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A PROJECT REPORT ON CRM IN INSURANCE SECTOR SUBMITTED BY SHANU GUPTA T.YB&I (SEM VI) SEAT NO. :- 6719 PROJECT GUIDE ACADEMIC YEAR
A PROJECT REPORT ON
CRM IN INSURANCE SECTOR
SUBMITTED BY
SHANU GUPTA
T.YB&I (SEM VI)
SEAT NO. :- 6719
PROJECT GUIDE
ACADEMIC YEAR
•2012-2013 •
DECLARATION
I am Shanu Gupta from Thakur College of Science and Commerce, student of T.Y.B.Com (Banking and Insurance), semester VI, Examination seat no:- 6719. Here I submit my project report on “CRM in Insurance Sector”.
I also declare that this project which is the partial fulfillment of requirement for the degree of T.Y.B.Com (Banking and Insurance) of the Mumbai University is the result of my own efforts with the help of experts.
Date:
SHANU GUPTA
SEAT NO. 880
CERTIFICATE
This is to certify that the project entitled is successfully done by Shanu Gupta during the Third Year, Sixth Semester of B.com [Banking and Insurance] under the University of Mumbai through the Thakur College of Science and Commerce, Kandivali, Mumbai- 400101.
___________ ___________ ________
Coordinator Project Guide Principal
Date:
Place:
______________ _____________
External Examiner Internal Examiner
ACKNOWLEDGEMENT
It gives me immense pleasure in presenting the project on CRM IN INSURANCE SECTOR.
Firstly, I take the opportunity in thanking the The Almighty and my parents without whose continuous blessings, I would not have been able to complete this project.
Secondly, I would like to thank my Principal MRS. C. T. CHAKRABORTY for everything that has benefited as in through college
I would like to thank my project guide for her great help, valuable opinions, advice and suggestions in fulfillment of this project.
I am also grateful to our coordinator MRS. PRITI AGGARWAL for supporting me, giving me encouragement and for providing me with the material and knowledge to make this project a success. I convey my deep appreciation to them for sparing their valuable time and efforts, so as to make me capable of presenting this project.
I am thankful to the college for all the possible assistance and support, by making available the required books in the fully equipped and giant sized Library and the internet room which have proved useful to me in successfully completing my project.
I hope that I have succeeded in presenting this project to the best of my abilities.
EXECUTIVE SUMM ARY
Customer relationship management is an old concept. It's all about how you treat your customer
after the sale. Businesses that handle well succeed referrals and repeat sales are the lifeblood of
business. They are also a direct result of effective customer relationship management. Financial
Services industry is part of an economy & successful operation of the industry sets impetus for
other industries and development of an economy. This article focuses related to customer
relationship building especially for retail investors from life insurance sector and its management
in general, based on the principles of Relationship management in service organizations.
Identifying the managerial practices and measures for relationship building for effective and
efficient business is the epitome of this article. Right from basic concept of CRM, its strategy &
technique formulation to evaluation of CRM, various aspects of customer relationship
management are covered in this article. This report examines and provides a detailed analysis of
Customer Relationship Management (CRM) with respect to its implementation in the Insurance
sector. The study investigates market trends, levels of its current practice, levels of successes and
failures and the factors associated with the implementation of the same. In order to gain proper
understanding of the subject matter research, two different case studies are discussed in detail. At
the end, the study presents a proposed model of successful implementation of CRM along with a
set of recommendations following the conclusion. The paper then discusses different case studies
with respect to the implementation of CRM in the Insurance industry. Thus, analysing the issues
practically involved and raised in the implementation of the management system aimed at
creating customer value, and also putting forward the experiences of two different companies in
the same industry. Therefore, looking into the challenges created for the management,
causes/factors associated with and resulting in the success/failure of CRM as a means of creating
customer value, and overall experience of the companies attempting to implement CRM. The
discussion therefore leads to a roadmap for successful implementation of CRM with a
recommendation of “Ten Key Steps” for successful implementation of CRM in an organisation.
Lastly, in the light of the analysis presented and case studies discussed, an independent
conclusion under the subject matter research is formed along with a set of
recommendations/suggestions.
Introduction
Customer relationship management is an old concept. It's all about how you treat your customer
after the sale. Businesses that handle well succeed referrals and repeat sales are the lifeblood of
business. They are also a direct result of effective customer relationship management. Customer
relationship management (CRM) is a practice that puts the customer at the center of the equation.
Over the years myriad software applications have sprung up to simplify and streamline this
process. In simple terms, CRM involves organizing and tracking all contacts with prospective
and existing customers and in a simple scenario, it involves:
• Recording all customer and interactions details in an organized manner into a database
• Providing the tools to view selected customer or prospect data in a desired manner
• Generating alerts for pending actions such as follow ups, service calls and marketing contacts
In a more complex large enterprise scenario like life insurance companies, CRM can become a
complicated exercise including:
• Marketing: Modules for Customer segmentation, List management, Campaign management,
Lead management, Loyalty management and other marketing tasks
• Sales: Modules for Sales forecasting, Sales performance management, Territory management,
Commission management and other selling routines
• Service: Installations & Maintenance, Customer service and support, Field service
management, Claims and other service management modules
CRM is a business philosophy based on upon individual customers and customised products and
services supported by open lines of communication and feedback from the participating firms
that mutually benefit both buying and selling organisations.
In short, CRM provides selling organisations with the platform to obtain a competitive advantage
by embracing customer needs and building value-driven long-term relationships.
Determinants of CRM
Trust
The willingness to rely on the ability, integrity, and motivation of one company to serve the
needs of the
other company as agreed upon implicitly and explicitly.
ValueThe ability of a selling organisation to satisfy the needs of the customer at a comparatively lower cost or higher benefit than that offered by competitors and measured in monetary, temporal, functional and psychological terms.
In addition to trust and value, salespeople must:
Understand customer needs and problems; Meet their commitments; Provide superior after sales
support; Make sure that the customer is always told the truth (must be honest); and Have a
passionate interest in establishing and retaining a long-term relationship (e.g., have long-term
perspective), See Diagram 1.2 for more details. Stages in the development of a Customer
Relationship: (Shown by Diagram1.1)
• The Pre-relationship Stage :The event that triggers a buyer to seek a new business partner.
• The Early Stage : Experience is accumulated between the buyer and seller although a great
degree of uncertainty and distance exists.
• The Development Stage: Increased levels of transactions lead to a higher degree of
commitment and the distance is reduced to a social exchange.
• The Long-term Stage: Characterised by the companies' mutual importance toeach other.
• The Final Stage: The interaction between the companies becomesinstitutionalized.
Diagram
Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate, develop
and enhance the process that is aimed at building trust and commitment with the customer.
• Initiating the relationship
Engage in strategic prospecting and qualifying; Gather and study pre-call information;Identify
buying influences; Plan the initial sales call; Demonstrate an understanding of the customer's
needs;Identify opportunities to build a relationship; and Illustrate the value of a relationship with
the customer
• Developing the relationship
Select an appropriate offering; Customise the relationship; Link the solutions with the customer's
needs; Discuss customer concerns; Summarize the solution to confirm benefits; and Secure
commitment.
• Enhancing the relationship
Assess customer satisfaction; Take action to ensure satisfaction; Maintain open, two-way
communication; and Work to add value and enhance mutual opportunities Functions of
Customer Relationship
Management
Direct functions (are the basic requirements of a company that are necessary to survive in the
competitive marketplace) (a) Profit (b) Volume and (c) Safeguard Indirect functions (are the
actions necessary to convince the customer to participate in various marketing activities) (a)
Innovation (b) Market (c) Scout and (d) Access.
The most common techniques include using information gathered during the sales process to
build emotional anchors and connections so that customers think of you and your business first
when they have a need. Storing and categorizing this information in an electronic environment
allows you to use it more effectively but simply noting important facts and refreshing your
memory before periodic marketing calls can be equally effective. The 2008 Executive Survey by
Gartner and Forbes.com states plainly that, "retaining and enhancing relationships with current
customers is the number one business issue, followed by attracting new customers."
Businesses that properly implement a customer relationship strategy stand a significantly higher
chance of achieving both of these goals. You can have the best products at the best prices, but if
you neglect customer service or customer relationship management you won't have the one thing
you need to succeed: customers. Showing existing customers that they matter and that you
appreciate their business inspires loyalty. That loyalty translates into the referrals and repeat
sales that move your bottom line in the right direction. In addition, it is far less expensive to
retain an existing customer than it is to attract a new one. Translation: "taking care of your
client's means more for you".
We can improve Customer Relationship Management & it doesn't take much. Simple things like
birthday cards, opinion surveys and focus groups are a great way to connect with your
customers. Coupons, discounts and special perks for loyalty and referrals are also a good way to
show your appreciation for your customers. Businesses are facing unprecedented pressure to
deliver value. Lowering customer acquisition costs, decreasing administrative waste, and
improving the outlook held of the customers they serve has become of paramount importance.
Inefficient, impersonal processes threaten the future success of many businesses. A great deal of
data is being generated in the course of interactions with prospective and existing customers.
Properly analyzed, the data can identify leads, product opportunities, customer segments and
market trends, for example. Such analysis can also support the selling process by tracking
responses and alerting salespersons, Sound customer relationship management practices are the
answer.
The major focus of CRM is to facilitate customercentric operations leading to strong customer
relations and loyalty. CRM seeks to do these through improved: Customer Experience
Management: Even if customers have to deal with different persons and offices of an enterprise,
they will receive a meaningful, helpful and consistent experience. CRM enables this by
maintaining easily-retrievable customer records from anywhere across the enterprise. The
records will show customer purchase history, contact details and pending actions.
Sales force Automation: Sales people are supported through automated alerts about pending
actions, customer issues and possible leads.
Customer Service: Customer call centers and Webbased help desk facilities & role of IT can lead
to quicker and more satisfactory customer service.
Channel Partners Management: Channel partners also need organized attention and excellent
support to improve their performance.
In order to have a high level of customer retention, the customers must be happy with the level of
service they receive and the company's ability to meet or exceed their needs. Expectations play a
big part in client satisfaction. If a company can exceed the customer's expectations, the chance of
them returning is significantly increased. Proactive CRM is one important method of exceeding
customer's expectations.
Proactive Customer Relationship Management: When it comes to good customer relationship
management, it always best to be proactive rather than reactive. Anticipating concerns before
they become problems can often make the difference between a customer returning and never
setting foot in the store again.
Taking care of customer concerns should be fast and immediate whenever possible. The longer a
client has to stew over a concern, the greater the probability that they will not return. Since
taking care of a client's concern quickly and efficiently increases the probability that the
customer will return, employee empowerment can make a huge difference in the time it takes to
resolve a concern. When an employee doesn't have the authority to immediately resolve a
concern, the customer has longer to stew over the concern. Employees that have direct
interaction with the customers should be empowered to make decisions for immediate resolution
of the concern. The end goal of active customer relationship management is to positively nurture
the consumer-seller relationship over time, inspire continued customer satisfaction, and spur on
future transactions.
Technique for CRM
One of the best marketing techniques for customer relationship management is one-on-one
interaction with the customer, In order to have a high level of customer retention, the customers
must be happy with the level of satisfaction they receive with the company's ability to meet or
exceed their needs. Besides meeting or exceeding their needs, an important aspect of customer
satisfaction is perception. If the customer perceives that a company truly cares about their needs,
they will continue to patronize a business. " Customer Relationship Management by Walking
Around " Customer Relationships and the Ten-Foot Rule The following rule is a good start to
get all employees on board.
The Ten-Foot Rule
• Any employee within ten feet of a customer will acknowledge their presence.
• The employee will acknowledge the customer with a standard greeting like "good morning."
• If the customer asks for a specific person, item or directions the employee will personally
escort the
customer to that person, item or location within the company.
• Customer Retention by Exceeding Expectations
Discussion & Conclusions:
Customer relationship management (CRM) is the key for success of organizations. When the organizations grow larger and larger, complexity increases in controlling potential customers. Establishing a Systematic and well organized CRM systems calls for understanding and analyzing the key success factors.CRM is a new business philosophy based on trust and value; The core function of CRM is the value creation process; Customer relationships develop over time; The role of global salespeople in the process is that of both relationship builders and relationship promoters; and The basic premise of CRM is to offer superior value to customers in an effort to turn prospects into customers, customers into loyal customers, and loyal customers into partners. Life Insurance companies want intermediaries who can deliver solutions to
customers, not simply products. They need intermediaries with technical knowledge and skills. They need people with relationship, communication, and negotiation skills & Customer Relationship Building skills. Improving CRM is an important part of the financial Sector especially in life insurance sector. This can be measuring of customer satisfaction, Making customer satisfaction targets part of the individual performance report, Extra focus on complaint management and solving client problems, installing product approval processes (including compliance and risk management) that guarantee careful information to the client.To become more customer-centric and optimize customer lifetime value, financial services providers need to consider the following five variables that create mutual value to the customer and the services provider: 5C's Coverage, Cost, Convenience, and Care & Compliance. To serve as a practical tool for managing customer relationships, the lifetime value optimization we have to adopt these 5C's. The results of customer value optimization can be highly rewarding. Life Insurance companies that have adopted this approach have been able to achieve business growth and profitability in competitive environment.
CRM IN INSURANCE SECTORINTRODUCTIONAnalytical CRM can be deployed to understand processing of claims in Insurance sector.
Deregulation of Insurance industry in the global has resulted in increased number of players in
the market hence competition. In India also Industry has undergone a major change. Before
2000, two state insurers – i.e. LIC and GIC were the only players in the market. These
companies were created after the nationalization of the life and non-life sectors in 1956 and 1952
respectively. Eventually government took a decision to dismount the monopoly. One of the
reasons may be that competition would promote better products, value & service to the
customers. This will increase the overall size of the sector. There are about twenty new entrants
and majority of them (about 12 or so) in life and about 6 in non-life sector. Initially life sector
has attracted more participants than non-life sector. Eventually the prediction is there will be
about 16 to 26 companies in life and about 8 to 12 in non – life sector.
In general performance of non life sector is more challenging than life sector. With deregulation
of Insurance sector financial companies, banks are getting into non life insurance sector to their
existing customer base. This requires non-life insurers to add value in the value chain.
Analytical CRM can be used in the insurance industry for the following applications.
- Acquiring new customers
- Identifying cross selling/ upselling opportunities
- Establishing the premium rates
- Assisting the regulators to understand from Rate and Models.
The two cases given below address the issue of establishing the rates and identification of cross
selling opportunities.
Establishing the premium rates is an important aspect of insurance business. The goal is to set
rates that reflect the risk level of the policy holder. The lower the risk, the lower the premium
rate. Identification of cross selling/ upselling opportunities involves identification of those
customers in the existing database whose likelihood of responding to a product which they do
not hold presently is the highest. As an example consider a case where we have a customer
database of about 100,000. out of the 1,00,000 customers, say about 10,000 are currently holding
a specific product and the balance 90,000 are not holding the product. We are interested in
identifying about 20,000 customers out of the 90,000, the criterion being their probability of
responding to the promotion/ marketing campaign is the highest so that we do not waste time and
energy on those whose likelihood of buying is not high. This will also help to develop a focused
marketing campaign/strategy. The above concept can be illustrated diagrammatically as given
UNDERSTANDING THE NATURE AND SIZE OFCLAIMSThe 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. For this
study, 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.
This is because it will not help us to derive generalized knowledge about the
Question we are trying to answer.
Using FORESIGHT a single decision tree is built using the option that at least 100
records should be there in each branch of the tree. Also 20% of the data is used
for testing.
If you look at Root node of the tree out of 800 samples used for training, there are
about 280 cases in Vandalism, 283 in Theft and 236 in fire. Cases are
approximately equally distributed. When the model is used to classify the entire
training data set a total of 274 samples have been misclassified. If you look at the
confusion matrix, you can see that majority of fire cases have been correctly
classified.
The confusion matrix is as follows:
Classification accuracy = 201+175+149
201+25+10+4+175+104+0+131+149
Error : 33%
º67
65.7
The most important variable is claim amount, which is related to the target variable i.e. claim
type. From the tree one can make out that if claim amount is greater than $5300, they belong to
fire class. Classification Error is around 2%, which means the classification Accuracy is about
98%. Majority of Claims relating
to fire has claim amount greater than $5300.
Drill down the segment containing the claim amount <= $5300. Again it shows
that claim amount is an important variable. This is broken down into Two
segments one containing >$2700 and another <=$2700. Now one can see that
majority of theft cases has amount greater than $2700 and <=$5300. The error is about
41% which means that accuracy is about 59%.
We can drill down each segment and understand the relation between
claim type and other variables.
Let us see whether we can improve the accuracy of the model by suing some of the
advanced features available in FORESIGHT.
Let us use the cross validation approach. Use 10 as the number of trees used
in cross validation. This means the system will build TEN different trees by
dividing the data into block. (This has been explained earlier). If uses 9 blocks to
develop the model and uses one block to validate. This is repeated by leaving out
one block that is different each time so that TEN trees will be generated.
Look at the display of the cross validation tree. By default the best tree is
displayed. In this tree also, claim amount is the most important variable. But the
split is at claim amount $4000 instead of earlier amount of $5000. The accuracy of
the tree is nearly 90.7% (Error rate: 9.3%). This has significantly increased the accuracy
of the Model compared to earlier one where the error was about 33%.
By looking at Two segments of the tree where the claim amount is <=4000
and >4000 one can see that right branch of the tree has fire claims of 91%, theft
9% and vandalism% which is in contrast with left branch of the tree where fire
5%, theft 45% and vandalism 50%. The figures clearly indicate that two segment
are very distinct, the left segment concentration on vandalism + Theft cases
where as the Right Segment Concentration on fire type of claims.
Drill down on the Right segment. Now you can see that for claim amount
>$7400, all belong to class fire. Out of TOTAL of 255 cases of claim type fire, 202
have been classified correctly in the total data set which translates to an accuracy
of 90%.
You can explore the tree further.
Click on Rule generation tab. FORESIGHT Automatically generates the
Rules by growing the tree to full depth and converting the tree to a set of rules by
pruning the trees.
Some of the Rules relating to claim type FIRE are:
If Claim > $7400; claim type Fire 99.3%
If Price <=$2,17,000 and claimtype Fire 99.2%
Claim amount > 4000
If % concrete > 40 and Claim type Fire 98.7%
Claim amount > 4000
Rules relating to Theft are:
If Price > 2,17,000 and number of bathrooms >2 and
Claim amount > 4000 and
Claim amount <= 7400
Coming to vandalism, there is only one rule which states that
If claim amount <3100
Then class = vandalism [ 51.6%]
This indicates that vandalism class is not correctly classified by the rule.
One reason may be that definition / separation between vandalism and theft is
not very clear. The second conclusion may be that input variables used are
insufficient to separate out this class from others. May be addition of few more
explanatory variables may help to separate out this class from others.
CASE STUDY: IDENTIFICATION OF CROSS SELLINGAND UP SELLING OPPORTUNITIESIdentification of cross selling opportunities is an another important application of
Business Intelligence. Basically this involves identification of those customers
who do not own a specific product but whose likelihood of response to campaign
targeting that product is maximum. Identification of such type of customer will
result in considerable cost savings in acquisition cost of customer.
The data for this case consists of Socio-economic / Demographics, Product holding (s), of
about 2300 customers. The original data set consisted of about 40 Socio-economic /
Demographic data and about 42 product holding attributes. The data set for this study
has been reduced and it consists of 6 socio/demographic information and about 8 product
holding information.
The information available are
Age
Customer type
Average – income
No. of houses
Rented – house
Purchasing power class
Contribution of car policies
Contribution of Life policies
Contribution of boat policies
Socio / Demographic
Variables
Number of car policies
Number of life policies
Number of Fire policies
Mobile home policy
Almost all the variable are grouped variables for example age has been grouped
into 6 groups purchasing power, contribution to different policies etc. into
deciles (10 groups: coded 0 – 9)
Customer type: into ten groups
Since this is sample of original data set, you may not have all levels.
Out of total 2340 Customers, about 350 hold Mobile home policy & the rest do
not hold.
The objective is to identify a subset of Customers Who do not hold the mobile
policy & whose likelihood of purchasing the mobile home policy is highest.
Obviously the target variable is Mobile home policy.
Include all other variables in input. Change the status of all input variables to
Group.
This example illustrates the case where the distribution of target is highly
skewed. In the sample data only about 10% own the policy where as the balance
90% do not own the policy.
Use cross validation option and generate the tree.
Product holding attributes
From the tree it is clear that contribution to car policy has the highest impact on
those who own the mobile home policy. There are two segments form the root of
the tree. The left segment consists of group 0,5,7 & Right 6 based on contribution
to car policies.
The left segment consists of group where only 6% own the policy; 94% do not
own. The right segment consists of group where 26% own the policy & 74% do
not own.
If one has to stop at this stage, we can say that those 690 customers in the right
hand segment of the Tree who do not own the mobile policy are those whose
likelihood of purchase is maximum.
Drill down this segments to Two levels below
The segment consisting of one where contribution to Fire policies is 3 and 4,
customer main type: GROWERS has 56% owning the policy and 44% not owning
the policy.
These 53 customers have highest likelihood of buying.
Thus from a total population of about 1754 who do not own, this level of the tree
has identified about 42 customers to whom the product can be targeted.
Benefits and Hurdles of crm
Since then, I've talked to many people in the insurance business who appreciate the possibilities
in CRM. However, insurance is a challenging field for CRM technology -- there are independent
agents and agents tied to specific insurance companies, and that adds a level of complexity. For
instance, if you're a large company, with your own agents and independent agents, how do you
distribute leads? When you do distribute leads, what do you do if they're not acted upon? How
do you share information -- and how do you control who sees what and when?
These are not minor considerations -- they're potential causes of conflict between agents and the
company that can result in lost revenues.
Agents not only put a face on the company -- they also do their fair share of prospecting for new
customers. That makes a CRM application a very helpful tool. But where does that tool come
from? Do agents go out and build their own (a practice frowned upon by large insurance carriers,
judging from my own experience), or do they wait for the IT departments of their parent insurers
to deploy CRM down from the head office? If you're an independent agent, CRM seems like a
necessity for selling -- but how do you integrate data from your CRM application with the
systems of the insurance carriers you work with?
Complex Navigation
Add to that the compliance issues that the insurance industry faces, and you have a thorny set of
circumstances to cut through.
But enough of the negativity -- there is an abundance of benefits to be had by putting CRM to
use in insurance.
For example, your car insurance rates are based on where you live and how far you drive. If an
agent has customers for any amount of time, they're bound to move to new households. An agent
who had the time to ask his customers every six months or a year whether their address or
driving habits had changed is in a position to help his insureds save money on their car insurance
-- and also gains an opportunity to upsell that customer on home or life insurance. But agents
don't have the time to ask every customer that question that frequently. CRM would allow them
to automate that process and to personalize the communication with the customer.
Here's another big benefit: having a record of when a prospective customer has interacted with
an agency and with the parent company can provide a much better view of what the customer is
actually looking for. Insurance industry studies have shown that 20 percent of customers now use
four or more interaction points to make decisions about buying insurance. Do the companies
they're buying from realize when a potential customer is interacting with them? CRM can
capture those contacts and, if an insurance company seeks a top-to-bottom integration with its
agents, it can establish what patterns of contact are being used most frequently by buyers, and
then alert agents when a buyer following one of those patterns in contact with them.
The Importance of Integration
That integration is increasingly important -- the same studies showed that while 53 percent of
insurance buyers use agents, 47 percent buy on-line. The distributed nature of agents poses a
structure that encourages the siloing of data -- something CRM is useful in avoiding.
Another crucial thing for the insurance industry is the reduction of churn. According to a 2010
study done by Accenture, only 50 percent of insurance customers said they planned to re-
purchase insurance from their existing carrier. That's churn on a massive scale -- and it shows
how important price is to insurance buyers. But breaking that pattern means emphasizing things
beyond price, and studies showed that there were three things that customers valued more than
rock-bottom premiums: speed of problem resolution, transparency of prices and charges, and
products and services that met their needs. CRM makes addressing all of these easier.
Social media will also play a major role for the insurance industry, and thus social CRM. Just as
customers will want to talk about and talk to their insurance carriers, so will they want to talk to
and about their agents. Unifying this into a single picture of customer behavior and sentiment
will be a task that CRM will facilitate.
Insurance presents a set of challenges to CRM practitioners -- but no more so than in other
industries with distinct compliance, distribution and sales models. Data has always been critical
in the insurance industry -- it's time that the management of that data through modern CRM
technology takes a central role in winning customers and curtailing churn
The real dilemma is current CRM software not being flexible enough, because there are ways
around this.
Lightweight CRM software companies, like JobNimbus (http://www.jobnimbus.com), are
designed to be much simpler and more flexible, than the larger "ingrained" solutions most
enterprises use.
Things like job, contact, and document sharing between "guest" users who don't have accounts
solves the issue of sharing information between agents, companies, mechanics, clients, etc.
These are low commitment, including free versions that allow anyone access to the information
without even making an account.
There are CRM solutions out there that can handle this type of work. It shouldn't have to be an
Agent-specific software nor will it come as a giant software suite that requires tons of
commitment and integration. It will come from lightweight, nimble solutions.
ROLE OF CRM
Customer Relationship Management, or CRM, is a catalyst in insurance industry growth.
Replacing the traditional in person encounter of door-to-door sales, the CRM system
engages solid business relationships to meet customer demands for better results. Customer
relationship management technology is proficient in qualifying leads, policy administration
and streamlines various work functions to successfully service an insurance business.
Continuing developments are providing the insurance industry with customized solutions
to satisfy consumers and increase profits.
What Is CRM?
CRM is a data tracking system used for customer, marketing, productivity and
organizational solutions. Beginning in the 1980s, CRM was focused on marketing, but by the
1990s, with significant advances in technology, began providing solutions to other industries.
CRM has become an important part of operations in the insurance industry.
Customers
Success in the insurance sector originates from positive customer relations. Using CRM for
your insurance book of business allows you to track leads, maintain customer profiles,
provide more personalized service to meet specific needs and build customer loyalty. Tools
for communication, such as email, enable lead, client and contact management.
Marketing
CRM offers a model for effective product management. Combining CRM solutions with
industry legacy systems immediately channels product enhancements while tracking new product
releases. This advancement allows insurers to meet the needs of policy holders within a shorter
product development cycle.
Productivity
Productivity and sales performance can be monitored with CRM tools. Results can show
which objectives are being met as well as areas needing improvement. After implementing a
CRM system, a leading insurance brokerage and risk management consulting firm was able to
meet set goals on performance metrics for 7,000 global employees, according to Salesforce.com.
Contact center solutions improve claims procedures, providing first rate customer service while
meeting business requirements.
Organization
The processes of underwriting, claims processing and support are well structured using
industry software to produce positive results. Claims solutions have provided built-in analytics,
enabling an insurance carrier to save $4 million annually and achieve 1 percent reduction in loss
ratio, according to Oracle's website. This type of efficiency strengthens relationships and keeps
work processes at a high standard
Industry Growth
The insurance industry has experienced broad strides within its corporate structure in
addition to the field division. Alleviating risk, meeting diversity needs, improving financial
challenges and employee operations are some of the successes that customer relationship
management has brought to the insurance industry. More insurance companies are using
advanced CRM technologies to meet the needs of an increasing customer base for better
retention rates and profitability. Software developers have recognized this growth and are
adapting technologies by offering solutions specific to the insurance industry's needs.
CASESTUDY
Reliance General Insurance
CRMnext improves adherence to turn-around-time by 400%.
Company Profile
Region: India
Revenue: USD 16.98 million
Industry: Insurance
Function: Executive, IT, marketing, operations, sales, service & support
CRMnext has significantly improved our processes across enterprise. Now we get end-to-end
visibility of information including process flows across departments and systems. Our users love
it and our customers are much more happy. It is truly our star investment.
Naganathan Sriram
Chief Technology & Operations Officer, Reliance General Insurance
Background
Leading providers of Health, Car, Home, Travel and Business insurance.
Network of over 200 offices spread across 173 cities in 22 states of India.
Founded in 2000.
Challenges
Different processes for different customer segments.
Reorganize and streamline reporting systems.
Eliminate multiple reporting tools and constant data reconciliation.
Implement "one version of the truth" solution across information silos.
Solutions
Targeted sale for corporate customers with a greater focus on relationship building.
Effective lead management through direct channel & telesales.
Lead capture through various source & distribution across agencies for a quicker
inspection & sale of policy.
Effective customer servicing by intelligent allocation of cases to specialist teams &
closures within SLA.
Integration between various core systems for effective customer servicing/operations
management.
Sales Force Automation, Marketing Automation, Customer Service & Support along
with Analytics module from CRMnext..
Sales processes for Corporate and Government Services Group, Retail and Telesales.
Starting with 500 users in 2008, Reliance General Insurance has now a CRMnext user
base of 950.
Benefits
Enhanced the capabilities of customer servicing by increasing first time right
(FTR) and turn around time (TAT) adherence by 400%.
Reduced the cost of servicing by a great margin.
Improved lead conversion.
Increased the capability of customer retention.
Reduced time and IT resource requirements for regulatory reporting.
How "People" is Going to Make an Impact on Insurance's CRM
The Mysterious Power of Cross-Functional Team and Agent Buy-In
Ms. Ro King, GCCRM Associate (US)
This article is exclusively written for GCCRM.
Over the past ten years, the business case for implementing a CRM approach in the insurance
industry has not changed significantly. Property and casualty insurers along with life insurers
continue to view CRM as a means of improving customer service and reducing the cost to
deliver that service in an industry marked by tightening profit margins due to convergence and
product commoditization. Unfortunately, the obstacles to implementing a CRM approach
have also remained about the same over the last decade. From a technical systems
perspective, most firms still have difficulty generating a single, common customer view.
While this obstacle might be overcome through business processes or organizational alignment,
the key people in an insurance company have different objectives: marketers focus on generating
leads; agents concentrate on sales, often to their own "book" of customers; CSRs are charged
with service, sometimes ignoring their potential for cross-selling or up-selling, and claims
adjusters work toward settling claims. Each group may work efficiently and effectively to reach
their goals; yet, without coordinated direction and a single customer view, multiple customer
touch points are bound to compete or, at the very least, confuse the customer.
It is not that insurance firms are not attempting to implement CRM to help each employee group
work together and work more effectively. Many case studies cite reasonable objectives for
insurance company CRM plans. They look for more accurate targeting of campaigns for
marketers or to create better customer interactions for agents. Some plans offer better cross-
selling for CSRs or increased retention of high-value customers across all channels. Yet, studies
over the past several years show that only between 30 and 50% of these CRM efforts succeed.
In reviewing insurance client successes to try to spot best practices, it became apparent that
success did not depend solely on choosing the appropriate technology or re-engineering
customer-facing processes. The common thread in each case was people. In one case study, the
creation of an effective cross-functional team led to the success of a CRM approach to marketing
and analysis. In another, the buy-in of sales agents or CSRs enabled an insurer to achieve their
CRM objectives.
Case Study: Accomplishments of a Cross-Functional Team
Situation
A US life insurance client approached CRM from the perspective of their marketing department.
Marketing wanted to reach consumers at the appropriate time with the appropriate product.
However, their ability to market effectively based on triggers (changes in interest rates) and
lifecycle events (marriage, childbirth, home purchase) was limited by the customer and prospect
data available to them.
In addition to these timing and targeting issues, they had contact management concerns. For
example, multiple contacts about the same product to the same consumer due to limited ability to
suppress data across multiple databases increased their overall cost per sale. Also, selecting
consumers from a variety of databases lead to inconsistent processing of suppressions including
consumer privacy preferences.
Finally, marketing was hindered by incomplete data feedback loops from the sales force (captive
agents) as well as the call center (CSRs). Without consistent and reliable information about sales
and the sales process, marketing was only able to perform cursory response analysis for their
campaigns. In effect, the insurer determined that their marketing environment was not conducive
to CRM and closed-loop marketing and analysis and the current situation restricted the firm's
ability to maximize return on investment from marketing activities.
Proposed Solution
The client's approach to their situation combined technology and process solutions in support of
their customer-focused strategy. On the technology front, the client had identified a need for a
single, integrated view of the customer or prospect. This single view would alleviate current
targeting and contact management issues. They began with business requirements and included
defining the data about customers and prospects that needed to be collected to support marketing
activities.
To facilitate the translation of business requirements into technical requirements, the insurer
formed a cross-functional team including members from the information technology (IT)
department, marketers and representatives from sales and the call center. The formation of this
team at an early stage, their strength at project management, and their early adoption of progress
measures proved to be a critical success factor for the entire project. This team led the design and
guided the development of the Integrated Customer and Prospect Database (IPCD).
The representatives from IT, ensured that the design was technologically efficient, that it
matched the technical standards of other systems within the company and that the project stayed
on time and within budget. The representatives from marketing made certain that the design
would meet their information requirements for targeting and for post-campaign analysis. The
sales and call center reps tested the system for ease of use as they would be entering manually
some of the data that marketing required for analysis. These front-office representatives were
familiar with the sales and service processes and the day-to-day workload of agents and CSRs so
they were able to adjust designs that looked good in theory but would prove too cumbersome to
maintain in the field.
The project team was also charged with automating the business processes supporting marketing.
Selecting and installing campaign management software was the primary component of the
business process automation. Once again the varied experience of the cross-functional team
came into play. In the original process, marketers called upon the IT department to pull customer
and prospect data from multiple databases for pre-campaign analysis and to complete selections
from the databases as targets of the campaigns. By implementing the IPCD and choosing a
campaign management tool to sit on top of that database, the marketers were empowered to pull
customer and prospect data on their own, analyze the data to design campaigns and even perform
campaign selections on their own.
The overall process changes were more substantial than simply adding campaign management
software. However, this technological change was the most significant. Marketers worked with
mentors from IT during a training and transition period to better understand the intricacies of the
data. Campaigns transitioned from the "old" process to the "new" in order of their complexity,
with simple, recurring campaigns transferred to the new process initially. In all, it took more than
nine months to transition all campaigns to the new process, to provide marketers with the skills
and knowledge they needed to succeed and to re-assign IT staff to other areas.
Success Metrics
After eighteen months, the project team reviewed the success metrics they developed at the
beginning of the project to measure their progress. The project timing had changed - another
large systems project had pushed the IPCD back several months, and the team decided to push
ahead with the implementation of the campaign management software and the process changes.
They were able to create a small, integrated data mart for the campaign management tool to
support the simple, recurring campaigns. And, of course, with missed project deadlines and
changes to project scope came increases to project budget.
While no project team likes to see their project rated behind schedule or over-budget, they were
pleased to review other metrics. From a cost perspective, the project enabled staff savings of
three full-time technology consultants who had been assigned to marketing previously.
Process improvements also afforded a decrease in campaign execution from 6-8 weeks to 2
- 3 weeks. Improvements in the quality of data, targeting capability and the ability to
eliminate duplicate mailings nearly doubled the response rate on some mailings. All told,
the team was able to report an expected return of about $1.50 for every dollar invested in
the project.
Case Study: Agent Buy-In Ensures CRM System Success
Situation
At another US insurer whose products include property and casualty and life insurance as well as
annuities and other investment products, the project began after the implementation of a CRM
system. The client had completed a CRM project which included the development of a data
warehouse that provided a single, common customer view. A "CRM system" had been installed
in the call center and in sales offices. Marketing and sales processes had been revamped to
include the use of the new system and the newly available data. Everyone had been trained and
sent back into the field...yet the promised returns on the investment in the systems, processes and
training had failed to materialize. This project began with diagnostic interviews to determine
what was going on.
It seemed that the agents in the field and the CSRs in the call center had not been part of the
original CRM implementation. Yes, they had been included in kick-off meetings and two-day
training sessions, but for the most part, they did not believe that there was much benefit to using
the new system. For one thing, they thought that much of the customer data was "wrong" or "out
of date." They preferred to use their individual laptops, PDAs and rolodexes for customer
information. At the call center, many of the data fields could be easily skipped by typing "9999"
or picking "other" in the drop down box rather than asking a prospect the question. As incentives
were based on call times, there did not seem to be a reason to spend extra time with prospects or
customers to correct addresses or gather data requested by the marketing department.
Proposed Solution
While the project's aims included data cleaning and data collection, the primary objectives were
about people - getting the agents and CSRs' buy-in so they would use the system and maintain
the data. In the case of the CSRs, the approach was two-pronged. First, each call center team was
partnered with a marketing team. In brief monthly meetings, the marketers explained how they
used the data collected by the CSRs using the CRM system. In these meetings, CSRs were often
able to add texture to the data collected and offer ideas for other data they might gather or
changes to the drop down menus that would make them easier to use. The meetings benefited
marketers and CSRs and helped to create an effective working relationship between the groups
from their previous antagonistic stance toward each other. The call center measurement and
incentive programs were also changed over time to balance call time with data correction and
collection.
Getting buy-in from the agents proved to be a bit more difficult. Many of them had worked with
the company during a previous failed attempt to centralize information and so maintained a "this
too shall pass" attitude toward the new system. Like CSR buy-in, agent buy-in required two
simultaneous projects. In the first project, the top customers (based on profitability) were chosen
and categorized by agent. Reports about these clients were produced on a weekly basis for sales
management and the agents and sales management meetings began including a section on cross-
sales and clean data about these clients. Data updates were tracked in a report and agents
received a higher incentive for cross-selling to clients where data had been improved.
In addition, a group of newer agents were selected for a pilot project where they worked with
consultants to learn how to use the new system and new process more effectively in their daily
routines. In exchange for their cooperation, they received access to orphaned accounts and new
leads generated by marketing that were not available to the rest of the sales force. As their
weekly sales numbers improved, they acted as advocates for the new system and processes.
Other agents began to ask to be included in the pilot program to help improve their own results.
In this way, the system and processes were actually rolled-out to the agents again, however, this
time they were asking to be included in the project rather than required to attend a kick-off
meeting and training session.
Success Metrics
Unlike the insurer in the first case study, there was no baseline business case for this company so
there are not relevant comparisons for time to sale or return on the investment in hardware,
software, training or consulting. The success metric used by the firm was the number of
agents using the system and the improvement in the cleanliness of their data as measured
by things like returned mail and wrong phone numbers. In each case, the client was
pleased. Data cleanliness improved to the point that it became a much smaller part of monthly
marketing meetings and weekly sales meeting. In fact, people began to take the quality of the
data for granted when they did analyses or tried to contact customers. At the end of the project,
there were still some hold-outs in the agent ranks who continued to use their own homegrown
systems, paper and rolodexes to manage their sales. As long as this was a small number of agents
and as long as all new agents used the new system and processes, the firm decided not to require
them to change. Even after more than two years, some of the hold-out agents have requested
inclusion in the new system.
Each of these cases illustrates the importance of people throughout any project which requires
the high level of organizational change needed by a CRM project.
Given the various goals and objectives of departments within an insurance company, the need to
handle the people portion of a CRM project effectively is magnified. Whether it is including the
right people in the project team from the beginning or effectively managing change during
implementation, without people and their ideas, expertise, and buy-in, no CRM project in the
insurance industry can expect success.
“CRM IN PUBLIC SECTOR GENERAL INSURANCE COMPANIESIN LIBERALIZED DE-TARIFF REGIME”R.Qaiser, Faculty Member, NIA PuneCRM, as is well known, stands for customer relationship management. It is perceived by
Common man as basically an I.T. solution to ensure a better customer service. But
obviously it goes much beyond that. It is a business approach that tries to integrate the
employees, the process and technology to improve an organizations relationship with its
customers – both the existing and prospective; as well as internal and external. Though a
complex process to put in place, the ultimate aim of CRM is to increase business in a
highly competitive environment by attending to the demands of the market and needs of
the customer. The customer is the focus all through in the process. CRM though. BUZZ
word now is not really so new. In fact ever since the start of organized trading the
customer has always been the centre of focus, more so if we look at service sector.
However, in an open market his status has considerably increased because he has lot
many options before him and the various service providers are wooing him to their fold.
Having brought to their fold, they have the new challenges of retaining him. General
Insurance policies are up for grab every twelve month. The challenge therefore is not
only to get new customers but to retain their loyalty as well. Acquiring a new customer is
more expensive than retaining an existing one. The cost aspect in a competitive
environment can not be ignored. Therefore, we need to understand what goes into the
mind of the customer and how it is reflected in his bahaviour. Fortunately for us, new
technology is allowing to do so now. Analysis of data collected through CRM initiative
and its updation help understand and anticipate the customers need, his expectation andbehaviour pattern. It also helps to understand the competitors strategy. This in turn willenable in matching out the unfulfilled needs of the customer. We can apply the customerknowledge to continuously improve performance through a process of learning fromsuccess and failure.2Customer expectations are rising. They want individual attention, responsiveness,customization and other value additions without any premium for these services. There istherefore an urgent need to improve and increase the convenience and comfort level ofthe customers. It is possible to meet these challenges through CRM initiatives. While it isvery important to retain customer, no retention strategy can be 100% success. Customer
acquisition becomes vital to ensure growth in customer base. CRM packages areavailable / can be developed which can be of immense help, both in retention of existingcustomer and increasing the new customer base. However, it should be very clearlyunderstood that CRM is driven by technology but it is not about technology and thereforethe people issues are very important. It should be appreciated that (CRM) technology isonly an enabler and not a solution by itself. The attitude, approach and response of thepeople in the organization will determine the success and failure of any such initiative.Organization having satisfied employees with right attitude create satisfied customer.Basically the employees are the key to keeping the customer happy. When the employeesare unhappy, they create unhappy customers. In a study about customer migration it wasfound that majority of the customer (almost 68%) who stop coming do so because theyare dis-satisfied with the employees serving them. The position may not be very differentin PSU’s General Insurance Companies. It did not matter much in post nationalization erabut it will certainly matter much more in post liberalized era.In view of the above, any CRM initiative must necessarily has to be an inclusiveapproach. Greater involvement of staff and officer through improved performance at alllevels and in all function must go alongwith CRM initiative. Various functionaldepartment have supportive role for each other and they have to work in true team-spirit.This integrated approach will enhance both performance and desired behaviour vis-à-visthe customer.Let’s now briefly examine the state of affairs in PSU General Insurance Companies postnationalization in reference to the attitude of the people towards their work as alsotowards the customer. The nationalization brought about job security without any systemof accountability. The era saw the growth of trade-unionism of not very healthy kind.3The priorities changed after nationalization. Most of the business was brought undertariff. The casualty in the process was customer service. On the positive side of it, attemptwas made to bring insurance to the common man, penetration in rural areas, investmentin socially relevant scheme and most important induction of educationally qualifiedperson in the industry through a transparent recruitment system. The nationalizationserved some of its avowed objectives. But it also brought in its wake a work-culture thatleft much to be desired. The monopolistic tariff regime ensured rigidity in approach. Itkilled innovation and creativity. U/W was reduced to referring to tariff pages. Thecustomer did not have choices. At best they can rotate in the four PSU’s. Instead of theinsurance companies coming out with new products to meet the customer need it was theother way. The clients have to tailor their needs in line with available insurance cover.Insurance marketing was no more than commodity selling. One important lesson that wasforgotten in the whole process was – unless the companies show excellence in operationand performance, stand on their own and generate profit on a sustainable basis – they cannot meet the social objectives or any other objective for that matter. This basic fact andtherefore the need to achieve all round operational excellence was never drilled into theminds of the people in insurance industry through-out the length and breadth of thecountry. This was in a way failure of the top management. There was no reward /punishment system and the mind-set that developed was that the premium in any case isgoing to remain with one of the nationalized companies under GIC umbrella andtherefore why to worry. This mind-set was anti-thesis of what was expected in postliberalization
era. There was no appreciation of the fact that if there is no customer, thereis no business and everybody has to pay a prize.With the nineties started the age of globalization. There was tremendous development ontechnological front. Distances started shrinking. There was opening of economy andremoval of barriers. There was perceptible changes in social and legal environment. Theglobal wind of change meant that insurance business, which also has internationaldimension must also change. And change it did with the passing of IRDA Act. The year2006 saw the demise of tariff regime and w.e.f. 1.1.2007 we are in a de-tariff regime in afree market. The liberalization has brought many private players. More are expected to4join with further liberalization in the offing. The four PSU’s are no longer under GIC’sumbrella. We are now living in a very dynamic insurance environment. The implicationsare :-• An average customer who used to be a non-entity in not too distant a past hasbecome the king. In fact he is now a dictator. Dealing with him calls for newapproaches, better relationship management and better understanding of hispsyche.• Demise of tariff means fierce competition and price-war. The challenge is tomaintain a price-level which is fair to both the insurance companies and thecustomer. This indeed is a difficult job and a big challenge. Detariffing after all isnot all about rate cutting alone.• You can not deal with the present day customer with a rigid mind-set rooted in thepast. 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 inselling discipline, punctuality, team-work, quality and better behaviour pattern toour 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 InsuranceCompanies as this was a totally neglected area because of tariff regime. Theprivate players will try to bring in the tested and tried product of their foreignpartners.• Yet another challenge that has come in the wake of liberalization and de-tariffingis retaining the knowledgeable and competent people. Companies spend hugeamount in training people, in upgrading their knowledge and skill. People doleave for greener pasture in a liberalized setup.• Companies may face difficulty in placing re-insurance if the direct Underwritingrate go too low because of price-war. In fact the companies have started feelingthe heat.5How can CRM help in addressing these challenges? They indeed can. We have basicallytwo kinds of CRM initiatives:-i) Operational CRMii) Analytical CRMThe operational CRM is meant to bring operational improvement and excellence. It isfocused on customer convenience. IT can be used in General Insurance industry in areaslike:
a) Integrating customer information from multiple channelb) Sales automation – web-based sale – reduction in transaction costof businessc) Better claim management and grievance handling - claim /grievance status on web.The analytical CRM is meant to analyze the data created on operation side of CRM. Itcan be used with advantage in matters like:• Marketing opportunity within an existing customer data-base.• Information on customer retention / attrition• Predictive capability to determine customer behaviour• Portfolio analysis to know how various portfolio’s are behaving and to takecorrective steps.• Pricing• Huge mass of data created on operational side of CRM can be made use of invarious ways for various purposes.The pricing of an insurance product has to take care of all cost elements. To keep theprice competitive, all costs must be kept at bare minimum. CRM initiative can be of helpin this effort. It should be appreciated that we are moving from a supply drivenenvironments to demand driven environment. The need to acquire, retain and supportcustomer will stimulate greater investment in CRM. The need of the hour is to think ofthe requirement of customer before he thinks of it himself. We have to manage6customers expectation so that it is never higher than we can deliver. All challenges alsobring in its wake opportunities. CRM is also an opportunity which can be leveraged forcustomer communication and convenience and development of market and for bringingoverall operational excellence.
