Insurance is a complex product where personalized service—achieved through an intimate knowledge of customers and their histories with an insurance company—is critical to making sales. As insurance options broaden and products grow more complex, customers seek superior, personalized service more than ever. With the repeal of the Glass-Steagal Act in 1999, insurance companies face increased competition from banks and brokerages. With the enactment of the Patriot Act, insurance companies need to ensure that they "know their customers." The situation grows even more urgent when one considers the bad economy that hurts investment income; as well as the extremely narrow window of time wherein an insurance call center representative, agent or broker holds a customer's attention—and a valuable opportunity to cross-sell or upsell. It is at this precise moment that these individuals have the chance to maximize these fleeting sales opportunities.To maintain competitive edge and viability, insurance companies are focusing intently on delivering superior customer service. A comprehensive customer relationship management (CRM) strategy addresses three imperatives: Sum providing a unified enterprise customer view; Sum retaining customers with great services; and Sum controlling costs as the insurance company in question expands.These three imperatives form a unique interplay that maximizes sales while reducing operational costs—the equation for improved revenue growth and profitability.Gain a Unified Enterprise View of CustomersWithin many insurance companies, there is a wealth of valuable information about individual customers: you know who they are and what insurance products and services they buy. You know their history of claims and the status of their accounts. You may even know about their opinions and preferences, or whether promotions have attracted their response. But can you unify all these fragments into a complete portrait of this most important asset: your customer?For insurance companies, "know thy customer" can be a challenging imperative. Customer data may be divided among product lines, or among legacy claims, policy and billing systems. If an insurance company has expanded its customer base through mergers or acquisitions, its information may be even more fragmented.CRM in insurance starts with a single, complete, real-time enterprise view, so that call center representatives, agents and brokers can understand and serve every facet of individual customers. This level of holistic, personalized service can be the differentiating factor that retains good customers and reduces

churn—an important goal, given that customer retention is profitable and new customer acquisition can be expensive.Retain Customers With Great ServiceMost insurance companies understand the virtues of a single, complete, real-time enterprise view of individual customers, and they have made great progress towards providing this view at customer touch-points throughout the enterprise. But it's critical to note that this view should not be regarded as an end in and of itself—rather, it is a rich foundation to be used as a basis for a deeper, more advanced level of customer understanding.Consider how foolish it would be to try to sell automobile insurance to someone who doesn't own a car. Without customer analysis and behavior prediction, this is exactly the quagmire that call center representatives, agents and brokers find themselves in every day. This advanced level of understanding is needed to help insurance companies predict customer behavior and align marketing, cross-selling and upselling efforts accordingly. By making customer analysis and behavior prediction data immediately accessible at the desktop, sales efforts are optimized and customer loyalty is strengthened, as individual customers feel that their needs are understood and met in a way that is fast and convenient.Predicting customer behavior for improved sales efforts is a three-step process:Sum Profiling: Insurance companies first build a profile of information about customers who have previously exhibited a targeted behavior. Profiling requires rich customer data, including enterprise-wide transactional and behavioral data such as call center and account holdings information. Other data sources include key performance indicators and third-party demographics. An example of profiling might be building a profile for customers who bought new homeowners' insurance policies in the past two years. The goal is to determine characteristics to look for in future buyers.Sum Modeling: By using data mining on the profile information, analytics can uncover the most relevant characteristics of the customer segment being analyzed. For example, the most significant attributes of customers who bought homeowners' insurance are gleaned from the profile via the data mining application. Such characteristics comprise the model of customers most likely to purchase homeowners' insurance in the future.Sum Scoring: Insurance companies use predictive analytics to score existing customers by comparing them to the model. Those most closely matching the characteristics included in the model are most likely to exhibit the targeted behavior. Given the example above, an insurance company can rate its

customers numerically to indicate how closely they match the model of the person most likely to buy homeowners' insurance.Once customers are scored and the analysis pinpoints customers most strongly correlating with the model, an insurance company can address those customers, especially the top prospects. Customers scoring a nine or above might receive a special promotion for homeowners' insurance, while a separate, incentive-based offer might entice those scoring seven and above.Customer analysis and behavior prediction can also be used to identify life events and/or extended relationships, which can be highly useful in improving profitability from individual customers. For example, life events often trigger changes in insurance coverage that can be anticipated and leveraged with targeted offerings. You might identify health insurance policyholders who have recently had new children and offer them an attractive life insurance policy. Using a single, complete, real-time enterprise view coupled with customer analysis and behavior prediction, you may be able to identify good drivers among your auto policyholders who have children turning sixteen. It's time for a targeted offer to add the family's new driver to the policy.As with many industries, the more products you can sell to a given customer, the less apt he/she is to migrate to another provider. Furthermore, as policy holders tend to stick with you, the ratio of premiums paid to the cost of claims increases in favor of the former. Lastly, statistics show that the longer a policyholder remains a customer, the less frequently he/she submits a claim. All of these factors contribute to improved profitability.Control Costs While You Expand Business expansion presents many positive opportunities to insurance companies, including increased assets and broader geographic reach to new customers.So how does an insurance company grow without sacrificing profitability? The company at hand must offer the same level of superior service that its customers have come to expect—while minimizing operational costs that, paradoxically, have the potential to spiral out of control, as the company begins to serve an augmented and growing customer base.The first key is to enable your agents, representatives and brokers to identify and spend the right amount on each opportunity. A high-value, low-risk customer, who carries policies over a long period and makes relatively low claims, is an ideal subject for marketing and sales efforts targeted at extending his or her portfolio. Call center representatives, agents and brokers need real-time access to this business intelligence, so they will know where to concentrate their efforts in the limited amount of time they have the customer's attention.

The second key is to use the most cost-effective channels without sacrificing a high level of customer service. Call center, agents, email, phone and self-service portals—how can your employees determine which channels are the most efficient and cost-effective for different target audiences and desired behaviors? Again, using customer analysis and behavior prediction, call center representatives, agents and brokers can target marketing and sales efforts through different channels depending on the target audience in question.Going one step further, new and advanced email response, Web chat and self-service portal tools are drawing more and more customers to the Web each day, enabling a consistently high level of customer service while "pulling" customers to a communications medium which is much more cost-efficient than the phone. Particularly valuable are Web-based self-service portals, which can function as a first and last point of contact and eliminate valuable time spent assisting a customer who can just as well assist him or herself. Finally, Web-based interactions tend to deliver on the holy grail of customer service—speed and convenience.The third key is automation of the more mundane insurance business processes. Given the myriad systems in the insurance world—claims, billing and policy systems, not to mention automobile, home, life and health insurance subsystems for each one—CRM systems in insurance will only add another layer of complexity, labor and expense if they are not pre-built to connect with legacy systems and automate the mundane work of keeping these systems updated. Automated, multi-step workflow capabilities are critical to minimizing these and other potential bottlenecks, such as the processing of trailing documents supporting a policy application—documents like expert appraisals, doctor's statements and/or proof of student status. By automating mundane processes and removing the paper trail, call center agents, representatives and brokers are freed up to focus on the more strategic activities—like servicing customers.Today's insurance companies certainly face a daunting challenge in maintaining and increasing their competitive edge. But by focusing on three key imperatives—gaining a unified enterprise view of customers, retaining customers with great service and controlling costs while expanding—insurance companies can turn challenges into strategic competitive advantage and enhance their long-term viability and profitability.

IN 21st century knowledge is most important asset the companies and organization own. Core knowledge assets are those of employees, partners, suppliers, customers and competitors. Customer knowledge is more vital to business success than ever before. Getting closer to customer and effectively responding to their needs is a grest to beast their loyalty, and encourage deeper relationship. Today Customer Relationship Management (CRM) is the key that fulfills the promise of helping sellers “to please all of people (customers) most of the times.” In this digital age, the age of ‘never satisfied’ customers, leading enterprises are indentifying the need to change from a product centric business to the customers centric one.

CRM is a fine art harnessing the intelligence that is embedded in a company’s data and transforming it in to profitable relationship with their customer. Building customer relationship is a complex undertaking. It is an organizational discipline that includes the identification, attraction and rention of most valuable customer in order to sustain profitable growth. CRM integrates data, technology, analysis, and marketing & communication process across all customers touch point. It is a comprehensive strategy and process of acquiring,

retaining and partnering with customer to create superior value for business and its customer. It is as an investment and the value of relationship marketing is done through marketing accounting procedure over several years. The importance of customer retention arises out of the fact acquiring customers is much more expensive than keeping them.

In life insurance industry, a decade ago, selling for insurance company is seemed straight forward. But thing have changed and competition have taken a new face. Today bank sell annuities, stock brokers sell life insurance. The line between financial services providers have bluddred . Combined with the competition, challenging economic condition have forced the insurance company to rethink how to do their business. To survive in this competitive world, insurance companies can no longer operative under a policy based model. Instead, they must adopt a new client centric approach to better meet the needs of its customers.

The longer an insurance company can keep a customer, the more profitable that customer become. Knowing what a customer needs and effectively responding to them is a great way to boost their business and build a strong relationship with their client. Insurance companies have a wealth of data and about their customer. But many companies lack the ability to soft through that data and extract the information that is critical to make important strategic and tactical business decision. Here arises the need for CRM.

Every insurer promises customer satisfaction, but to what extent this promise is being translated into reality is the million – dollar question. Some companies understand what the customer wants, but they cannot or would not deliver it because their organization structure and way of doing business prevent them from doing so. Many insurers remain inflexible in traditional functional areas, such as underwriting, claims, marketing and loss control. If insurers do not adapt to changing needs of the customer, they can not survive and are sure to the victim of “marketing myopia.”

CRM is revolutionizing the financial services industry. It is the most valuable tool to identify profitable customers and strengthen relationship with them. Selling policies to new customers, through important, usually isn’t a cost effective as keeping existing customers. When a profitable relationship already exists, CRM can especially boost superior services at a lower cost. Successful CRM should give insurer the ability to measure customer value and improve the customer’s services perception while reducing servicing cost. Ideally, smart CRM solution should automatically make intuitive insurance connection and

allow non-intuitive but relevant assured connection to be created. CRRM can help / hurt the risk management process depending on how effectively it is managed.

As companies engage in the battle to win over a larger share, of customers, corporate interests in the concept of relationship marketing have grown dramatically. It focus managing all interaction that an organization has with its customers, in order to leverage the data in a variety of business application. While CRM is not a new process, its evolution over the years has changed the way business are viewed and interacted with their customer, to the point that many insurance executives are now discovering CRM to be a valuable corporate assets – one that can directly impact there bottom line.

Insurance provides traditionally concerned on product creation, with distribution and sales considered a different business focus, and therefore customers relation was not a key concern. But with the evolution of technology, customer are now demanding multiple channel through which they can interact with their provides including face – to face contact, phone, website, e-mail, mobile devices etc. This has forced the insurance company to explore new distribution channels, so that ordinal customers has more information about multiple insurance products than ever before. The challenge to insurance firm is therefore is to grow and sustain business by rapidly improving operational efficiencies and providing tailor mode products for diverse group of customers. Thus CRM in insurance is a novel way to beet the odds.

Study and analyse the CRM activities of 3-5 leading companies

RELATIONSHIP MANAGEMENT AT MAX NEW YORK LIFE INSURANCE

Max New York Life Insurance Company has undertaken various steps to strengthen its customer relationship management. Max New York Life Insurance has announced the introduction of INTERACTIVE VOICE RESPONSE (IVR) service in 10 different languages. The leap is in a bid to enhance and improve max New York Life’s customer and distributor experience by availing the customer service in their own language. Sanjeev Mago, executive vice president, Customer Operations and Service Delivery, Max New York Life Insurance, said, "This initiative is yet another step towards improving customer satisfaction by enhancing their ease of resolving pre and post policy issues. At Max New York Life, we lay emphasis in interacting with our customers and distributors in their choice of language." In order to improve its customer relationship management, MNYL has maintained internal records and marketing intelligence systems to maintain a database of profile and contact information of the customers.

DATABASES, DATA WAREHOUSING AND DATA MINING AT MNYLMNYL Insurance has organized their information:-· Customer databases· Product databases· Salesperson databasesThe most important of the above three is the customer database in which the profile and the contact information of the customer are saved. The customer database may even include the demographics and psychographics (activities, interests and opinions) according to which a customized policy is formulated for his/her needs.MYNL conducted a study in association with AC Nielsen, which revealed that the customers want return and protection in an insurance policy. Based on this study, the company launched ‘Smart Express’ for a smooth ride through the volatile markets

MAX NEW LIFE INSURANCE WINS OVER CUSTOMERS WITH CRM

Max New Life Insurance has over 15,000 employees and a turnover of Rs 3,857 crore. It also has about 1 lakh agent advisors at 712 offices across 389 cities. But agents were not the only way the insurer's customers could approach the company. It also had a website, tie-ups with banks and distribution partners. The problem with these multiple customer touch points was that the organization didn't have single view of the customer. This had an impact in multiple areas: from customer service to agent management and training and a decline in the company's ability to effectively control collections, renewals, and retention processes. It also impacted Max New York Life's ability to increase profitability. One of the key business challenges that paved the way for the project was a lack of an efficient lead management system, which could enhance the ability to increase wallet share from existing customers. These problems brought about the decision to implement a pivotal enterprise CRM. It would lead to the implementation of a customer service management system, a lead management system, a policy holder portal, a collection, renewals and agent management and performance system. Because it sought to fix many problems in many departments, the project needed to be wide and deep. The project was also the first of its kind in the Indian insurance industry, which left the team with little guidance. They had to start from scratch by documenting requirements and working out the flow and design of the system - and simultaneously manage changing requirements and additional request that impacted the project's timelines. Despite these challenges the first three phases of the Rs.4.5-crore project were launched by August 2009 and they have seen wide acceptance. Today, the system has over 1,600 simultaneous users and it has served about 75,000 customers. It has also resulted in fewer customer calls because the customers can access information for themselves. The system has registered more than the targeted expectations.

CRM Programs at Life Insurance Corporation of India

LIC of India have special feature on its official website “POLICY LOCATOR”. This site has been designed for giving a variety of general and policy information to the policyholders. For viewing the policy related information, new customers are required to go through a Registration procedure. The customers have to login to the site and become a registered user by filing a registration form. On successful registration, the customer will have access to information regarding status of policy/s, loan, revival, premium due/ policy calendar, maturity

calendar etc. Policyholders also have the facility to use the ‘Feedback’ link to send their queries and valuable suggestions /Comments. Insurance Selector is an application on their official web site. This helps one in deciding which plan is suitable according to his/her age, occupation, income and insurance needs. LIC have a phone helpline, i.e. toll free no. A customer can have interactions with the executive or with IVR. The site also has a Grievance Redressal System. In a vast organization like LIC, catering to the various needs and aspirations of millions of policyholders, grievances of customers do arise occasionally. In order to redress this grievance, LIC has established an elaborate Grievance Rederessal Machinery and the details are as under:

Grievance Redressal Officers: Grievance Redressal Officers have been designated at all levels of the Organization: At the branch level: The Sr/Branch manager At the divisional level: Manager, CRM At the zonal level: The Regional Manager CRM At the Central level: The Executive Director CRM/Chief(CRM)

Policyholders can personally contact these designated Officials and seek redressal of their grievances.New Initiatives by LIC in CRMLife Insurance Corporation of India (LIC) has launched two portals -- one each for customers and agents. The customer portal will help one who has at least one policy with LIC to get information relating to-·The Status of his policy,·The amount of loan one can get against the policy and· Download forms that one requires to start another policy.The Life Insurance Corporation of India (LIC) has roped in Wipro and IBM for its customer relation management (CRM) project. The project will help the corporation chalk out its future plan and marketing strategy. “This CRM project is the largest of its kind in India. It is aimed at studying consumer behaviour and chalking out our future plans and marketing strategy,” said R N Bhardwaj, managing director, LIC.

CRM- The ICICI Prudential Experience

• CRM involves increased communication between the insurance company and its customers and prospects as well as within the group itself

• The underlying idea is to enhance every instance of contact with the customer

• ICICI Prudential believes that a true customer-centric relationship can only be accomplished by considering the unique perspectives of every single customer of the organization

• ICICI prudential chose Taslima CRM

• The objective is to enable the customer to “Serve Himself “ – it is a self-service monitor

Why Talisma?

• Highly cost effective

• Development centre based in India

• Transparent support process

The CRM Business Cycle

Understand and Differentiate

• ICICI Prudential believes that the organizations need to understand their customers in order to have a relationship with them

• Primary research is done to capture needs and attitude

Develop and Customize

• ICICI Prudential believes that the extent of customization should be based on the potential value delivered by the customer segment

Interact and Deliver

To foster relationships, ICICI Prudential is ensuring that:

• All areas of the organization have easy access to relevant, actionable customer information

Acquire and Retain

• The more ICICI Prudential learns about customers, the easier it is to pinpoint those that are producing the greatest value for the organization

• It aims to continue to learn more about each customer segment and use it for successful customer retention

• As it moves step further in CRM, it hopes to gain insight and understanding that enhance the subsequent efforts

Health claims management system

• Provided cashless claims decision within 8 to 3 hrs providing anywhere and everywhere access

• Allows real time information for analytics and reduces fake claims

CRM Roadmap of ICICI Prudential

• Focus on automating and improving the business processes associated with managing customer relationships in the areas of sales, marketing, customer service and support

• Achieve the end goal of one-to-one marketing by tracking complete customer life-cycle history

• Facilitate the coordination of multiple business functions

• Coordinate multiple channels of communication with the customer to carry out customer management more efficiently

• Cross- and up-selling capability to provide market opportunities within an existing customer database

• Predictive capability to determine customer behaviour

• Information regarding customer retention or attrition helps determine the likelihood of policy lapses and helps identify customers worth targeting for retention campaigns

• Customer segmentation that leverages data to create accurate categories for use in marketing strategies

Reason of failure in 2 different companies

And propose the initiatives to overcome the failure

In January 2002, Philadelphia-based CIGNA HealthCare migrated3.5 million of its members to new claims processing and customerservice processes and systems. The broad-based $1 billion initiativeincluded CRM and an overhaul of its legacy technology infrastructure.Benefits did not materialize as planned and resulting impacts oncustomer service caused the nation’s fourth largest insurer to lose 6percent of its health-care membership in 2002.CIGNA wanted integrated processes and systems for enrollment,eligibility, and claims processing so that customers would get one bill,medical claims could be processed faster and more efficiently, andcustomer service reps would have a single unified view of members.This meant consolidating complex back-end processes and systemsfor claims processing and billing, and integrating them with newCRM applications on the front-end. The project required complextechnical work and an overhaul of the way business processes worktogether between front and back office as well as an overhaul of customerservice staffing levels and skills. In addition, new processes andapplications were designed to allow members to enroll, check the statusof their claims and benefits, and choose from different health-planofferings—all online.There are several reasons why CIGNA was under considerablepressure to make these changes. First, along with other insurers such asAetna and Humana, they were being sued by thousands of doctorsabout payment delays. They were also being accused of deliberatelyrejecting or delaying payments to save money. In 2001, Georgia’s insurancecommissioner found serious issues with CIGNA’s claims processingsystem and it was fined by the state of Georgia. CIGNA signed a consentorder pledging to reform its claims processing system.Also, during sales cycles, CIGNA had promised large employeeaccounts that it would have revamped systems for improving customerservice up and running by early 2002. Finally, the companyhad reported disappointing second quarter results in 2001 and wasunder pressure to cut costs. Although some selective hiring of staffwas planned in order to alter the firm’s skills mix, the goal was a netreduction of staff by 2,000 people through layoffs.At first, CIGNA conducted small scale migrations,moving its membersin small groups of approximately 10,000 people at a time. During

this time, problems were limited and manageable. At the same time, thecustomer service areas were being revamped in anticipation of the newfangledsystems. Huge gains in claims processing and customer serviceefficiency were expected, and the company started laying off reps as partof a consolidation of service centers. In 2002, the company terminated3,100 employees and spent $33 million in severance payments.CIGNAalso invested $32 million in the new regional service centers.At this point, in January 2002, with members renewing and newmembers lining up, the company performed a mass migration to thenew infrastructure. Serious problems emerged immediately.Membershad trouble obtaining, confirming, and inquiring about coverage.Employees at one member company effectively lost coverage due tomembership data problems. Member ID cards were issued withincorrect numbers and prescription icons. Some people could not gettheir prescriptions filled at drugstores.As a result, a flurry of inquiries put CIGNA’s new customer serviceoperation to the test. But lower staff levels left the centers short-handed.Customers who phoned were put on hold, and when they did getthrough, some of the new reps struggled to navigate the new systems.In addition, data from back-end systems did not show up properlyin the customer service systems, making it difficult for reps tofully understand the customer’s situation.In the rush to go live, the system’s ability to handle claims andservice from front to back and in large volumes was not adequatelytested. Problems in one area cascaded into others; staffing levels wereinadequate, and staff were improperly prepared. Rather than realizethat benefits would come over time as the company became used tonew processes and systems, they expected them the day the switcheswere flipped.Given this experience, CIGNA has now slowed down the paceof migration and solidified the processes, systems, and staffing. Italso has improved testing practices. By mid-2002, CIGNA wasmoving new members without major problems. In January 2003, itsuccessfully performed a significant migration of 700,000 members.It also successfully launched www.MyCIGNA.com, a website formembers to look up their benefits, select health plans, check claimstatus, search for health information, and communicate with nursesonline.Now that the problems have been handled, the company is processingmedical claims more efficiently and servicing customers better

than in the past. Some of the initiative’s original goals have now beenachieved. The elimination of duplication in claims processing andbilling, as well as other benefits, have allowed the company to streamlineits sales force and medical management team.However, the pricetag for the project has exceeded the $1 billion planned and significantdamage was done to the company’s reputation and its financialperformance.

The CRM activity failed in this case due to failure in defining scope for initiatives during automating the current practices without addressing the redundancies, outmoded practices, and other problems that become ingrainedin business processes over time. In migrating to a new system, businessusers tend to fixate on not losing any current functionality. Yet fewspend enough time objectively assessing how valuable current functionalityreally is. The following steps could have taken to address the failings:• Ending the perpetuating existing process flaws.Duplicating current processes in new software packageswithout addressing flaws, outmoded practices, or redundanciesin current processes makes the new system extremely complex and unmanageable. Hence it is important to first address the problems of the current system.Falling into Technology TrapsAlthough technology itself is typically not the most common causeof failure, its complexity requires projects to be carefully planned andproperly budgeted and staffed. In addition, delays in policy, process,and organizational decisions can cause teams to rush through vitalengineering and technology tasks. In many cases, technology teamsare forced to make assumptions about system functionality due tolong delays in business decisions. Mistakes require time-consumingrework or cause disconnects between how business and technologystaff believe the system should be working.In addition, IT-led projects tend to over-engineer the solutionsas the role of technology is overemphasized. Similarly, many ITteams will spend too much time tinkering with new technologycomponents. Unfortunately, brand new hardware is often beingunwrapped in the IT department before the team has finished definingthe initiative and the proverbial cart leaves the gate before the horse.In general, technology issues tend to arise when:• Using new and untested technologies in critical situations

• Not dedicating enough testing time to the technologyimplementation• Failing to spend enough time understanding, gathering, andpreparing company data• Underestimating the complexity and cost of integratingone technology system with another• Over-customizing CRM tools, leading to installations thatare buggy and slow

Hence clear amount of testing is required before the implementation of the program. Implementing in phases is always easier and far less time consuming as well as being cost advantageous. There are always added advantageous when the implementation is done in stages rather than as a one time plan. It facilitates the easy involvement of resources when done on a short term basis, and makes easy the constant monitoring of results so that corrective measures can be taken.

Young Star &Young Star Plus: It is combination of mutual funds and Insurance (unit linking life insurance plans). This is one of the competitive product of HDFC Standard which provides insurance cum investment to customers and which has following features.

Short term PPT (premium pay time).

It is mandatory for the period of 3 years, where customer has to pay his minimum premium of 10,000 p.a.

The minimum returns are 20%.

Partial /total withdrawing if customer wants to with draw his amount from the policy he can withdraw money only after 3 year until he can not.

Increase/ decrease his premium, he can increase premium at any time but decrease take place only after 3 years.

CRM in HDFC Standard requires integration with core banks and offers end to end functionality to effectively address the needs of the complete cycle of marketing, sales and service of banking products.

The CRM activity failed because there was no proper integration at various levels. Proper data sharing up and down the distribution chain is very essential for a successful CRM activity.

Insurance has a complex B2B2C distribution and service model, with multiple levels taking partin the life cycle of a customer. For CRM to be truly effective, it has to provide an informationconvergence point for all these parties to see the interactions with the end client. Since carriers,

distributors and Producers use different (or no) CRM tools, there is little to no sharing. A fragmentedpicture of the end client is the result, with no-one having a view of the customer that can betrusted to be comprehensive and up-to-date. Hence integration at various levels is required.

c02.qxd 3/10/04 4:02 PM Page 2930CRM UnpluggedCRM Contributes to a Scary Halloween for HersheyCandy producers record 40 percent of their annual sales betweenOctober and December. Halloween, the biggest candy-consumingholiday, accounts for about $2 billion in sales.7 For a candy producer,missing Halloween is like a toy company missing Christmas.Unfortunately, in 1999, that’s just what happened to Hershey, thenation’s largest candy maker.8 Just before the big candy season,shelves at warehouses and retailers lay empty of treats such as Hersheybars, Reese’s Peanut Butter Cups, Kisses, Kit-Kats, and Rolos.Though inventory was plentiful, orders had not arrived and distributorscould not fully supply their retailers.Hershey announced in September that it would miss its thirdquarterearnings forecasts due to problems with new customer orderand delivery systems that had been recently rolled out. The newenterprise resource planning (ERP) and CRM processes and technologyimplemented earlier in the year had affected Hershey’s ability totake orders and deliver product. The $112 million system aimed tomodernize business practices and provide front-to-back automationfrom order-taking to truck-loading, but Hershey lost market share asproblems allowed rivals to benefit during the season. Mars and Nestléboth reported unusual spurts of late orders as the Halloween seasongrew nearer. The most frustrating aspect of the situation is thatHershey had plenty of candy on hand to fill all its orders. It justcouldn’t deliver the orders to customers.By December 1999, the company announced it would missalready lowered earnings targets. It stated that lower demand in thelast few months of the year was in part a consequence of the earlierfulfillment and service issues.c02.qxd 3/10/04 4:02 PM Page 30Hershey had embarked on the project in 1996 to better coordinatedeliveries with its retailers, allowing it to keep its inventory costs under

control. The company also needed to address Y2K problems with itslegacy systems. CRM, ERP, and supply chain management systemswere implemented, along with 5,000 personal computers and a complexnetwork of servers. The intention was to integrate these softwareand hardware components in order to let the 1,200-person salesforce shepherd orders step-by-step through the distribution process.Sales could also better coordinate with other departments to handleevery issue from order placement to final delivery. The system wasalso designed to help Hershey measure promotional campaigns andset prices, plus help run the company’s accounting operations, trackingredients, and schedule production and truck loading.Hershey realized that the business process changes involved withsuch a transformation were highly intricate. However, despite thesize and complexity of the undertaking, the firm decided on anaggressive implementation plan that entailed a large piece of the newinfrastructure going live at the same time. Unfortunately, the projectran behind schedule and wasn’t ready until July 1999 when theHalloween orders had already begun to come in. Problems in gettingcustomer orders into the system and transmitting the correct detailsof those orders to warehouses for shipping began immediately. ByAugust, the company was 15 days behind in filling orders, and inSeptember, order turnaround time was twice as long as usual.In recent years, Hershey sales growth had exceeded its rivals, andthe company was expecting 4 to 6 percent growth that year.However,sales instead slipped and the company admitted that problems with thenew system alone had reduced sales by $100 million during the period.31A Review of CRM Failuresc02.qxd 3/10/04 4:02 PM Page 31In the past few years, other companies have experienced similarCRM-related problems. For example, printer manufacturer Lexmarkabandoned a CRM initiative in 2002 and announced that it would takea charge of $15.8 million.9 Similarly, Agilent Technologies blamedits quarterly profit shortfall in August 2002 on problems installing anew company-wide software system.10 Separately, Carsdirect.comestimated in a lawsuit that it suffered $50 million in operating lossesdue its inability to adequately meet customer demand after installingcustomer-tracking tools.11The cost of CRM failure is dramatic and can take its toll in manyareas of the business. The following summarizes the typical impacts

by category:Financial Per formance• Market share and operating losses• Failure to achieve a return on investments• Budget overruns• High post-implementation running costsCustomer Service Quality• Customer confusion, frustration, and dissatisfaction• Lower service levels• Slower time to market• Negative brand perception32CRM Unpluggedc02.qxd 3/10/04 4:02 PM Page 3233A Review of CRM FailuresSales Effectiveness• Lower sales force productivity• Increased sales force cynicism toward new systems• Increased sales force turnoverCultural Impacts• Low morale within IT and affected departments• Growing cultural cynicism within the company towardadopting business change• Company-wide loss of confidence in its ability to enactchange• Lost jobs in the executive suite• Propensity for companies to become overly conservativewith regard to investments in strategic initiatives. Thisleads to dampened innovation, a failure to strengthenadvantages, and deferring the update of aging processesand infrastructureWhy CRM Projects FailBecause it changes the way a company interacts with customers andthe daily jobs of thousands of people throughout the organization,there are many potential failure points for CRM. These implementationsare strategic in nature, change policy and business practices,c02.qxd 3/10/04 4:02 PM Page 33and require the entire organization to coordinate closely towardspecific goals. Exhibit 2.1 demonstrates the most commonly cited

reasons for failure.Like all complex initiatives, risk exists and must be managed.Thefollowing section describes the most common reasons for failureusing broadly defined categories:• Poor objective setting• Lack of senior leadership• Inadequate planning and scope setting• Implementation missteps34CRM UnpluggedExhibit 2.1Leading CRM Risk FactorsLack of cross-functionalcoordinationInappropriate ITinvestmentsPoor businessrepresentation on teamLack of executive supportLack of process changeNo CRM businessstrategySource: Meta Group, Leadership Strategies in CRM, January 2000; Data WarehousingInstitute (March 2001).(% citing risk in top 3)50%48%45%40%32%32%c02.qxd 3/10/04 4:02 PM Page 3435A Review of CRM Failures• Lack of change management• Inadequate post-implementation operationPoor Objective SettingThese failures relate to the overall aims of the initiative. In many ways,these are the most common cause of CRM failures, as poorly defined

goals complicate downstream efforts and undermine end results.Failing to Align Initiative with StrategyAs introduced in Chapter 1 and covered in more detail in the nextchapter, CRM initiatives must be properly aligned to firm strategy.Unfortunately, most initiatives tend to be based solely on gains inefficiency and do not produce any competitive advantage. Little considerationis typically given to how the goals of the CRM initiativewill help bolster the firm’s unique competitive advantages in themarketplace. As a result, arduous and expensive efforts result only inminor efficiency gains that come after the big changes initially slowthe company down.The overwhelming majority of companies fail toalign goals to strategy, so much so that it is a rarity for a CRM initiativeto begin with a discussion of the firm’s competitive advantagesin the marketplace.In one case, a financial products and services company spent over$10 million on efforts to duplicate its highly complex customerspecificcontract process. This required significant modification to asoftware package that didn’t support such processes out of the box.Eventually the process was halted as senior management becameaware that the program was not helping address its more fundamentalc02.qxd 3/10/04 4:02 PM Page 3536CRM Unpluggedissues—the obsolescence of certain product lines and the need todiversify into new markets.Failing to Anchor the InitiativePlanning and implementing CRM projects is a difficult job requiringexperienced program managers capable of shepherding through policy,processes, people, and technology change while keeping all branchesof an organization, several teams, and multiple vendors in concert.Wehave observed that successful initiatives tend to be anchored firmly inthe objectives they follow. For example, they are either focused onmaking select strategic changes, re-platforming existing processes, orconverting current processes to Best Practices (often those found inpurchased software packages). Some successful programs contain acombination of all three, but most are more focused. Exhibit 2.2describes this anchoring.Without clarity around the type of goals being pursued, the programwill default to a hodge-podge of all three objectives. In thisunsatisfactory situation, few within the organization agree on the

goals.Without alignment and a strong guiding light, decision makingis difficult, compromises are rife, and initiatives tend to limp across thefinish line late and without fully satisfying any of the stakeholders.Focusing on Internal rather than Customer PrioritiesIn pursuing CRM, many organizations focus on existing customerprocesses rather than enhancing or building new interactions that customersmay prefer. They typically fail to spend enough time criticallyevaluating their current operations from the customer’s perspective,and this inside-out thinking can cause significant misfires.c02.qxd 3/10/04 4:02 PM Page 3637A Review of CRM FailuresFor example, General Motors Acceptance Corp.’s commercialmortgageoperation (GMACCM) managed to unduly upset customersduring its CRM implementation in 1999.12 GMACCM, which is anindustry leader and known for its technological prowess, implementedan automated voice-response technology as the first point of contactwith commercial loan customers inquiring about their loan balancesand other information. But upon activation the company found thatcommercial customers simply weren’t willing to spend time punchingin numbers and navigating the system. Literally 99 percent of its20,000 customers were calling the 800 number and zeroing out to acustomer service “operator”. Customers were annoyed, complaints wereExhibit 2.2Anchoring CRM++++++0–– –STRATEGICAUTOMATINGAS-ISPROCESSESADOPTINGBESTPRACTICESPROGRAMMATICDEFAULT

NATURE OF CHANGELEVEL OF BUSINESS BENEFITTransformationTransitionStatus QuoDegradationNatural Pullc02.qxd 3/10/04 4:02 PM Page 3738CRM Unpluggedup, and loan officers were losing business. Rivals used this misstep asa marketing tool to lure customers away.In another example, Owens Corning began a CRM implementationproject in 1992.13 The company had acquired a number ofsmaller companies to expand beyond its core insulation product lines,which led to many pockets of unconsolidated electronic customerrecords. In addition, marketing approaches weren’t consistent acrossthe many parts of the organization. On top of this, the company wasgetting its internal processes updated and automated using a largeERP package which siphoned budget and attention away from theCRM effort and made it difficult for the CRM teams to create newtypes of interactions for customers. The over-emphasis on internalpriorities bogged Owens Corning down, preventing vital customerfacingchanges. Owens has stated that a better approach would havebeen to start with the customer wants and needs and work backward.In case after case, poor results clearly illustrate the importance ofgaining the customer’s perspective up front. Objectives cannot beappropriately set unless the outside-in perspective has been attained.Lack of Senior LeadershipIn many organizations, top management is either not engaged at all,loses interest once the initial high-level decisions have been made, ordoesn’t focus long enough to ensure successful post-implementationoperation. These kinds of leadership shortfalls sound the death knellfor CRM initiatives.Leaders Fail to EngageBMC, the $1.5 billion software company,was an early CRM visionaryand rode out two failed CRM initiatives before achieving success andc02.qxd 3/10/04 4:02 PM Page 38returns. In the first attempt, processes and systems were implementedwithout the involvement of key executives or business units.The

new system suffered from very low utilization, with only 30 to 50percent of users adopting it. The system was also plagued by problemscaused by inaccurate data. The second attempt went forwardunder the mistaken impression that all the users needed to getonboard were more features and better data. The system again failedto capture wide usage.BMC’s persistence paid off on attempt number three once theyrealized the need for executive support. The project team obtainedC-suite commitment and formed a steering committee of IT andbusiness owners. In addition, more than 150 grass-roots–level salespeoplehelped define the system’s features and usability and this timeadoption soared to 97 percent.14 BMC spent more than $10 millionon the third effort alone, but returns are expected to be in the orderof $70 million the next two to three years as sales reps increase theirleads and convert more of them to sales.Another common leadership engagement issue is a tendency fornewly hired executives to be unsupportive of current or past CRMinitiatives. Often, these leaders have their own ideas on how thingsneed to be done. In most cases, however, this spreads confusion andcreates apathy or active opposition to the program.Risk of failure issignificantly increased as a result.Leaders Disengage before Mission Is AccomplishedEven after high-level planning and approval is achieved, senior executivesmust stay with the program through completion and beyond.Executives often lose interest once the project is underway, but teams39A Review of CRM Failuresc02.qxd 3/10/04 4:02 PM Page 39can easily lose control, and the various areas of the firm can quicklybecome unaligned. Another problem is that after implementation,companies often forget to carry out measurement procedures toassess how the initiative is performing. They also fail to tie employeeand management compensation plans to the goals and results of theinitiative. By engaging leaders at every stage, the majority of commonrisks and failings can be closely monitored and mitigated.Inadequate Planning and Scope SettingAfter objectives have been set, firms often stumble at the criticalplanning stage.Attempting too much, not addressing vital changes tobusiness processes, and not removing organizational roadblocks aretypical failings.

Attempting “Big Bang” ImplementationsAs the CIGNA and Hershey examples illustrate, companies tend tobite off more than they can chew or digest. Large initiatives are morecomplex and have higher failure rates. Unfortunately, companiestend to try satisfying the needs of too many areas of the firm witheach initiative, causing scope to become bloated in a “boil the ocean”approach to CRM. In an example of tackling too large a task,monster.com rolled out a new sales application intended to enablethe growth of the company’s orders and revenue. Unfortunately, thesystem was over-configured with too many features and its performanceso slow that the inside sales representatives were unable to useit. In addition, the field sales force was unable to access their accountsand customer information for a full year. The company admits thatit underestimated the complexity of the effort.40CRM Unpluggedc02.qxd 3/10/04 4:02 PM Page 40In another example,Dow Chemical attempted a large scale CRMrollout to its global salesforce in 1996.15 But business processes werenot adequately defined and the tool failed to adequately supportremote users. This first, overly-complex initiative failed, but later,small localized CRM initiatives started to emerge throughout thefirm. These implementations were highly focused and much smallerin scope. They allowed Dow Chemical to more effectively addressspecific issues and the size of projects allowed for better visibility,control over investment, and higher success rates.A more incremental approach to CRM implementation is mucheasier to manage, but many organizations shy away from this, fearingthe political difficulties of prioritizing scope and delaying benefitsfor various parties. An incremental approach also makes achievingbuy-in throughout the firm more difficult, but avoids the disastrouscosts of widespread operational problems. Exhibit 2.3 demonstratesthe increase in risk as initiatives grow larger.Failing to Adequately Address Business ProcessRecently, a large telecom company rolled out a $7 million softwarepackage to help improve its customer segmentation and marketingapproaches. Though the firm provided sales and marketers with a tool,they failed to identify and enact the new policies and processes neededto put the tool to proper use. As a result, few benefits were gained.In all surveys of CRM project successes and failures, lack of time

and attention to business processes is one of the most common complaints.Processes define the sequence of events and help identify theinformation passed from one person or department to another. Ifnew tools enable new tasks or alter existing ones, the impact on business41A Review of CRM Failuresc02.qxd 3/10/04 4:02 PM Page 41process needs to be defined up front. Even if the users of the toolsunderstand the reasons for a change in their procedures, the peoplein neighboring departments might not.

The CRM activity failed in this case due to failure in defining scope for initiatives during automating the current practices without addressing the redundancies, outmoded practices, and other problems that become ingrainedin business processes over time. In migrating to a new system, businessusers tend to fixate on not losing any current functionality. Yet fewspend enough time objectively assessing how valuable current functionalityreally is. The following steps could have taken to address the failings:• Ending the perpetuating existing process flaws.Duplicating current processes in new software packageswithout addressing flaws, outmoded practices, or redundanciesin current processes makes the new system extremely complex and unmanageable. Hence it is important to first address the problems of the current system.Falling into Technology TrapsAlthough technology itself is typically not the most common causeof failure, its complexity requires projects to be carefully planned andproperly budgeted and staffed. In addition, delays in policy, process,and organizational decisions can cause teams to rush through vitalengineering and technology tasks. In many cases, technology teamsare forced to make assumptions about system functionality due tolong delays in business decisions. Mistakes require time-consumingrework or cause disconnects between how business and technologystaff believe the system should be working.In addition, IT-led projects tend to over-engineer the solutionsas the role of technology is overemphasized. Similarly, many IT

teams will spend too much time tinkering with new technologycomponents. Unfortunately, brand new hardware is often beingunwrapped in the IT department before the team has finished definingthe initiative and the proverbial cart leaves the gate before the horse.In general, technology issues tend to arise when:• Using new and untested technologies in critical situations• Not dedicating enough testing time to the technologyimplementation• Failing to spend enough time understanding, gathering, andpreparing company data• Underestimating the complexity and cost of integratingone technology system with another• Over-customizing CRM tools, leading to installations thatare buggy and slow

Hence clear amount of testing is required before the implementation of the program.

Lack of Change ManagementCRM initiatives significantly impact jobs, roles, skills, and the dailyroutine of an organization, and are often disruptive and initially unpopularamong the rank and file. The people aspects of large initiativesare often the most challenging part, with politics and organizationalconflicts being the norm in CRM initiatives. Without adequatepreparation, employees and even entire departments will be apatheticor even hostile to the change. Yet many organizations fail to assigntime in their plans to prepare for and deal with the change. In fact,change management is often the first item struck from proposedplans and budgets. Executives who have bought into the initiativemay assume that employees are as excited as they are and face a rudeawakening when confronted with opposition.An executive at Mutualof Omaha relates how the CRM initiative was announced to anemployee meeting and was greeted with a sea of rolling eyes. Itprompted executives to immediately increase efforts to help theorganization prepare for and cope with the change.17Another common CRM problem relates to the structure of mostmodern corporations. For example, most businesses are structured to

have a corporate head office and subordinate business units—each ofwhich has a degree of autonomy. The problem is that many firms tryto dictate CRM initiatives to business units, despite the fact that eachtypically has its own unique competitive strategy. Many companiestry to adopt a single software package as an enterprise standard47A Review of CRM Failuresc02.qxd 3/10/04 4:02 PM Page 47which allows them to purchase licenses in bulk at lower prices. Thismay make good financial sense but it forces each business unit to usethe corporate standard CRM tool, and one size typically does not fitall when it comes to CRM. Some standard packages are overkill forthe needs of certain businesses and each business has competitiveadvantages they are trying to create or strengthen. Shoehorningevery business unit into one package is a serious failing. Executivesat the business units find their goals compromised and often fightagainst adopting the standard-issue software. This strains relationsbetween the corporate and business unit entities and increases thealready complex task of delivering on the CRM opportunity.If a company successfully generates excitement for a CRM initiative,this can create another problem—inflated expectations. Thereare countless cases where the team has brought the initiative in ontime only to find user or executive expectations were very different.Executives wonder why they spent the money and business users failto see the benefit of adopting the changes.Inadequate Post-Implementation OperationCRM is an ongoing process not an event. It must be carefully managedover time, even after a successful rollout. Even if excellent useradoption is at first achieved, success will fade if CRM is not nurtured.The results of new approaches and tool usage must be trackedand reviewed regularly by management. The company must investover time in upgrades to process and technology. These will notbe trivial and some may require careful managing. For example,AT&T Wireless recently announced that three million users hadtrouble accessing their account numbers or making any change to48CRM Unpluggedc02.qxd 3/10/04 4:02 PM Page 48their service. This was caused by problems performing an upgrade ofits CRM software.18

Companies fail to define measures of success or management teamsfail to review them often enough.Typically, CRM does not becomeingrained in the management process of the company. And as longas it remains just another initiative, project, or computer system, it isalways likely to fail, taking millions of investment dollars with it.CRM failures are abundant as are the lessons to be learned.There are many points of failure, but strategic approaches and goodplanning can significantly increase the chances of success. In the followingchapters, we will show how CRM can be approached andimplemented in ways that mitigate its inherent risks and maximizeits powerful benefits.Key Points• There have been many CRM failures, and reviewing thereasons for them can help mitigate risks with any CRMinitiative• The costs of failure are significant, affecting company earnings,customer satisfaction, market share, investor sentiment,internal morale, and brand perception• Reasons for failure can be categorized into the following:• Poor objective setting• Lack of senior leadership• Inadequate planning and scope setting49A Review of CRM Failuresc02.qxd 3/10/04 4:02 PM Page 49• Implementation missteps• Lack of change management• Inadequate post-implementation operationNotes1. Lindsey Sodano, Heather Keltz, and Rod Johnson, The CustomerManagement Applications Report, 2002–2007. Boston: AMR Research,June 26, 2003.2. Sodano, Keltz and Johnson, The Customer Management ApplicationsReport, 2002–2007.3. Meredith Levinson,“Pain Free CRM,” CIO Magazine, May 15, 2003.4. Laura Preslan, Aligning Customer Investments With ROI, Metrics, andEnterprise Performance Management. Boston: AMR Research, August12, 2003.5. Laura Preslan and Heather Keltz, The Customer ManagementApplications Spending Report, 2003–2004. Boston: AMR Research,

August 26, 2003.6. Alison Bass,“CIGNA’s Self-Inflicted Wounds,” CIO Magazine,March 15, 2003.7. National Confectioners Association,“Confectionary Seasonal Sales,”www.candyusa.org/Stats/seasonal.shtml, available as of January 22, 2004.8. Emily Nelson and Evan Ramstad,“Trick or Treat: Hershey’s BiggestDud Has Turned Out to Be Its New Technology—At the WorstPossible Time, It Can’t Fill Its Orders, Even as Inventory Grows—Kisses in the Air for Kmart,” The Wall Street Journal, October 19,1999; and Shelly Branch,“Hershey Will Miss Its Lowered Target for4th Quarter,” The Wall Street Journal, December 29, 1999.50CRM Unpluggedc02.qxd 3/10/04 4:02 PM Page 509. Marc L. Songini,“Lexmark abandons CRM project,” COMPUTERWORLD,October 11, 2002, www.computerworld.com/softwaretopics/crm/story/0,10801,75086,00.html, available as of January 28, 2004.10. Agilent Technologies, Agilent Technologies reports third quarter resultsbelow expectations; drive to profitability continues, Company press release,August 19, 2002, www.agilent.com/about/newsroom/presrel/2002/19aug2002a.html, available as of January 28, 2004.11. “CarsDirect Sues Software Maker,” Los Angeles Business Journal,December 4, 2000, www.findarticles.com/cf_dls/m5072/49_22/67721084/p1/article.jhtml, available as of January 28, 2004.12. Dale Buss,“CRM horror stories: GMACCM spills the beans overfailed CRM,” Context, November 26, 2002, http://searchcrm.techtarget.com/originalContent/0,289142,sid11_gci865340,00.html,available as of January 28, 2004.13. Dale Buss,“CRM horror stories: Obstacles plague Owens Corning,Perseus Development,” Context, November 26, 2002, http://searchcrm.techtarget.com/originalContent/0,289142,sid11_gci865343,00.html,available as of January 28, 2004.14. Kimberly Hill,“CPR for CRM,” CRM Daily, March 26, 2002,http://crm-daily.newsfactor.com/perl/story/16941.html, available as ofJanuary 28, 2004.15. John McCormick,“A Cheat Sheet for CRM Success,” BaselineMagazine, March 18, 2002, www.baselinemag.com/article2/0,3959,818844,00.asp, available as of January 28, 2004.16. Buss,“CRM horror stories: GMACCM spills the beans over failedCRM.”

17. Jennifer Hubley,“Mutual of Omaha employees buy into customerfocus,” SearchCRM, October 30, 2001, http://searchcrm.techtarget.com/originalContent/0,289142,sid11_gci778611,00.html, available as ofJanuary 28, 2004.51A Review of CRM Failuresc02.qxd 3/10/04 4:02 PM Page 5118. Grant Gross, “CRM glitch still plagues AT&T Wireless Service,”ComputerWeekly, 27 November 2003, www.computerweekly.com/Article126862.htm, available as of January 28, 2004.52CRM Unpluggedc02.qxd 3/10/04 4:02 PM Page 52

CRM INVADES THE INSURANCE SECTOR WITHAMAZING RESULTS

The current scenario in the insurance industry is a complex andcompetitive environment tinged with little stability.The major hassle the industry faces is obtaining clients. This is dueto the fact that the big fish in the insurance industry dominate the sector. Ithas become increasingly difficult for this particular sector to gain profitswhile curtailing costs. Acquisitions, mergers, have all contributed to thedifficulty insurance agents and other professionals from this industry face.Long considered a job only restricted to insurance companies,selling insurance policies has now become an option for banks as well. Thishas resulted in a lot of increased as well as unwelcome competition.Customers tend to lose out as they are not buying from the right provider. Inaddition to this the Internet has increased the pressure for insurancecompanies in capturing the market. All this has succeeded in making theinsurance world more complicated.What is required is a comprehensive database of information aboutcustomers who hold your insurance policies. The answer? Choosing acustomer centric strategy can go a long way in achieving this. CRM -Customer Relationship Management holds the key. CRM helps insurancecompanies to ensure that the customer is understood better.Right now insurers can achieve excellent policy administration;good billing systems etc but fall short on the customer front. However thisalone is insufficient to survive on. Insurers have now realized that CRM isessential if they want to deliver high quality services since it satisfies currentcustomers and gains new ones. This is because policies get sold only ifrelationships are built. CRM solves these problems with its user-friendly,web-based CRM tools that increase sales opportunities.WHY OPT FOR CRM INSURANCE SOFTWARE?· Insurance CRM decreases the time required to make product changes· A holistic integrated customer view· Targeted marketing· Customer retention· Increased growth· Increased policy sales· Increased insurance market share· CRM Insurance integrates marketing with other operations· Efficient distribution channels are secured· CRM provides the chance to reduce operating expenses· It provides for more affective and efficient communication· It improves the response time· It increases customers satisfaction

· Insurance application queries/ claim status queries can be answeredsooner· It reduces the time that is normally taken for printing· Policy mailing time is reduced· It decreases overall costs· Aids the call centre activities· Insurance CRM guarantees lead managementINSURANCE CRM GAINSSince most insurance companies are not adequately equipped to help theiragents deal with customer centered problems CRM insurance enablesinsurance organizations to survive in a tough economic climate by using thedata the insurance company has on the existing customers and then use it toincrease the level of profitability. It manages to enhance your customerrelationships based on customer's unique requirements.A wealth of customer data is available but insurance companies donot have it readily assessable nor is it coherent. CRM insurance softwarecreates a holistic view of the customer which helps eliminate customerirritation experienced due to this, when they need to identify themselvesrepeatedly. Insurance CRM assists Customer Service Representatives whenthey are not able to properly access customer data. Having ample customerinformation on hand enables a CSR to be more confident of dealing with theclient. It removes the chance of errors.CRM enables customers themselves to do research on products,have answers to their questions etc. In addition to this policyholders orbeneficiaries can check their claim status, change their account information,submit complaints etc. Insurers find that CRM is assisting them in theirmarketing efforts as well through a comprehensive understanding of theclient base. CRM aids the insurance companies by ensuring that campaignsare more affective.Conclusion:-Max New York Life is the first company to be awarded license by IRDAafter liberalization of the insurance industry. The Company's paid up capitalis Rs. 657 crore, which is more than the norm laid down by IRDA.I think that the company has positioned itself on the quality platform and ithas developed a strong corporate governance model based on the core valuesof excellence, honesty, knowledge, caring, integrity and teamwork. Themain strategy is to establish itself as a trusted life insurance specialistthrough a quality approach to business. Their financial practices are prudentenough to ensure safety of policyholder's funds. Its primary channel ofdistribution is individual agents. As being the best in class agency

distribution model in place, the company is spearheading a major thrust intoadditional distribution channels to further grow its business. The fiveprongedstrategy to pursue alternative channels of distribution includes thefranchisee model, rural business, direct sales force involving groupinsurance and telemarketing opportunities and corporate alliances. It alsooffers a suite of flexible products.So the company has a strong distribution channel and solid strategies. It alsohas a wide range of products, which will certainly help the company to growin the near future.

BLUESUN WHITE PAPER:How CRM Has Failed InsuranceBLUESUN WHITE PAPER SERIESBLUESUN WHITE PAPER: HOW CRM HAS FAILED INSURANCE P a g e | 2© 2009 BlueSun Inc.

OverviewCRM was introduced as a tool that would improve customer service while increasing sales by maintainingall client data in a single location. The life insurance industry has been slow to adopt CRM, with many welldocumented project and ROI failures. Why has CRM had such a low take-up and why does it oftendisappoint in terms of ROI and business impact?Our analysis points to a number of reasons including:Business factors that are peculiar to the life insurance industryFunctionality requirements peculiar to the life insurance vertical that make horizontal CRM a poorfitGeneral weaknesses in typical CRM packagesThe policy-centric nature of legacy administration systems and processes

Business FactorsThere are aspects of life insurance as a business that provide major challenges for CRM to overcome.Firstly, many financial products have low service requirements. Once the life insurance businesshas been acquired, the next significant event will likely be a claim or expiration. Service thereforedoes not typically provide an ROI justifying the cost of implementing a CRM. Consequentially, thisfunction is in general provided by a servicing agent accessing multiple administration systems,possibly through a simple GUI overlay.Secondly, life insurance sales forces are typically acquisition biased. Even though it is generallywell recognized that cross selling is cheaper than acquisition and that greater product-percustomerratios result in higher persistency, there are more powerful forces at work to prevent crossselling from happening. Compensation structures and the training provided to new Producersactually encourage acquiring new customers rather than nurturing existing ones.

Thirdly, and probably most importantly, is poor data sharing up and down the distribution chain.Life insurance has a complex B2B2C distribution and service model, with multiple levels taking partin the life cycle of a customer. For CRM to be truly effective, it has to provide an informationconvergence point for all these parties to see the interactions with the end client. Since carriers,distributors and Producers use different (or no) CRM tools, there is little to no sharing. A fragmentedpicture of the end client is the result, with no-one having a view of the customer that can betrusted to be comprehensive and up-to-date.Lastly, many insurance CRM implementations focus on the distributors as the clients of theorganization without the connection to the actual sales results. This makes analysis on what worksand what does not very difficult. Many CRM implementations are confined to usage as contactmanagement systems. The scope of their impact is confined to the delivery of a semi-consolidatedview of the client (the distributor) for the wholesaling teams.

Vertical RequirementsThere are other peculiarities to insurance that challenge the typical CRM package:CRM needs to handle the complexities of the typical insurance distribution structures and translateit to correct security and data visibility. For instance, Producers must only be able to see their ownBLUESUN WHITE PAPER: HOW CRM HAS FAILED INSURANCE P a g e | 3© 2009 BlueSun Inc.clients. This is fairly straightforward, but when you layer in the multiple levels of distribution and thecomplexities of many-to-many relationships that the structure typically has, normal CRM can’thandle it. As an example, consider a client who has two Producers (sharing commission), but thedistributor must only be able to see the one Producer who has a contract with them. Or aproducer with the Producer with different licensing codes who should be able to view their entireblock of business without the need to sign in multiple times.To be effective for Carriers and Distributors, the CRM needs to give them a consolidated view oftheir Producers. Commission structures will have multiple instances of Producers reflecting themultiple contracts they may have or had with a carrier. To provide useful information to carrierwholesalers, a consolidated view of the sales activity and results of their distributors and Producersis essential to enable meaningful conversations. It also easily settles disputes on whether salestargets have been met for the purpose of sales bonuses and incentives. This works better if theProducer themselves can be directed to their own version of the report for self-service.CRM also needs to enable carriers and distributors to categorize their distributors and Producers sothey can customize communications. Typical categorizations would include productexpertise/focus, sales performance levels, channel uniqueness, regulatory environment andposition in the distribution hierarchy.Insurers need to be able to market on behalf of the Producer as Producers are predominantlyconcerned with hunting for new clients and, in any case, are very unlikely to have up-to-dateinformation on their clients as previously discussed. Carriers don’t do this effectively due to thedifficulty in communicating effectively with the client and the lack of good tools for distributing andtracking leads.CRM has limited utility unless it is connected to administration systems as this is a key visibility pointfor client activity, especially at the submissions stage. This requires systems integrator experiencedin life insurance, where the age and multiplicity of administration systems provide a majorchallenge.The CRM system needs to be very intuitive and easy to use. Typically Producers will get little or notraining, so the system has to hand-hold them and provide only what they need. CRM systemstend to be too complex to use and non-intuitive. Vendors have often responded to competitionby fighting a feature/function war, which has left packages bloated and complex.Traditional CRM doesn’t have the database structures to hold the specific information required,such as coverage or beneficiaries.

General DeficienciesThere are also general deficiencies in CRM which can cause problems with its take-up or operation:CRM depends on tracking events or activity, but sales people are notoriously bad at this as theirpayback is small. In fact they are dissuaded from doing this because the information may be usedagainst them at a future point. Sales people resent doing administration in deference to sales.CRM tends to have its own calendar functionality, when the world uses either Outlook or LotusNotes. Either you then get conflicting appointments or the pain of trying to keep diaries in

synchronization.CRM systems may operate in disconnected mode, which seems on the face of it a good thing.However, synchronization then becomes a support headache. Given the ubiquity of mobileBLUESUN WHITE PAPER: HOW CRM HAS FAILED INSURANCE P a g e | 4© 2009 BlueSun Inc.connectivity now and the fact that Producers don’t tend to take their laptops to client meetings,why do this? There is also the security problem (data has to be loaded onto the laptop) and thefact that Producers or sales people who leave can now take the information with them to transferclients.CRM doesn’t support mobile devices (e.g. Blackberry and iPhone) very well, when this is thetechnology that most Producers will be familiar with and use the most. Simplifying the interfacesand pushing information is much more effective than waiting for Producers to pull the data.CRM tends to be very passive and is not designed to drive activity or any action; it doesn’t drivemore sales. To make an impact, it needs strong calls to action, and clear links to benefits for theuser. It needs to change behavior to make a difference in sales.

SummaryInsurance companies need to understand the objectives and requirements clearly when considering CRM.Trusting that a solution will have everything ‘out-of-the-box’ rather than matching solution capabilities withrequirements can lead to costly and ineffective projects. There are unique requirements of insurance thatneed to be considered and choosing a vendor with a good track record in your industry may make themost sense.

GLOSSARYProducer: an independent sales agent who is responsible for face-to-face selling of financial products.Distributor: an intermediary sales/marketing entity who sits between the carrier and the Producer. Thiscould be a BGA, MGA, AGA or IMO.Sales Directors: Sales people internal to an insurance carrier who support sales through the channels e.g.wholesalers, inside sales people, sales directors etc.About BlueSunBlueSun Distribution Performance Management software increases the sales performance of insurancecarriers and large distributors in North America.BlueSun Inc4190 South Service RoadBurlingtonON L7L 4X51 905 333 3353info@transact-one.comwww.bluesunlife.comNotice: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronicor mechanical, without the prior written permission of BlueSun, Inc., Burlington, Ontario, Canada. This document is protected by copyrightlaw.