From a business perspective, the customer must be the CRM design point (not a particular technology, line of business or business process). Understanding the CRM end game, which is about managing your business based on a customer lifecycle, can be summed up in three domains:

Customer lifecycle (engage, transact, fulfill, service): ETFS lifecycle is a segment-specific abstraction layer.

Supporting business processes, including sales, service, marketing and distribution channels.

CRM ecosystem enables business processes: the CRM application architecture must combine both operational (transaction-oriented business process management) technologies and analytical (data-mart-centered business performance management) technologies.

Notwithstanding the above technical definition, CRM is the centralization of client files, automation of marketing and sales, lead management projects, streamlining sales and service interactions to provide a 360-degree view of the client, which will lead to greater customer satisfaction, retention and sales opportunities.

So, who is the customer? This question has been the epicenter of debate for insurers. Is it the agent or the insured? The traditional response was the agent, and this was often an error in judgment, especially from the independent agents view, where resistance to installing proprietary systems added to the failures. The customer is both agent and the insured. Focusing on one will not fulfill the strategy of the carrier.

Indeed, from the carriers perspective, they are not unlike consumer-packaged goods, automotive and other businesses that sell through distributors. In fact, in the CRM world we have a special business model for that: B2B2C. This, however, is predicated on having a complete view of the customerthe “panoramic view.”

Obtaining this 360-degree view and knowing the customer is not easy to do, especially in an industry regulated in every state, and in most cases regulated differently. Unifying client data can be impossible with consumer privacy laws like Gramm-Leach-Bliley and the Health Insurance Portability and Accountability Act, as well as consumer identification laws like the U.S. Patriot Act. Adding to this complexity is the location of data, which can be disbursed throughout numerous policy administration and claims systems.

Insurance companies must consider CRM in the context of portfolio managementmaking trade-offs based on the nature of the business goals and assigning a business owner for this application. Companies should develop and manage portfolios on a line-of-business basis to minimize portfolio contents and better evaluate spending and resource impact on line-of-business results. For instance, carriers look to CRM to run, grow and transform (RGT) their business. What do we mean by RGT in insurance?

Run the business, keeping operational and customer lights on. Examples include manual customer outreach (sales, distribution and claims), basic call handling or separate customer databases per operational applications.

Grow the business, expanding products and services. Examples include business process automation (sales, distribution, underwriting, service and claims), analytical applications, incremental capacity, skills evolution and training.

Transform by migrating to new markets like wealth management.

Think of todays business economic climate. Probably the most frequently cited reason for CRM initiatives in insurance has been increasing customer wallet share by knowing who the customer is and further penetrating existing customer capacity, cross selling and up-selling them. This is the “transformation” stage.

Unfortunately, starting with a transformation stage inherently puts at risk the ability for the initiative to succeed. Why? Because its very difficult to “transform” unless you have the “grow” and “run” stages in order, since so much of the transformation stage is co-dependent on run and grow. So what is run and grow?

Grow means getting efficient by extending internal processes within the organization and external partners as a means of facilitating collaborative processing. Run involves cutting costs and migrating their customer interactions from the higher-cost channels to lower-cost channels (for example, Web self-service).

If CRM is so great, how come very few carriers are getting it right? After the crush of 2001, we are seeing more tactical CRM projects. Carriers tried to implement CRM on their own, but with reduced staff and placing untrained people in these projects, they failed.

In one well-publicized CRM fiasco, an aggressive move to consolidate 15 classic systems coupled with a CRM initiative resulted in significant customer loss and drop in stock value. That issue could have been predicted and prevented. CRM is moving beyond the buzzword and the associated skepticism of “wheres the ROI,” and now organizations, realizing that customers are the business, see that they have no choice but to move forward.

This is not to say all implementations failed. There are some well-documented success stories out there.

To get CRM right, begin with one key aspect of CRMobtaining buy-in from the CEO, and if applicable, the chief customer officerthen move forward. Measurement of results at each of the stages will greatly enhance chances of goal achievement. Too many full-scale CRM projects did not have targeting or measurement, and they failed as a result.

Sometimes just reusing existing assets for CRM, which may only require business process re-design coupled with a small tactical implementation, can achieve success. On-time and on-budget are not necessarily successful factors. How well the business benefit has been achieved is a better measurement.

Selecting the application to fit the business processes is just the beginning of a successful CRM implementation. The hard part is determining how to measure success. Carriers need to find their own key performance indicators for CRM projects, such as developing enterprise metrics and imbedding them in the business process.

Stephen Forte is a research analyst with META Group Inc., Stamford, Conn., covering information technology and its impact in the property and casualty, life and annuity, and health care (payer) segments.

Reproduced from National Underwriter Edition, January 16, 2004. Copyright 2004 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.