Incredibly, in this highly informed day and age, it is still news to some that denial is not a river in Egypt.

Customer relationship management–the idea that technology will enable us to determine the wants and needs of our most profitable customers and develop products and services aimed at them–has been a buzzword in our industry for more than two years. Yet experts like Clarence Smith, assistant vice president at Conning & Company, a Hartford, Conn.-based researcher, tell us that CRM programs fail between 55% and 70% of the time. The cost of such failures may range up to $100 million, says Conning.

Why are CRM programs so dysfunctional? According to Smith, the answer lies in the insurers culture and business model. In his study for Conning–”CRM in Personal Lines Insurance”–Smith notes that, “Unfortunately, some P-C insurers view CRM as nothing more than a technology effort, rather than a fundamental strategy that helps establish and build customer relationships.”

Theres a lot of truth there, but Id like to suggest a further, more insidious reason for the failure of this and other technologies to make a difference in insurance. I call it “technological denial.” And while cultural factors certainly play into the equation of failure for CRM in insurance, technological denial (lets call it TD, just to add another acronym to the already overloaded acronym circuitry in our brains) is the x-factor that renders all other factors null.

What is TD? Let me provide an illustration.

Psychologist James Dobson tells the story of a mental health practitioner who had a client who insisted that he, the client, was dead. Lengthy sessions of talk therapy still failed to convince this patient that he was anything other than a walking corpse. At his wits end, the practitioner finally hit on an idea that would demonstrate to the patient conclusively that he was, in fact, alive.

In their next session together, the client again declared he was deceased. At that, the practitioner abruptly grabbed the patients hand and pricked it with a sharp needle. Naturally, a bubble of blood formed on the spot of the wound.

Pointing to the blood, the practitioner triumphantly said to his client, “There, now! What do you say to that?”

“Well, whaddya know?” the patient responded. “Dead people bleed.”

Sadly, this kind of intractable denial is not limited to those in mental health institutions. The Conning study found that “some p-c insurers had invested only in operational CRM and not in analytical CRM, leaving service representatives and field personnel collecting a great deal of data without analyzing the data to identify ways to build stronger customer relationships.”

How is that possible?

According to Smith, “Some insurers have an intention, at a later date, to buy analytical software, but they havent done that. Meanwhile, the data ages.” And as the data gets older, it becomes irrelevant, making its analysis (if that ever happens) an exercise in futility. As a result, the CRM initiative doesnt yield the expected results.

Cant you just hear these insurers a year from now? “Well whaddya know? CRM really doesnt work.” As my 14-year-old son would say–Duh!

This is the height of TD. It fails to pay attention to the facts as they are clearly displayed. It fosters the false expectation that a piece of technology–blithely tossed into the hands of information technology professionals–will boost market share or increase efficiency, without any significant involvement or effort from the business side. This is a recipe for failure.

Smith offers more insight into why the majority of carriers havent been successful with their CRM programs. “They may have underestimated the training that is required where front line staff is concerned,” he says. “Also, some employees dont buy into change easily.”

These are also valid points, but how can insurers complain about their shiny new CRM engines not working when they have failed to read the directions in the first place? Gather customer data, analyze customer data, meet their needs and give them what they want. Its not easy, but its not rocket science, either.

By the way, if youre a life insurance executive whos feeling like this doesnt apply to you, beware. While the Conning study focused on p-c carriers, Smith believes that life insurers face “similar challenges.” Conning is considering a study to confirm that, he notes.

Smith asserts that CRM users will tend to gravitate toward one of two business models. The first is a “market focus value adds model,” in which data will be captured and analyzed to improve products and provide better service. The second model is a “process innovation model, which may make an operation more efficient, but isnt going to improve [customer] retention, because youre not doing anything with the data,” he explains.

Smith adds, “Right now, were seeing more of the process innovation model.” He cautions that while CRM technology may help such companies serve customers more efficiently, the carriers “wont reap the full benefits of CRM.”

Agents also have a role in the CRM process, says Smith. “Agents must be willing to share information that the company can leverage,” he observes. For example, an agent may hear from a customer about why the customer doesnt want to purchase both auto and homeowners coverage, but that information doesnt get passed on to the carriers involved, he notes.

The sad truth, however, is that rather than deal with customers in reality, many carriers would prefer to purchase a magical software program, pass it on to IT, and forget about it. They deny the very real fact that successful CRM involves a fundamental change in the way carriers do business–demanding a switch from a product-centric focus to a customer-centric focus.

Weve been talking about this for years, folks. Its time to pull out the manuals, get the analytical software, and do the work necessary to make sweeping changes in the way you operate. Do it right, and you may discover that giving customers what they want and need really can be profitable.

Well whaddya know?


Reproduced from National Underwriter Life & Health/Financial Services Edition, June 24, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.