Choosing CRM Sides
Insurance Networking News, April 1, 2009
Customer relationship management software has helped insurers get closer to their customers, but CIOs are often forced to make hard integration and cultural choices when deploying and administering these packages. Now, to add to the complexity, CIOs are being asked to decide between on-premise or on-demand offerings.
It’s more important than ever that the business understand the investment and expected return of any project. While some experts speculate that the final cost difference between the two could be about the same, the details differ.
Advertisement
For some insurers, on-premise models are worth the up-front investment because it allows them to better control their data. Others prefer to spread out the investment and put the responsibility for maintenance and uptime on a Software-as-a-Service vendor. Which is best for you?
For years customer relationship management (CRM) has been questioned, analyzed, kicked around, thrown out, redesigned, etc. Some insurers report success through CRM, while others curse the day they implemented CRM technology without processes in place.
The first wave of CRM in the 1990s and early 2000s underwhelmed, says William Band, VP and principal analyst at Cambridge, Mass.-based Forrester Research Inc. He says insurers may have thought that CRM technology was all they needed to establish successful customer relationship management. "Everybody learned that didn't work very well. They may have made big investments in CRM in the past, but now want to look at it again."
But is now the right time for another big investment? Maybe, according to Jonathan Steiman, analyst, financial services technology for the New York office of London-based Datamonitor. "Three years ago the industry was looking at great top-line growth, investment income and strong competition, so the insurer was focused on customer growth, retaining the right customers and expanding, whether it was into new markets or acquiring their competitors' customers," he says. "Now, the bigger issues are flat rates, increased catastrophes and the crushing portfolio numbers on the investment income side." Insurers find themselves weighing whether to focus on growing the top-line or improving efficiencies to make it through this period.
Steiman contends the overall sentiment among insurers is that now's the time that efficiency is crucial, and CRM should be positioned as an efficiency tool. "You want to be spending the right amount of money on the right customers. You don't want to have call center agents spending extra time verifying information or capturing data that's already been given on one channel."
Forrester's Band has recently fielded calls from insurers - mostly health insurers - about CRM. "They're all asking me the same things: What are other people doing, and who are the vendors? They are an industry that's starting to look more seriously at CRM."
THE CHOICES
On-premise and Software-as-a-Service (SaaS) models are of specific concern when looking at CRM technology. There are pros and cons that apply to both models. Forrester's Band says since SaaS CRM solutions are delivered via the Web, you don't need a lot of IT infrastructure. "It's fairly easy and quick to deploy, however, on-premise solutions are more robust, as far as functionality, specifically in relation to industry specialization."
SaaS remains attractive to smaller insurers because they don't have the up-front capital investment or the large workforce and expertise it takes to maintain the on-premise model. Conversly, large enterprises (with 5,000 or more employees) are likely less interested in SaaS for CRM, probably because they have already made significant investments in CRM.
Indeed, St. Paul, Minn.-based Securian Financial Group Inc., which made a number of attempts at CRM over the past 10 to 15 years, and in 2004 launched its on-premise CRM, is sticking with its initial investments, which includes SmartOffice from Pasadena, Calif.-based E-Z Data Inc. "We wanted to go Web-based, and we wanted to take more of the work off of our field and distribution channel, and manage it ourselves," says Patrick Kulzer, director of client development and marketing strategies at Securian.
Kulzer contends Securian's on-premise model is providing enhancements to the field and delivering value. "Right now we have something that works really well. Until we can see dramatic savings - including all of the work, time and effort - from making the change, that's not a path that we need to go down," he says, referring to SaaS.
Patrick Kulzer
Alternatively, after evaluating on-premise and SaaS models, Keenan & Associates, a Torrance, Calif-based broker, decided to go down the SaaS path. "When we were looking at CRM solutions about four years ago, we were coming from what I would consider more of a spreadsheet realm, so there were some cobbled-together access databases and the like that we were managing," says Paul Volkman, Keenan's CIO. "We only had one view of the customer, and were constantly sending information to the wrong addresses - a hodge-podge of issues." Most of the on-premise models were not able to incorporate Keenan's niche focus and products, but Salesforce.com, without a lot of insurance industry experience at the time, according to Volkman, was able to put together a SaaS model that fit virtually and succinctly the space in which Keenan plays. And it provided the mechanism it needed to look at its clients.
Looking at customers and evaluating them is the crux of CRM, no matter the model, according to Steiman. "There are customers that are costly in terms of calls into call centers, or lack of increasing their portfolio with you," he says. "And without a sound CRM strategy, you would be spending the same amount on these customers as opposed to a customer who is continually growing with you and continually improving profitability."
For more information on related topics, visit the following channels:
