements. In many companies, this strategy represents a different marketing focus than the traditional one of new customer acquisition. A plan for the High Profit/High Retention customers, for example, might focus on retaining customers, cross-selling them specific services and insulating them from competition. In contrast, a plan for the Low Profit/Low Retention customers might be low maintenance with heavy emphasis on self-service.

The third supporting strategy is operational. The focus here is to develop the capabilities needed to execute the marketing plans. Recognize that this is where most CRM initiatives have failed. Solid analysis and well-designed plans cannot overcome the need to execute effectively across a range of customer contact points. It also is important to realize that developing an effective CRM operational capability is not about technology alone. Success requires a tight integration of People, Process and Technology.

So that is it — our primer on CRM. How does such a simple concept get confused? Easily! There is a gaggle of technology vendors labeling whatever they have to offer as the “CRM solution.” They are hoping the trend wave-riders will sign the purchase order and ask questions later. To prevent your organization from being caught in this wave, be sure you have a solid CRM business strategy that first integrates analysis, marketing and operations. Then demand that there be near-term benefit with real ROIs for each project approved under that strategy.

Here are some cautions based on lessons learned from the banking segment of the financial services industry, which has been working hard on CRM for the past five years:

This is a strategy for optimizing your existing customer relationships. Do not even try to match it with your strategy for acquiring new customers until you can make it work with your existing customer base. 

Your producers have a role. Be sure you understand what that is and be sure they agree with it. 

It’s about execution, and the technology piece is the easiest. Be sure you have figured out the people and process issues or else the expected ROI won’t appear.

UNDERSTANDING THE NATURE AND SIZE OF

CLAIMS

The case study given below illustrates how Analytical CRM concepts can be applied to understanding the Risk factors that arte related to size of claim in nonlife insurance sector.

We have a small insurance data base named CLAIMS.xls which contain data for about 1000 policies containing claim data for Residences for various types of claim.

The information available are:

• Policy Number

• Cost of the Asset

• Age in months

• Number of bedrooms

• Number of bathrooms

• Number of Floors

• Percentage of wood used in construction

• Percentage of concrete used in construction

• Percentage of other materials

• Whether there is a smoke alarm

• Claim type (Theft; Fire; Riots)

• Claim amount

The problem to be analyzed is how the type of claim is related to claim amount, age, material used in the construction. This type of understanding will help to price the insurance product that relates to the risk involved. So we use claim Type as DEPENDENT OR TARGET VARIABLE. all other variables are included as independent variables. The presence or absence of smoke alarm is treated as categorical variables while all others are treated as numeric variables. The policy number is excluded from the analysis.

“As insurance companies strive to improve operational efficiencies and use enhancements in customer service as a key differentiator in a competitive market place, modern CRM solutions like Sword Ciboodle can be important elements of executing that strategy,” said Matthew Josefowicz, director of Novarica.

Insurance and innovation. They don’t seem to go together, do they? Yet, one insurance company is making major investments in innovative programs and initiatives designed to provide better service to customers, while continuing to expand its business around the world.

Founded in 1845, the New York Life Insurance Co. is the largest mutual life insurance company in the United States, with 15,000 employees and 50,000 agents worldwide. Despite its longevity, the New York-based firm is not mired in the past. The company’s executives encourage, support and fund creative endeavors in all aspects of the business, and advanced technology plays a key role in those efforts.

Eileen Slevin is at the center of technology innovation at New York Life. As chief information officer and head of the Corporate Information Department (CID), Slevin directs a staff of 1,300 IT professionals in six U.S. locations, providing technology services for the company’s customers, employees and agents.

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