Busy Signals: Insurers are scrutinizing their call centers for potential improvements in cost savings and efficiency. (Technology).

As insurers increasingly rely on call centers to expedite and enhance customer service, many are adapting new technologies and other cost-saving measures to make the centers more efficient.

The use of call centers across all industries has risen dramatically over the past several years. The number of U.S. call centers is expected to reach nearly 78,000 in 2003, according to market-analysis company Datamonitor. And according to Input, a Web-based information-technology market-research and marketing-services firm, the call-center operations market will grow 21% annually, from $7 billion in 1998 to $18 billion in 2002.

In the changing world of financial services, where customers no longer have traditional relationships with agents and are in need of services, call centers can help provide customers with a place to get information and get familiarized with self-service concepts, said Andrea Csaszar, vice president of operations for Prudential Insurance Company of America. For insurers, these operations are the centralized port to thousands of monthly inbound and outgoing calls. And during catastrophes, such as the recent terrorist attacks, call volumes can exceed several hundred thousand in one month.

Insurers are trying to enhance the capabilities of their call centers by getting the highest level of productivity from highly trained personnel, said Patricia Tilton, a partner and national service leader for the insurance practice for KPMG LLP, a professional services firm. Simultaneously, they are "leveraging technology, such as voice-response units, imaging and telecommunications, to facilitate servicing and maximize dollar investments," she said.

Online and Offline

The Internet now has a home in many insurers' call-center operations. John Hancock Financial Services Inc. and other insurers are achieving savings by using their Web sites for claims processing, answering questions and direct selling. The Internet also reduces phone wait times and increases agent accessibility to customers.

"The Internet plays an important role by providing our customers with another option to report their claim," said Vince Donofrio, director of claims support services for Farmers Insurance. Through its round-the-clock HelpPoint multichannel contact center, Farmers' call-center agents are able to do more than process claims reported over the Internet, by phone or through their agency force. They use Internet-based technology to verify coverage, assign the claim and dispatch a vast network of vendor services, including contractors, rental cars and tow trucks, all during the initial contact of reporting the claim.

Interactive voice response, automated phone systems and a host of call-center software also are giving rise to a new spectrum of communication tools for call centers.

According to the research firm Computer Economics, the electronic voice market is expected to surpass $1 billion this year and $2 billion by 2005.

Cost Containment 

Prudential recently added several interactive voice-response enhancements to its centers to assist with front-end self-service functions, allowing the company to reduce service costs. Prudential also has formed a group to examine emerging technologies for the purpose of incorporating these tools into its call-center operations. Prudential expects automation of its insurance transaction processing and building technical knowledge into the logic of technology will result in future cost savings, Csaszar said. This will allow processors in the call center or paper-processing area to focus on completing transactions as well as providing more service at a lower cost to the insurer.

Insurers can better manage call-center technology costs by examining their telecommunications expenses, said Tilton of KPMG. "How you're negotiating telecommunication contracts with providers is key in saving money." Insurers should eliminate services that have no direct impact on current operations or seek to better leverage organizational telecommunications costs.

Nationwide Mutual Insurance Co. is evaluating a computerized phone tool and a call-routing system to automate many of its call-center functions. Tools that can automatically evaluate the skill sets available at different locations and other conditions, such as call volume and wait time, decide in milliseconds where calls should be directed and then move those calls to the appropriate people, said Orysia K. Meyers, assistant vice president of claims call centers and claims services.

Insurers such as John Hancock have recognized the value of getting customers connected quickly with people who have the skills to serve them. "Because bank producers are selling a lot of products, such as long-term disability and variable life, it is difficult for them to be experts in each of these areas, so we are conferencing in licensed specialists on the phone to assist in these sales," said Brian Burn-side, vice president of telesales. By answering questions and ensuring that applications are completed accurately, the specialists help streamline the sales process and cut back-office processing costs.

Virtual Centers

Some insurers have reduced costs with virtual call centers, in which call-center agents are networked with computers, interactive voice-response systems and other call centers via the Internet.

Virtual centers help John Hancock market products in sparsely populated states, such as North Dakota and South Dakota. "Because it can often get somewhat expensive to place full-time people in these areas, making the wholesaling process more virtual makes much more sense in the long run," said Burnside. John Hancock is now producing some of its business out of these territories that weren't generally targeted before and is using virtual call centers to make outside sales forces more efficient.

"Because calls don't always come in a predictable fashion, you are often left with making the tradeoff between customer service and efficiency," said Himanshu Patel, senior vice president of mass marketing, Liberty Mutual Insurance Co. By converting to a virtual call center, Liberty Mutual eliminated this concern and increased its efficiency of call handling. Since it went virtual, more than 80% of Liberty Mutual's incoming calls are answered in 30 seconds or less. "If you want to maintain that kind of service level, virtual centers allow you to have the same level of staffing while increasing your level of customer service," Patel said.

Farmers Insurance Group also is finding value in going virtual. The company is using technology to operate two geographically separated centers as one, Donofrio said.

Rooting Out Expenses

While call centers have become the heart of many insurers' operations, the overhead has insurers re-examining how to make them less expensive.

Staffing accounts for the largest cost of operating a call center. Nationwide recently reallocated some of its claims call-center positions to temporary and seasonal employees to assist its part-time and full-time staff with the 25% to 30% increase in incoming calls during peak months. "When we have call-volume spikes, we're able to utilize a part-time work force and staff according to those spikes, thus allowing us to become more cost efficient in the long run," Meyers said.

But some insurers are concerned that staffing with temporary workers may result in high turnover. Nearly 98% of the Liberty Mutual call-center staff are full-time employees. "Because call-center jobs are often stressful and typically have a high turnover, we believe it is better to have full-time people who are not viewing their jobs as just temporary work but want to stay with us for many years to come," Patel said.

The goal is to reduce staffing expenses without cutting service. "One way to do this, while still maintaining high-level staff productivity is by utilizing smart workers in the technology areas and lower-level skilled personnel for routine maintenance," Tilton said.

Tilton also believes insurers should benchmark their call centers' performance to achieve maximum results. Expectations are very high in this industry, and it comes down to understanding and maximizing utilization rates, service-response rates and understanding turnover levels, she said.

John Hancock recently relocated a large portion of its Boston-based direct-to-customer center, product support and customer-service activities to Albuquerque, N.M.

"We have a wealth of talented and skilled employees in Boston, but we were faced with the high costs of labor, space and services, and as a result we recently opened our Albuquerque facility as a way to lower many of these associated expenses," Burnside said.

Nationwide also restructured its call-center operations to save money. Several years ago, Nationwide's call-center operations were divided and spread across several regions. After a recent call-center restructuring, Nationwide consolidated its claims operations in Columbus, Ohio; Gainesville, Fla.; and San Antonio.

Many industries, including banking and financial services, are now outsourcing several of their call-center activities to national businesses. A growing number of companies also are beginning to shift a portion of these functions to India and Pakistan, reducing the cost of salaries and benefits. In April, life insurer Conseco said it would move about 2,000 of its U.S. jobs to India over the next two years in a cost-saving move.

"However, as more companies do this, there is a movement growing among people in these outsourcing centers to see some job jumping and increasing salaries," said Tilton. This may reduce some of the initial cost savings and service expectations, she added.

Prudential began outsourcing with a third-party enterprise to gain exposure in the western region of the United States this year. Prudential sets the tone of the operation, including directing the number of staffers needed, the type of technology used and the quality of training programs. "We are able to take expense out without any degradation in the level of service being provided to our customers--which is our ultimate goal," Csaszar said.

While Nationwide doesn't outsource its day-to-day call-center activities, it does rely on outsource claims-call handling during unpredictable events, such as hurricanes or other weather-related catastrophes. During these events, Nationwide relies on outside vendors and staff from other departments within the company to help handle the spike in calls.

But many insurers keep call-center operations within company walls. "We view call-center [operations] as a core competency of the company, and we don't want to depend on outside organizations to undertake these responsibilities," said Liberty Mutual's Patel.

Looking Ahead

As insurers anticipate continued investments in their call-center operations to increase customer satisfaction, they also are examining future cost-saving measures, such as technology enhancements and alternative staffing processes.

In addition, insurers believe several trends already making their way into the market may affect future call-center spending. To achieve greater profitability from their centers and maximize both inbound and outbound calls, insurers are beginning to upsell and cross-sell products through their centers. "They are taking a hard look at how to use these centers as revenue drivers, and by and large, upselling and cross-selling will be one of the biggest focuses in call centers' future," said KPMG's Tilton.

Insurers believe that the overall future savings from call-center operations will lie with the customers themselves. The key to making call centers more cost efficient is finding cost-saving measures while still giving customers what they want, Tilton said. "The younger generation's expectation will be more e-based, while the older generation continues to be more people-based. However, the biggest challenge for companies will be assessing the wants and needs of the significant population of people that lie in between these two groups--those who want both personal service and quick answers."