Customer relationship management (CRM) is an essential component of any forward-thinking broker's business. It is part of the "adapt or die" culture that has gripped the broker market in recent years. ...
Customer relationship management (CRM) is an essential component of any forward-thinking broker's business. It is part of the "adapt or die" culture that has gripped the broker market in recent years.
Although the benefits - a strong broker/ client relationship and higher retention rate - are lauded, many brokers are still holding back.
"It is difficult to assess just how many brokers, or rather intermediaries, are using CRM, as firms vary in size from a handful of people to organisations with multi-billion turnovers," says Manjit Rana, head of insurance e-business at ICL. "But generally, I would say brokers do not practice CRM for a number of reasons."
These include prohibitive costs up front, integration difficulties with regard to back-office systems, the business not being a particularly marketing-led firm and general ignorance of what CRM can achieve.
For many brokers, especially the smaller firms, CRM is an ill-defined or a vacuous catchphrase to describe the existing effort they put into their relationship with their clients. It is essentially a new buzz phrase to describe the way things have always been.
For others, it means costly technology which the software houses insist will result in all sorts of value add-ons and enhanced revenue earning potential - all of which is of course very useful when you are looking to repay the cost of installing the technology in the first place.
The right balance
Key issues for the exponents of CRM relate to the issue of intangible benefits and technology costs. It does tilt the insurance-buying paradigm away from the issue of costs towards relationships, says Rana, but the technology spend can be a real problem for brokers - it is hard to encourage a view beyond the bottom line.
But does it have to be? According to Jim Woods, business development director at Fineos UK, application service provider (ASP) services aimed at brokers, such as the Rarrigini & Rosso 24-7 initiative and Cox's Brokersure brand, can help.
"It is conceivable to expect that initiatives like these might also include the provision of CRM services in order to spread technology investment costs across a wider user base," he says.
And in the meantime, small brokers should be able to compile their own data-mining strategies using standard software packages like Excel and Access, assuming they are prepared to put in the additional hours.
But as Rana points out, all the CRM technology in the world won't secure additional business unless the organisation changes to support it.
This applies to Northumberland-based Beaver Insurance Agency in Corbridge. A small family-run firm with premium income of around £800,000 a year and a commission income of around £100,000, the suggestion of re-focusing the business to suit a CRM strategy sits uncomfortably with the firm's boss, David Orchard.
If customer relationship management is about continuously and pro-actively reviewing your client base to sell add-ons and additional policies, Orchard says it may look good on paper, but the practicalities are more onerous for small firms like his.
"We're probably all guilty of ignoring CRM but, at our end of the business, you're reacting every day without ever being pro-active. You get into the office in the morning and the phone rings, and there's post to be attended to there and then. So the great plans you had for the day get waylaid."
For him, taking CRM seriously would mean investing resources in additional staff and technology without necessarily seeing any come back. And there is little chance of companies like Beaver affording expensive data mining technology to do much of the work for them.
"At a certain level, perhaps there's merit in it (investing resources in CRM). But for me, it would mean £25,000 to come off the bottom line. I'd have to employ someone and it would take 12 months to find out if they were any good - and then it might take another 12 months to get rid of them."
Orchard believes his views are not dissimilar to those of hundreds of smaller brokers up and down the country.
Woods is not surprised, but adds that rather than leaving brokers standing still, failure to adopt CRM at some level will lead to erosion of business. "If they continue to remain product and commission-focused, they will lose out to the direct channels. The message has to sink in that, while CRM itself may not bring tangible benefits, intelligent use of the data it collages will enable them to sell more core products."
He believes that in the general insurance market it is insurers, and not brokers, who are leading the way. "Insurers in the personal lines arena are paying lip service to brokers and are developing their direct channels to handle 100% of their business in the longer term," he warns, adding that a combination of insurer telesales and internet self-service will "obliterate the small broker and make insurers more profitable".
Orchard begs to differ. He claims the selling of insurances on the web has been tried and has substantially failed. He has surfed the web and found nothing to impress and certainly nothing which he feels has the independent edge that a phone call to an insurance broker can have.
But while the smaller broker may find significant financial and resource barriers in their way, some firms, such as Wrexham-based haulage and commercial vehicle broker John Peers, appear enthusiastic.
While the firm has not introduced formal disciplines or dedicated staff, the firm's principal John Peers says he does practice CRM in the sense that client files are continually reviewed for new marketing opportunities.
"In both the areas of commercial legal expenses and directors' and officers' protection, we have written business on behalf of our existing clients," he says. "In both instances, the clients were not aware of the risks they faced without these protections."
The company has also built a website (truckinsurance.uk.com) to inform existing clients of new products and services and to introduce new clients to the firm.
"CRM gives us the opportunity to inform our clients of insurance and/or services which may be essential to their business needs," he adds.
As Woods says, brokers now need to use CRM databases creatively and to "rifle-shoot more than machine-gun."
"Once a broker has identified who the best customers are, they can analyse the data they have about them and buy in data from other sources, then spend more time selling the right things to them.
"General insurance brokers traditionally have a very high rate of customer turnover. If they lose 30% of their customer base each year, they have to find the same number of new ones to stand still. If good CRM practice reduced this rate to, say, 15%, could any broker put a value on that?"