IBM ANNOUNCES RELATIONSHIP MARKETING SOLUTION
FOR INSURANCE INDUSTRY
IBM has announced the worldwide availability of DecisionEdge* for Relationship Marketing, Insurance, a business intelligence solution for insurance companies that allows them to gain a comprehensive view of customers and helps determine how individual customer relationships can be maintained and enhanced. DecisionEdge, which applies new algorithms from IBM Research to enterprise data, is a key relationship marketing solution for insurance companies who need to integrate information across their many lines of businesses. Relationship marketing is one component of a total customer relationship management (CRM) strategy. DecisionEdge includes integrated hardware, software, consulting and services.
Two leading insurance companies -- U.S.-based Farmers Group, Inc. and Switzerland-based Winterthur Insurance -- said that they are implementing DecisionEdge for Relationship Marketing. By analyzing large volumes of claims information, DecisionEdge is helping Farmers to more accurately determine the claims risk of its customers. Winterthur will use DecisionEdge as a relationship marketing and prospecting tool to efficiently determine which customers are the most likely candidates for new or existing insurance offerings.
"DecisionEdge helps actuaries, underwriters and marketing managers to develop a customer-centric view of their business," said Virginia M. (Ginni) Rometty, general manager of IBM Global Insurance Solutions. "It allows them to see which customers are most profitable, discover unique sales opportunities that might otherwise be missed, and identify new opportunities for cross-selling. Customers also benefit because, by using DecisionEdge, insurers can provide more customized service, reduce premiums in some cases, and offer insurance products that are more likely to suit customers' needs."
DecisionEdge enables insurers to gather, manage and analyze customer and transaction data for the purpose of turning that data into useful information. The information can then be distributed throughout an enterprise and used to drive strategies.
"Faced with the fact that customers are letting their policies lapse at rates as high as 35 percent, insurance companies are using business intelligence solutions to enhance customer loyalty," said Ben Barnes, general manager, IBM Global Business Intelligence Solutions.
In an initial project with DecisionEdge, Farmers found that covering a certain type of high-risk sports car had become quite profitable -- provided the owner also had at least one other vehicle. This revelation will enable Farmers to price the sports car’s coverage more affordably, yet still earn targeted margins.
"If we're not looking for ways to better price and segment our markets, we could be left behind," said Melissa McBratney, vice president of business development, Farmers Group, Inc. "We can uncover subtle trends more quickly, and act in time to stem losses or capitalize on lucrative opportunities as they occur. More precise segmentation can facilitate better rate setting as well."
Winterthur Insurance, one of Europe's leading insurers and one of the ten largest internationally-operating insurance groups, aims to increase market share using DecisionEdge, by scanning data on thousands of existing and potential customers to find the perfect match for specific insurance products, significantly increasing the likelihood of a purchase.
"In the past, our direct marketing activity was limited to basic, large-scale mailing programs," said Jean-Marie Schmid, Winterthur project manager. "DecisionEdge gives us the flexibility to define and execute more sophisticated, simultaneous campaigns with promotions tailored to specific groups of customers. We aim to double our campaign response rates while cutting direct mail costs 50 percent."
In Winterthur’s multi-million dollar project, IBM is providing everything from development, building and management of a new data warehouse to integrated campaign management software. DecisionEdge also allows Winterthur to have a single, comprehensive view of its customers and their purchasing histories.
The DecisionEdge solution offering includes the following key elements:
DecisionEdge for Relationship Marketing is also built on open standards, so it can be used with a variety of third-party analysis tools.
Insurers typically know relatively little about their customers as individuals, according to Professor Merlin Stone of the UK's Surrey European Management School (Sems), University of Surrey, who has written a series of reports on managing customer relationships ("Close to the Customer," Policy Publications, Bedford, UK).
"This explains why customers generally do not buy more than one product from insurers," Professor Stone said. "When they do buy more than one product, the customer’s decision is usually based on features and price, rather than successful targeting. In addition, the second purchase most often is made through a different channel of distribution than the first."
Farmers, the third-largest underwriter of both auto and homeowners' coverage in the U.S., has 9.9 million auto and 5.1 million homeowners' policies in force in the American West, Midwest and Southeast. Farmers' annual premiums for 1998 totaled more than $10 billion.
Together with the bank subsidiaries of Credit Suisse Group, Winterthur Insurance is one of the world's leading integrated financial services companies. Winterthur offers private and corporate customers tailor-made insurance and pension solutions at the local and international level, and is among the world's leading insurers of multinational corporations. As a reinsurer, Winterthur focuses on selected market and customer segments. The company, which has been in business for 123 years, employs more than 28,000 people in 30 countries.
DecisionEdge for Relationship Marketing, Insurance is available now worldwide. For more information about this solution, visit IBM's insurance industry Web site at http://www.insurance.ibm.com or IBM's business intelligence Web site at http://www.ibm.com/bi