Case Studies, K. Harris Research Note 18 August 2003 Allstate: A Financial Services CRM Best Practice Allstate Insurance found success at careful planning, testing, implementation and management of customer relationship management. It exemplifies best practices in insurance and financial services. Core Topic Financial Services: Financial Services Drivers, Strategies, Direction and Vision Key Issue How will changes in technology and processes affect financial services requirements and efficiencies? Allstate Insurance is a diversified financial services organization offering a range of products including life insurance, property and casualty (P&C) insurance, savings and banking and investment products. The company has a wide and diverse distribution network, including captive insurance agents, as its major proprietary channel for life and P&C insurance products. Allstate was a customer relationship management (CRM) early adopter in the insurance market, dating back to 2000. Unlike many of its peers that hesitated to invest and build CRM strategies because of concerns about customer ownership, Allstate began a path of CRM development that the company calls "enterprise CRM" (ECRM). The development of this strategy, however, wasn't easy given the heavy reliance on insurance distribution models (for example, approximately 85 percent of its business coming through a captive-agent sales force). The company overcame challenges and embarked on a staged CRM implementation that included infrastructure modifications, an enterprise customer database, the use of analytics and business-rule-based solutions, and change management. Problem: Allstate is a multiline financial services company with an insurance heritage and widespread distribution network including proprietary and independent channels. Historically, this has contributed to problems such as channel conflict and vertical sales business unit (SBU) silos that have inhibited the ability to cross-sell and grow product penetration within households. Objective: Rather than focusing solely on customer experience, Allstate's ECRM focus was expanded to include cross-sell, retention and revenue growth. The goal was to generate quick, measurable wins and to continue to evolve and strengthen the business case for continuing investments in CRM. The company Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
believed that timely, relevant, proactive contact including service and marketing contacts would inevitably improve the customer experience, as well as drive incremental revenue growth. Approach: Strategy Allstate's strategy includes: Focusing on customer profitability optimization across marketing, sales and service. Controlling assessment and implementation of CRM projects Allstate created an ECRM testing center, the "war room," in which all solutions are tested prior to launch. The war room is also used as a communication platform for change management. In the war room, key stakeholder groups and cross-functional units are educated as to how ECRM will help solve business problems by leveraging customer information, analytics and technology. Technology Allstate's technology initiatives include: Focusing on "horizontal" infrastructure and breaking down the silos In 1988, Allstate began to assess multichannel infrastructure requirements. This phase laid the foundation for initiatives, including major data initiatives, such as the 360-degree customer profile, that would be needed for the next stages and provide leverage for sales/service treatment conditions that began in 2000. This was paired with changemanagement methodologies, including incentive realignment and reorganization to ensure project success. Combining operational, analytic and collaborative CRM to maximize effectiveness Complex back-office business rules and analytics feed the operational CRM desktops. Sales leads sourced from third-party strategic alliances, primarily through the Web, are triaged and routed to humans for follow-up and closure to sales. Integrating sales, service and marketing approaches for rules management Rules are integrated at the desktop for customer events, policy events and service events. Business rules are managed using Pegasystem's engine in specific geographical locations for financial services, banking and P&C insurance lines of business (LOBs). All LOBs use the same data logic to ensure more-targeted cross-sell for inbound and outbound customer contact. Pegasystems is the business rules engine for Allstate's "Reason to Contact" triage process. MarketSoft, which is also used, is devoted to the identification, classification, routing and tracking of sales opportunities for agents and call center personnel. 18 August 2003 2
Leveraging and integrating past e-commerce investments into lead-generation mechanisms for other channels Allstate has chosen a best-of-breed solution set because it believes that there is no one CRM suite that meets all of its needs. Different CRM technologies are used for each channel (for example, the call center and sales force) and then integrated. For example, Allstate uses multiple sales force automation technologies, including Siebel Systems in the call center and Siebel's Janna solution for distributors. The Janna solution, which has been used for several years, has been highly customized. Allstate's long-term strategy is to consider replacement of its desktop solutions to support sales productivity increases and leverage the investments made in CRM middleware and database systems. Other solutions, such as SAS's enterprise-miner and base statistical analysis system, data-extraction tools, and Xchange applications and DML from MarketSoft for lead management are used. To facilitate integration, Allstate requires vendors to support the Association for Cooperative Operations Research and Development's (ACORD's) Extensible Markup Language (XML) open standards. Organizational Collaboration/Change Management Allstate's organizational collaboration and change-management initiatives include: Focusing on partner relationship management (PRM) for agents and brokers Multiple projects focus on building distributor morale and routing sales leads based on skills. Corporate CRM/PRM efforts are also integrated with producer sales force change management, including incentives and compensation. Evolving the organization to focus more on channels (for example, proprietary and nonproprietary) rather than products. Allstate plans to evolve this to a more-customercentric model, which will allow tighter product/channel alignment with customer needs. This evolution will challenge, however, its transaction systems, which are centered on products (for example, P&C transaction-processing systems, banking and life insurance). The company has no plans to centralize transaction systems. Integration, which is in development, will occur at the front-office desktop for orderentry for all products. Vision Allstate's vision for the future includes: Creating an integrated, cross-channel and SBU sales, service and marketing experience that optimizes value to and value from the customer. 18 August 2003 3
Starting with cross-sell, then expanding over time into other aspects of customer experience. Processes Allstate's processes include: Integrating service event information with the marketing offers As a result, Allstate is now able to ask the customer about follow-up related issues regarding the service level received. This effectively "warms up" the customer for the cross-sell attempt significant gains in sales rates have been achieved in the sales force and call center channels, with the Web acting as a generator of "hot" sales leads for the other channels. Revising the process sequence Customer service is first priority; timely, relevant and proactive marketing offers based on needs is second. This sequence of events increases cross-sell rates and improves the customer experience simultaneously. Deploying sophisticated rules, algorithms and triage processes that drive incremental lift A cross-functional team of sales, service and marketing stakeholders developed rules for inbound and outbound customer contact, using sales potential as a key driver. Metrics Allstate's approach to metrics is to create cross-functional teams to define the metrics and "compliance monitoring" teams to prepare reports and update management on progress. Data/Information Allstate's approach to data and information management is to: Create an enterprise 360-degree customer view to be used throughout the company Allstate has a dedicated team that focuses on data requirements (data in database systems and data it can buy/change) that is applied to the customer interaction strategy. Use data analytics to improve CRM The company created a household relationship management system, a database system built in two years (from 1999 to 2001) to augment its customer repository. Analytics are applied to sales and marketing, especially in the front-end customer contact. Allstate uses a combination of data from its legacy systems, external sources and predictive modeling, especially for outbound customer contact. Unlike many of its peers, the company has invested heavily in analytical CRM, business rules and business process management designed to optimize customer profitability. Allstate's goal is to pair 18 August 2003 4
technology with creative knowledge workers to leverage data to augment its customer-facing business rules to improve customer experience and business productivity at the same time. Customer Experience To improve its customers' experience, Allstate believes that integrating service and marketing information/business rules in the same customer interaction, letting customers know that the company was aware of their service history, then extending a timely and relevant offer, generally creates a richer, more productive customer interaction. Results: Although Allstate continues to build and implement its ECRM strategy, the company has found positive return on investment (ROI) results from the investments made in ECRM capabilities. While the company cannot release numbers, it reports significant sales increases in addition to: Improved sales productivity by orders of magnitude in the call center and sales force as a result of cross-sell investment and deployment. To date, the company reports a 200 percent call center increase. Additionally, Allstate has successfully integrated the e-commerce channel as a generator of qualified sales leads for the sales force and call centers. Web leads close at a significantly higher rate than other lead types. Overall, Allstate reports that "hot" leads close at eight times the rate of cold leads. Creative thinking around business rules that contribute to desired metrics. Increased sales levels; the company reports a 107 percent sales force increase. Significant progress in cultural shift. CRM information capabilities have changed the way Allstate interacts with customers and several key cross-channel, cross-lob business processes. No finding yet on the impact on customer satisfaction the measurement curve is long, Allstate is evolving its analytical capabilities rapidly to support a "just In time" customer-interaction model. Critical Success Factors/Lessons Learned: Allstate found multiple critical success factors during its journey. Other insurers following a similar route should be aware of these factors: Management support Allstate's chairman, who is an ECRM evangelist, is directly involved and references the ECRM strategy in the financial markets and in the 18 August 2003 5
"Chairman's Message" section of the company's 2002 annual report. Greater support and requirements for customer-facing staff The company believes that all customer-facing individuals should be educated, inspired and evangelized. Allstate employs a vice president, ECRM effectively a "chief customer officer" whose job is to gain alignment/buy-in among channel owners, create the information-management capabilities, business rules, change-management strategy, metrics monitoring and training. Adequate incentive/compensation to promote change Allstate changed compensation in the call center, for example, to leverage its CRM investment (this has not yet been done with the independent contractor agency force). Incentives for cross-selling using the new ECRM capabilities were implemented in the call centers. Voluntary adoption of CRM within Allstate by certain groups such as independents (opt-in process drives more quality metrics). Metrics and measurement It is crucial to measure ROI at every stage to continue funding. Allstate uses a "gated" measurement cycle, getting measurements in the door before the next funding cycle begins. Integrated customer-contact strategy in sales, service and marketing designed to optimize customer profitability Creative leveraging of data in the form of integrated business rules is more important than technology. Keeping all solutions open for better integration with best-ofbreed solutions. Acronym Key ACORD CRM ECRM LOB P&C PRM ROI SBU XML Association for Cooperative Operations Research and Development customer relationship management enterprise CRM line of business property and casualty partner relationship management return on investment sales business unit Extensible Markup Language Change management and transformation leadership is crucial and, in many ways, more important than technology. Engage in business process management and design first, then deploy technology. Training, compensation and motivation/reward are fundamental. Bottom Line: By combining a variety of customer relationship management, business-process and change-management strategies, Allstate has been able to optimize its investments and better position the company for future top-line growth. 18 August 2003 6