In the early 2000s, the idea of customer relationship management technology took the insurance industry by storm, promising to identify a carrier’s most profitable customers and help develop products and services aimed directly at them.
Seven years later, however, comparatively little is said or written about CRM in the wake of multiple insurance CRM project failures and millions of dollars invested–all apparently for naught.
Despite those problems, however, CRM today remains an attractive concept to insurers seeking to become more competitive and to fatten bottom lines. The term CRM may be sparingly used–or not mentioned at all–but the benefits are still being offered in different forms, experts say.
“CRM didn’t really go away. We just kind of banned the use of that word,” said Kimberly Harris-Ferrante, research vice president for Gartner, based in Stamford, Conn. “The vendors [in the early 2000s] over-hyped CRM technology, but it still remains a strategy and methodology designed to change business operations to be more customer-centric.
“To a certain degree, the technology led the strategy, which is why we heard so many horror stories,” she explained. The problem emerged when carriers began purchasing CRM technology “without knowing what problem they needed to solve.”
The vendors were also complicit, selling large comprehensive software suites that purported to do everything in one package, she said, adding such packages were also not customized for the insurance vertical.
While that approach didn’t work, however, insurers continued to use sales force automation, customer service technologies, and centralized customer information strategies–”all key elements that the CRM vendors promised, said Harris-Ferrante. “They just didn’t call it CRM, because of the vendor over-hype, confusion, horror stories and failures. It was a stigma to say CRM.”
Today, CRM is more strategy-led, and more aligned with technology than it has ever been, she noted. “When people buy technology to support customers, they know what they’re buying,” she said. “It also means they are buying smaller pieces of software. It’s a completely different buying pattern.”
According to Harris-Ferrante, vendors have had to modularize their technologies so they could sell smaller pieces. One result is that products have become more “verticalized” for insurance, addressing key areas such as claims, first notice of loss, distribution systems and commission handling.
“I would hate to be a vendor, because you have to find middle ground,” she said, noting that insurers want products that are neither “off the shelf” nor totally built in-house.
The breaking of CRM into discrete functions has spawned a variety of terms for the activities, but Harris-Ferrante described the concept overall as “customer experience management.”
Customer experience management, she noted, “is the same as CRM, but one thing CRM missed years ago was that it emphasized sales transactions [as opposed to customer management].” The focus now, she added is on determining how customers want processes to look and feel.
“Companies are taking a step back and doing more customer research,” she said. “Instead of inside out, they’re taking an outside-in approach by trying to improve the experiences their customers have with them.”
Harris-Ferrante predicted that CRM, by whatever name it is called, will succeed, but it needs to overcome some challenges. “The number one barrier is, “how do you know your customer?” she noted. “Accessible and clean customer data is the key. Insurers have a lot of dirty, siloed customer data they have struggled to use. It’s not just cleaning up the mess you have, but making sure you have the right data.”
She added that insurers need to change their priorities and processes in collecting data to address these challenges.
“Agents know much of this data,” she continued. “A lot of information sits at the point of sale, and insurers need to access it.” That will mean that insurers and agents need to communicate more effectively, she said.
“The concept behind CRM has a future, but I don’t know that the term has a future,” she noted. “Whatever we call it, we need to understand customers and improve the way we interact with them. This is a core component of how we run our businesses.”
According to Judy Johnson, long-time industry analyst and current principle solutions architect, Insurance, for Patni Systems, Jersey City, N.J., CRM is “more or less the same as it’s always been; whatever Siebel said it was.
“Since most CRM implementations were failures, CRM was a bad word for many years,” she added. “But it’s being used again, although not widely.”
CRM now means “a single view of the customer, and to a lesser extent, customer service for claims,” said Johnson. While such a view is “a laudable objective, I’m not sure what it means or why companies are trying to do it, other than [to improve] data quality,” she said. “Maybe cross selling opportunities, speed to market and getting new products out the door [are involved].”
The term CRM today doesn’t have the same cachet as it once did, said Johnson. “Vendors are scared to death to use the word, because it has such a bad reputation.” She added that vendors also have to fit the CRM message in with SOA and other current technology initiatives.
While she noted that the industry does need to provide customer service, Johnson said insurers have found that “throwing money at customer service doesn’t necessarily get better customer service.”
She agreed that poor data is also a stumbling block. “It’s difficult to have CRM if you have bad customer data,” she said. “That’s what caused problems in 2003 and previous implementations. The problem wasn’t the technology, but many blamed the technology.
“Just as with every major technology shift, CRM became the silver bullet long before it was the reality,” said Johnson. “We’re not seeing a great resurgence in pure CRM.”
Too much strategy?
“CRM went through phases,” said Chuck Johnston, senior director, insurance industry strategy, for Oracle, based in Redwood Shores, Calif. “You always managed your customer relationships, although maybe not as efficiently as you could have. We got overloaded on the strategic value of CRM, rather than integrating it into the way we do business.”
Oracle owns Siebel, which is a well-known marketer of CRM solutions.
According to Johnston, Oracle defines CRM for insurance as “distribution management, customer service via service centers, marketing–and analytics, insight and data management.
“We tend to operate at the level of talking about the specifics,” he noted. “Distribution management and customer service are the high-level terms. CRM is too high level, and there is a lot of baggage.”
One reason term CRM got “bad press,” he said, is that “people tried to do galactic projects. They bought into a vision of CRM as all things to all people. The reality is that it’s a good piece of software that did sales force automation, or some other aspect of CRM.”
He also pointed out that for CRM to be effective, “a lot of social change has to go along with it. You really have to determine, ‘How does it fit my business?’”
Johnston opined that if CRM buyers in the past had specific business goals going into purchase, they were usually happy because the goals were met. Specific improvements or extension of particular areas could be measured. Many purchasers, however, had no such goals for CRM or the goals were “fuzzier.” That being the case, “How can you measure success?” he asked.
According to Johnston, the “hot” area in CRM today is the analytical tools–dashboards, measurement capability and data hubs.
“Yes, we are selling more pieces around projects, but we are also seeing interest in single sourcing,” said Johnston in reference to the current trend among buyers to purchase modules that address specific needs, rather than a global CRM system. Buyers “are not doing a galactic project, but the smaller projects have to fit together into a larger goal,” he said.
“Insurers are always looking for ways to grow the business, and you can only do so many acquisitions,” he added. “Real competitive growth will come through new markets and the ability to get into the channel faster. Distribution management addresses these pain points. As an aspect of CRM, it enables you to manage a multi-channel environment as a day-to-day operation, as opposed to a traumatic event.”
“I don’t think CRM has changed a lot in the last two years,” said Matt Josefowicz, managing director, insurance, for Boston-based Celent. “Since the end of the CRM boom, we’ve seen a disaggregating of the category, which was a vendor-created category that took in related things. It was oversold as a transformational product, and that is often problematic.”
According to Josefowicz, the term now takes in customer data integration, data mining, marketing, and contact center management–all pieces of what had been touted as CRM.
“Rarely these days do you see these things as part of a grand CRM strategy,” he explained. “People now realize they have to keep track of customers–what they said and did and when–manage interactions, then use the data to make business decisions. There are a lot of important tools.”
In particular, he said, “People are spending on customer data management, interaction management, and cleansing of customer data–all of which falls under the CRM umbrella. Approaching this as an overall strategy is biting off more than most companies can chew.”
CRM got such a bad name, he noted, not because the technology failed, “but because it was bought in a frenzy of technology buying without any clear business goal. We thought it would fix everything and it didn’t, so it was a failure. It has to be part of a very clear business strategy.”
Josefowicz added that while insurers continue to invest in aspects of CRM, “it’s not as high a priority as core systems, data mastery and workflow.
“We’ve seen the explosion of the category,” he concluded. “Now the solutions under the umbrella are still out there and still delivering value.”