1 March 2010

Expectations among insurance customers have escalated, and new regulations are coming in thick and fast, making for a difficult marketplace for businesses to compete in. Jasmine Yalds takes a look at the CRM technologies that are allowing insurers to stay one step ahead.

Times are tough for today’s insurers. Operating in an increasingly transparent market, they need to do everything they can to keep costs down and customer satisfaction up.

But this isn’t easy. Today’s insurance customers are much more demanding, and can compare quotes from different agents at the touch of a button. “The majority of consumers still see the insurance marketplace as confusing and the products themselves as a necessary evil,” says Phil Cook, financial services account director at CDC Software. “This misconception about insurance, and the increase in comparison Web sites, has left the majority of insurers involved in a price battle – with consumers assuming the lowest price is the best product.”

Albert van den Broek, executive director at Figlo, agrees with Cook, adding that the online marketplace has levelled out the playing field for many insurers. “Today’s customers are difficult to please and rarely loyal,” he adds. “Insurers are under great pressure to meet all of their needs while keeping costs to a minimum.”

Undoubtedly insurers need to find a way to differentiate themselves from their competitors in order to appeal to the new generation of capricious customers. To do this they need to get a much better understanding of who their customers are, how they use their money, what products they are likely to buy and how they like to buy. This is where customer relationship management (CRM) technologies are invaluable.

“The opportunity for an insurer to establish itself as the best in the market for customer service provides a clear and important differentiator,” says Cook. “Good customer service is driven through good customer insight and knowledge, enabling insurers to react to their customers’ requirements immediately.”

Good customer service is driven through good customer insight and knowledge, enabling insurers to react to their customers’ requirements immediately.

Phil Cook, CDC Software Ben Goss, CEO at Distribution Technology agrees that the effective provision of CRM technology enables insurers to engage with their customers at a higher level. “It enables them to move beyond the straight product sell, to a relationship where the customer’s long-term financial situation and needs are assessed accurately, efficiently and compliantly,” he explains. “Solutions can be recommended, which help the customer achieve their financial goals in a truly personalised way. We have seen that this approach results in both an increased share of the customer’s wallet as well as a better outcome for the customer.”

“Insurers and brokers have to understand the needs of their customers so that they can not only deliver the products the customers need at a price they are prepared to pay, but also retain them by providing a great customer experience,” says Mark Bates, CEO at insurance software provider RDT. “Knowing more about a customer allows you to be more specific in the way in which you deal with them.”

AXA is one insurer that has seen significant improvements to the customer experience through an effective implementation of CRM technology. In order to automate and improve its complaints and feedback process, the company implemented CDC Respond’s complaints and feedback management system across the organisation to capture complaints and general feedback at all of the customer facing points.

Built using Microsoft SQL Server and running on .NET, the solution has significantly improved the capture of complaints and feedback around the organisation, reducing turnaround time for acknowledgement of complaints to just 24 hours, and upping customer satisfaction levels by two per cent in the first year alone.

“The Respond solution has enabled us to raise the bar in terms of customer feedback,” says Alison Blackmore, head of customer care at AXA Insurance. “We use the system to define trends and identify risks through the reporting it provides. Respond produces reports for all levels within the company from monthly group reports to a board report for the CEO who uses it to drive change from the top. ”

The effective use of customer insight can also help insurers gain a better understanding of their risk profile and the general health of their business as a whole. “Customer insight is becoming more and more important for getting an understanding of the risk that is being taken on,” explains Gordon Ejsmond-Frey, Microsoft’s EMEA lead for insurance. “If you have a better understanding of your customer then you can get a better understanding of the risk they carry. This means that you can underwrite policies more accurately which will have a direct impact on the bottom line.”

Regulations have also brought about the need for CRM. “Regulators need to see that the insurer is aware of its accumulation of risk,” says Ejsmond-Frey. “CRM technologies can be used to better monitor risk at an enterprise level. They will also be able to spot which are the better quality channels for specific products, or in which areas their customer risk profile is deteriorating.”

What’s more, there are increasing directives about the way in which products are sold. The majority of customers rely on an expert to be honest about the choice of products available to them – if they tell them they need something then they are likely to believe them. In order to avoid miss-selling, many regulations are now coming in that require full audit trails. “For several years now life insurance providers have been helping intermediaries and their own advisers deal with the regulator’s requirement to treat customers fairly,” says Goss. “The Treating Customers Fairly regulation requires that advisers take into account a customer’s needs, circumstances and attitudes prior to formulating their advice and selling a provider’s products.”

CRM technology can create an audit trail to show that selling has been controlled and that it has been done in a professional way. It ensures that there has been openness about the choice of products, highlights the commission paid to the sales person, and ensures that the product terms have been properly explained to customer.

Regulations are also changing the areas in which policies can be sold. “The EU regulations about insurance are becoming harmonised, to raise standards and to ensure that insurers can sell across the whole of Europe” explains Ejsmond-Frey. “Those insurers that pay attention to customer and performance insight will not only be able to sell more to their existing customer base, but will also be able to sell more effectively to a much wider audience. They will also have better leads, better conversion rates and a better allocation of capital.

“Regulators are definitely becoming more active and looking to improve practices across the whole industry,” Ejsmond-Frey continues. “Solvency II is a case in point here – they want to make sure that insurers are solvent, even in volatile market conditions, and to make sure that they are actually in control of the way that they are taking on business and underwriting the risk. This all comes back to customer and performance insight – it could make the difference between being able to continue trading, or being told to stop.”

The business case for CRM is undoubtedly strong, but there are still many insurers out there who have yet to realise its potential, as RDT’s Bates explains. “The biggest single problem is that many insurers and brokers still have legacy solutions and bolting technology on is only ever a stop gap solution,” he says.

CDC Software’s Cook agrees: “More than ever insurers are required to deliver high quality service to agents, brokers and policy-holders, yet many struggle to do this due to disparate and fragmented customer data across the organisation.”

Despite this, Ejsmond-Frey says that the current a vanguard of around 10-15 per cent of customers who are using these technologies to their full potential will grow. “Over the next two to three years this will increase as regulations tighten up,” he says. “When this starts to happen it will allow those insurers that have got it right to pull ahead and succeed in a much more demanding marketplace.

Ejsmond-Frey goes on to say that a flexible, integrated system can provide agents with a complete and accurate view of client history. “Those insurers that have got it right have one unified system that is made up of integrated parts,” he says. “From the sales database through to the claims database, they should all be part of one joined up system. A good CRM system makes it easy to capture information, easy to define customer profiles, and also makes it available to people in the office, on the move or via mobile. Many of our partners use Microsoft Dynamics CRM because it is a very accessible platform with a familiar interface and it is accessible by a variety of different channels.”

Once you have a system that gathers information across all of the available data, you need tools that can work with the data such as in SharePoint Server. This can construct analyses and reports, which are needed to monitor the business. Used with SQL Server, a flexible and scalable database, SharePoint can then be used for publishing and sharing information, as well as ensuring compliance.

“Insurers can use tools like SharePoint to do much more with the CRM data that they’ve been gathering for so long,” says Ejsmond-Frey. “What’s more, with its new integrated Search functionality it allows insurers to better explore different customers and find patterns of need. For example, they may find that new homeowners are more likely to buy travel insurance. The insurer can then target this specific demographic rather than conducting timely blanket marketing campaigns. This will not only increase the volume of products sold, but also significantly increase the effectiveness of how this is done and offer a more tailored service.”

Looking to the future it seems that CRM technologies will play a vital part, with technology providers looking to offer more value by providing services in the cloud. “I think what we will see is the continued emergence of software as a service, where providers of CRM technologies will make services available in the cloud so that insurers can access software they wouldn’t have otherwise. As it becomes possible to make these services in the cloud, insurers can not only reduce the cost of running and maintaining these systems, but there will be better opportunities for cross sharing of data across the whole industry.”

This article first appeared in the Spring 2010 edition of Finance on Windows magazine.
 

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