Bolster Returns With Relationships.

Customer relationship management goes beyond automation of personalized data. It entails using the information to better serve and anticipate a customer's needs.

Inspired by customer relationship management (CRM) successes and attractive return-on-investment figures from neighboring financial-services segments such as banking, insurance executives are pushing the CRM throttle forward. While the shift from traditional, product-driven strategies to the customer-centric mantra is strategically sound, if not imperative, execution requires surmounting increasingly complex obstacles.

For many reasons, there are no textbook answers to CRM problems, such as the rationalization of conflicting intermediaries or the determination of optimal points of contact with customers. Therefore, while our neighbors in other industries give us hope, we are left to riddle out the labyrinth of insurance CRM for ourselves.

Operational vs. Analytical

One interpretation--and there are many--of the goal of CRM is to drive intelligent, cross-channel personalization based on a common understanding of all interactions resulting in enhanced customer knowledge and increased bottom-line profit. The implementation of strategy can be divided into "operational" and "analytical" CRM, both of which are equally essential to success.

Operational CRM represents the automation of business processes involving customers (e.g., agency sales, direct marketing, claims, customer service centers and the Internet). It also includes the integration of activities that are the result of customer contact, such as application submission and customer service changes. Because operational solutions directly affect the customer, they are very appealing and often are the first implemented components of a CRM strategy.

Analytical CRM is the synthesis and interpretation of operational data to identify opportunities, optimize customer interactions and manage business performance. It also provides the insight into customer behavior needed to implement intelligent personalization. Perhaps because analytical CRM encroaches on the statistical sophistication that is considered the domain of the actuary, it is often underdeveloped or ignored in CRM initiatives driven from the top executive level or from marketing. Be warned, however, a lack of integrated analytical CRM will result in, at best, lost opportunities and, at worst, the misappropriation of CRM operational resources to unprofitable activities.

The Power of Analysis

To provide every customer--policyholder, employer, payroll group, agent or whomever you choose to define as your customer--with an experience that recognizes their complete relationship, you need to ensure that all customer contacts are individualized based on the context of the entire relationship. This level of recognition demands that your operational applications know about the entire relationship with the customer, not just the relationship with the particular channel. Moreover, to maximize the customer experience, you must analyze and understand your customers, identify patterns and trends in their behavior and craft communications tailored to address individual needs.

Analytical CRM starts by integrating data from disparate sources--legacy administrations systems, call centers, the Internet and, ultimately, from operational CRM applications--to create a unified, 360-degree view of the customer and the customer experience. The creation of this unified data, which is usually found in a data-warehouse environment, provides a common source for access to relationship history, enabling recognition--the step toward personalization.

Considering the numerous data sources and legacy systems in a typical insurance company environment, many will do well just to get to this point. This can be the longest, most resource-intensive step in the analytical CRM process, and yet another reason why analytical CRM is often neglected. But once data are collected in a central repository, we become empowered in unfamiliar ways. Combining the disciplines of data mining, marketing statistics and industry know-how, we enable our operational systems to discern among individual customers and tailor solutions to their individual needs.

When a customer interacts through operational systems with finite resource capabilities, the level of service we provide is gauged on our complete understanding of the individual. Analytical CRM endows our operational CRM solutions with the intelligence to maximize their benefit. In so doing, we increase the certainty that the investment in operational solutions will meet the return-on-investment expectations of our executive sponsors.

Michael Helms is an industry consultant with Teredata, a division of NCR, in chicago.