Now that the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 has allowed banks of all sizes to sell insurance services, how much progress has really been made?
The sales of individual life insurance by banks during 2001 may seem minuscule, at about 3% of total premiums written, but the growth trend in sales over the past several years has been distinctly positive. Although banks have been selling insurance products such as variable annuities for what seems to be ages, the life insurance business is still relatively new and fundamentally different from the annuity business. Growth will come in time.
What will it take to pump up the volume of individual life insurance sales? Is there a magic bullet for bankers selling life insurance? I would respectfully submit that customer relationship management, or CRM, could be that magic bullet.
What is CRM, anyway? From the purists point of view, CRM is a business strategy that seeks to ensure that financial services institutions interact with their existing customers (whether for sales or service issues) in a consistent and appropriate manner, regardless of the contact channel used.
FSIs build strong relationships with their existing customers by recognizing their unique needs and the precise tailoring of value propositions. In a CRM environment, the techniques of mass marketing are too clumsy and simplistic for use.
But could there be two more divergent industries, especially when it comes to CRM? Lets face it: The traditional purveyors of insurance services and banking services have been very different animals. And when it comes to the execution of marketing/sales/service skills, they couldnt be more dissimilar.
Yet thanks to the Gramm-Leach-Bliley Act, we are seeing a significant increase in the numbers of institutions that are selling insurance products of all stripes.
In the world of financial services, theres an aphorism that states that consumers buy banking products and agents sell insurance products. In the latter half of 2002, both banks and insurers have adopted a vision of CRM that works for their respective industries.
The differing business models in the two industries have given rise to different skill sets and emphases. Insurance firms have developed certain CRM skills in marketing/sales/service and banks have developed others. When the two industries converge in a bank branch that offers insurance products, whose marketing/sales/service skills dominate?
The business models and sales processes that dominate each type of organization have determined the CRM skills that have been adopted. At the most basic level, the banking business is concerned with selling low-complexity products at a very high volume.
Service in the banking industry is continuous, because transactions and statements occur with great frequency. Insurance agents, however, are primarily concerned with selling high-complexity products at a relatively low volume. As a result, service in the insurance industry is infrequent at best, as most insurers equate customer service with the claims-handling process.
Given the different business models and CRM skills found at insurers and banks, it stands to reason that banks wishing to sell insurance products in their branches will look to a hybrid CRM approach. Insurance products are different from bank products, yet the long-term goals of CRM are always the same: to build strong relationships with existing clients that are appropriate and consistent regardless of the communication channel.
Its time for bankers to actively borrow the best CRM ideas of the insurance industry, and insurers need to recognize that bankers also have much to offer in this area.
CRM in banks. Retail banks have been early adopters of CRM technologies and thus have paved the way for many other industries in effectively using CRM. These banks have shown strengths in marketing abilities, particularly in aggregating customer data across the major processing systems, analyzing the data and creating marketing campaigns based on the analyses.
Coupled with a relatively simple and streamlined product line, banks have made the most of their marketing abilities and have mastered the maxim, “easy to buy, simple to sell.”
Unfortunately, while banks as a group have shown strong marketing skills, their sales abilities are sorely lacking. Having products that are simple to sell and easy to buy has allowed the industry as a whole to avoid developing sales management disciplines. As a result, banks are notoriously poor at reaching out to customers in sales interactions. Product selling, especially when it requires a license, does not come easily to retail bankers: The product complexity, the length of the sales call and the underwriting issues that can delay a commission award tend to perplex them.
One area where bankers do shine is in customer service in a 24/7 environment. As a rule, bankers generally perform well when reacting to service issues raised by customers. They may not actively initiate service interactions, but they do tend to resolve issues and challenges.
Customer service is considered part of the banking landscape. Snafus and service breakdowns are expected, but, rather than preventing the problems inherent in their processes, banks have focused on resolving them.
CRM in life insurance. Although sales may be the preeminent skill of insurers, marketing is by no means a foreign art. Insurers have been myopic in developing their ability to gather customer information across diverse processing systems into a consolidated customer information storehouse. As a result, lead-management programs are often simplistic, with only basic demographic data used in list creation.
But life insurers have been brilliant at capitalizing on the myriad insurance opportunities that can be uncovered in the financial planning process. This has been particularly important given the complexity associated with insurance products.
Additionally, the role of agents cannot be underestimated. The skills routinely exhibited by life insurance sales professionals are beyond the ken of most bankers. The sheer complexity of the life products, coupled with the capability to assist consumers credibly in the quest for financial planning elevates life insurance agents to a new plane.
The life insurance industry recognizes the key role that agents play and has designed compensation and incentive plans to foster the sales of life products. Clearly, the industrys strong suit is sales.
Customer service, however, continues to be an Achilles heel for the insurance industry. In insurance, customer service is typically equated with claims management, a relatively infrequent occurrence.
The infrequency of customer service is in stark contrast to the experience of retail banks. The life insurance industrys conservative nature has led many insurers to be late in adopting CRM strategies for improving customer service. While this situation has been changing, the insurance industry as a whole continues to lag behind other consumer-oriented industries in its investment and attention to customer service.
Hybrid CRM approach. When selling life insurance products in the retail bank branch, the clash of cultures between the two industries could easily threaten success. Some financial services institutions will spend considerable time and resources searching for the right business model (i.e., buy or co-market with an agency, hire agents to sit in branches or license branch staff for insurance sales).
TowerGroup recommends that FSIs start from a different perspective: Look to the skills that each industry has proven over the years. The FSIs that have experienced success in their life insurance sales programs have done so by finding a blended CRM model–one that is based on best practices in marketing/sales/service skills.
Simply stated, no one organization or industry has a lock on CRM skills. Individual industries develop their CRM capabilities with consideration of their unique business model, their regulatory environment, and their culture.
Convergence in financial services requires a hybrid approach to CRM for success to take root. Retail banks selling life insurance provide an excellent example of this need for a blended approach.
Concrete advice for retail banks selling life insurance products in their branches includes:
Focus on simplifying the products as much as possible. Products should be easy to buy and simple to sell.
Streamline compensation. Commission awards and incentives must become more immediate and more transparent.
Get the sales people used to selling. A sales culture must be cultivated within the entire institution.
Market aggressively. Actively market insurance services and exploit a centralized customer data repository for marketing them.
Use the banks strengths. Encourage the use of financial planning services as an entr?e into building strong customer relationships.
Invest in customer service capabilities. Its the quality of service provided day in and day out that builds relationships in financial services.
FSIs that adopt a blended CRM approach, taking the strengths from both the insurance and the banking industries, will ultimately build institutions that are capable of robust sales of all financial products. They will also ensure that customers needs are met appropriately and consistently with high-quality customer service.
is a senior research analyst with the TowerGroup, a research and consulting firm in Needham, Mass. She can be reached via e-mail at firstname.lastname@example.org.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 14, 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.