CRM’s flexibility has a price

In this final article in his three-part series on CRM, John Sarich discusses the costs of implementing a CRM system, some possible alternative approaches, and the payoff.

We started the first article with the thought that the flexibility of CRM comes with a cost that most insurance buyers don't fully understand. Some insurance carriers still hold a bias toward building their own system. Perhaps it's because they are currently managing agents using a variety of systems and applications, so they have an idea of what they can build. Typically a carrier's IT department will send out numerous RFIs and RFPs, and from those responses someone will say, "We can build that!"

Part 2: CRM becomes insurance focused

Building a CRM application is not terribly difficult if the functionality is capped at basic contact management and sales information. But understanding all of the nuances of insurance distribution is difficult — and they quickly move from typical CRM functionality to industry-specific functionality.

Take for example the end-to-end process of accounting for agents — recruiting, on-boarding, compliance, compensation, analytics, self-service portals, and all the various workflow and process-management functions that make generic CRM seem like a valuable application that solves numerous insurance-business issues. Sometimes ignorance really is bliss. Many insurance companies have embarked on a home-built solution only to find, down the road, that this is harder than they thought — and there are other priorities for IT to manage.

Then other costs arise, such as licensing, that most companies don't think about until they have decided to buy a shiny new CRM system. And that licensing issue isn't a small one. Suppose a carrier is using a CRM system to manage marketing campaigns for certain agencies. The carrier gives those agencies access to the campaign, requiring access to the results of the campaign and access to input data into the campaign.

Many CRM systems require that anyone accessing the CRM system is a licensed user. And to become a licensed user, the carrier will be required to pay the going rate for anyone accessing the CRM system. The going rate isn't cheap. Some CRM vendors, depending on the user fees contracted, can be over $100 per month per user — some more popular CRM systems charge up to $300 per user per month.

Let's do the math on this. A marketing campaign for 300 agencies, with 2 users per agency — that's 600 users — could have monthly costs of more than $60,000 per month, if each user is paying $100 per month or more.

Licensing costs have been a major source of heartburn for many insurance companies, as they can instantly render a well-designed marketing campaign cost prohibitive. Yet other vendors that have insurance expertise have a much lower cost profile, with user licensing that reflects how insurance is marketed through the agency system.

CRM is fundamental to distribution modernization

A well-designed distribution system or platform with the ability to manage the key (but complex) business process of distribution — recruiting and on-boarding, compliance, compensation, portal, and analytics — will have all the requisite functionality for most carriers. Additionally, the modular design of the system should let various parts "plug and play" with each other. This allows various applications, some of which would normally be disparate, to be used in concert, sharing information to the entire organization, not just sales and marketing.

For example, a modern modular distribution system will have applications for:

agent recruitment and on-boarding (a function that is a hand-off from the field to internal distribution operations):
agent and agency management and compliance, which is the application that is required after the on-boarding/recruitment process is complete;
a module for compensation management that is not only for the producer/agent, but for the distributor as well;
a self-service portal that enables agents and agencies to access their information not only for simple file maintenance, but also as a means of accessing key information such as sales results, expiration lists, claims in process, application status that is accessible from any device (phone, tablet, PC); and
a reporting or analytics module that pulls data from the entire distribution system and brings that information to dashboards that are granular at the manager level and more holistic at the senior management level.

Ultimately, driving the overall distribution system is workflow designed to automate the entire function of field management, enabling easy reporting, scheduling, task lists, and communication between the field and the office.

Marketing: the payoff

The obvious payoff from CRM designed for insurance is its ability to manage a significant part of the sales process. However, the missing link in most CRM applications is the point where marketing meets sales. Most CRM applications handle the sales aspect very well, but do not have the functionality to manage marketing campaigns.

Although it is all well and good to manage the interactions between parties, agents, and field marketing personnel, having the ability to design, develop, and execute sophisticated marketing campaigns is better. Even better is having the ability to use email, specialized content, and other marketing tools that give insight into who is opening the email, going to the website, or downloading a value-exchange item.

Obtaining this type of data is where the rubber meets the road. Driving e-marketing campaigns generally requires third-party applications that are specifically designed to track and manage the entire marketing campaign. For one example, Marketo, a leading independent marketing management vendor, has the ability to process unqualified contacts from a variety of sources including web-registration pages, direct mail campaigns, email marketing, multichannel campaigns, and database marketing.

Most CRM systems will not natively do all the sophisticated marketing management that one would expect and require. With social media, electronic media and even old snail mail, being able to identify prospective insureds for a specific product is a very effective use of CRM. Today's technology allows a marketer to see virtually, in real-time, who is on a particular website, what they are looking at, how long they have been on the site, who the person is, and what got them to the website in the first place.

The ability to tailor content to meet the needs of potential clients is a major factor in the sales race. A key benefit for insurers is that with lead management, they have the ability to run and manage marketing campaigns that directly involve their agents at a very reasonable cost.

CRM still is the Swiss army knife of technology

CRM has become a necessary business tool and application in virtually every industry. The challenge for the insurance industry is to find CRM applications that are designed for the insurance market — not just a warmed-over version of CRM that the vendor is also selling to manufacturers, pharma, or other industry verticals.

Insurance has unique needs, and operates very differently from other industries. It requires applications designed to solve business issues that insurance organizations uniquely face each day. Is there an insurance CRM in the house?

John Sarich is an industry analyst and VP of Strategy at VUE Software. He is a senior solutions architect, strategic consultant and business advisor with over 25 years of insurance industry experience. He can be reached at [email protected].

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