Know Your Customer and Segment Accordingly
Insurance Networking News, February 1, 2009
To beat their competitors, carriers need an overarching view of their customer data to discover new marketing and cross-selling opportunities. Some insurers have started to use predictive modeling and other techniques to methodically assess customer behavior and target the right customer with the right products and services.
Insurers have been slow off the starting line to embrace customer segmentation tools and techniques. While customer profiles serve as the basis for reaping greater profits from existing clients, and for attracting new ones, only about one-third of life and P&C carriers in North America have created a single view of the customer to be used for cross-selling and service, according to a study in third-quarter 2008 by Gartner Inc., a Stamford, Conn., research firm. In fact, 14% fewer P&C firms had a comprehensive view of customers that quarter compared to the similar quarter of 2007.
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By all accounts, the customer segmentation efforts of carriers have trailed those of other industries that harbor similarly rich amounts of customer data. Banks and telecommunications firms have made strides to ascertain their customers' preferences, tastes and habits, and establish progressive customer segmentation plans and strategies, according to Raquel Pinillos, manager of the insurance practice of Daemon Quest, a consulting firm based in Spain.
Meanwhile, carriers tend to either misuse or underuse the information they have about clients. "They do not have a global vision of their client; they just have a policy vision," says Pinillos. "And that is a block to managing the client, and to having useful segmentation. It is very difficult to have customer segmentation when all of your data is not integrated to give you a vision of your client."
Plaguing insurers' attempts to effectively segment customers is the siloed business approach they frequently adopt. An insurance firm's "marketing organizations go out and do their segmentation analysis, the underwriting area does their segmentation analysis, which is obviously pointed toward risk and, unfortunately, never the two shall meet," says Mike Tracy, the sales director for SPSS Inc., a predictive analytics technology provider based in Chicago. While P&C officials fail to share client information with their life and health colleagues (or vice versa), within business lines communication also is woefully inadequate.
"Unless you have a good management structure that says 'we just have to share data across the company,' people are very protective" at carriers, explains Kimberly Harris-Ferrante, a VP and analyst with the insurance industry advisory service of Gartner Inc.
At the same time, large insurers, in particular, are saddled with bulky legacy systems and may have gone through a merger or acquisition, leaving them struggling to extract data from their ubiquitous systems (many of which have been recoded) or to quickly compare information about a client in one system with information about that client in another system. This inability to compare apples to apples hampers insurers' drive for clean data about their customers across the enterprise, which serves as the foundation for segmenting customers.
RETENTION AND ACQUISITION
Still, partly driven by tougher-and more global-competition, some insurers have begun to recognize the primacy of a customer-centric focus, says Pinillos. "Five years ago they had no interest at all in customer segmentation or even in customers," she says. European carriers especially have recognized the importance of being customer-oriented, and middle-sized insurers have been more nimble than their larger peers in accessing and utilizing their customer data.
Carriers such as New York-based MetLife have combined in-house technology and vendor strategies and solutions to better segment their customers. Behind homegrown data mining solutions and business intelligence tools from IBM Cognos, Ottawa, the insurer has achieved savings in its auto and home lines through segmenting customers for its targeted mailings. "When you know who are the right people to mail, then you spend your dollars far more wisely," says Nancy Casbarro, VP of the IT Group at MetLife and part of a unit that supports the carrier's auto and home insurance. Casbarro's unit has developed a warehouse that crosses its products and pulls together all of the information about its customers.
"We want profitable customers, and we want long-term customers," says Casbarro. "From the customer's side of it, they want a company that they can trust, and one that offers products and services that meet their everyday needs."
Nancy Casbarro
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