Health Insurance CRM, Part 2: The BPO Catalyst
Instead of amassing huge numbers of anonymous policyholders, largely through group insurance plans, and treating them as a faceless mob, health insurance firms are finding they will need to pay much more attention to individual customers in the future. That factor has sparked an interest in the greater use of customer relationship management tools.
Part 1 of this two-part series addresses the reasons CRM has lagged in the health insurance industry and suggests that change is imminent.
"The health insurance industry, in general, is one of those sectors where there's been a reluctance to make comprehensive investments in technology compared with other sectors. Generally, the firms in the sector have been very tactical, only investing in specific areas -- basically reacting to pain points," Joanne Galimi, an analyst with Gartner, told CRM Buyer.
"Some of the resistance stems from the complexity of installing lots of modules and because it's very costly," she added.
Mergers within the industry, beneficial in gaining market share, have added to the problem. Integrating data management operations, a necessary step to fully implement CRM, has been hampered by the difficulty of meshing the different systems of the merged companies.
Recent Interest in CRM
"It's been a challenge for these companies to get a full 360-degree view of their customers and operations. Managing data is a huge task, and it's expensive and laborious," Larry Mosiman, worldwide product manager in customer intelligence at the SAS Institute, told CRM Buyer.
However, in the last three years, health insurance firms have been paying more attention to customers -- and in the last 18 months, the pace of interest in CRM within the sector has accelerated.
"We're starting to have more conversations each week with firms that are looking to catch up in CRM. They want to cut costs and better identify risks within their customer base," Rick Pro, a healthcare principal at SAS Institute, told CRM Buyer.
Insurance firms no longer can take their customer base for granted. Some employers are dropping their plans, resulting in customer attrition for the insurers. Other employers are providing more choice within their programs, including offering policies from more insurance carriers -- as well as a broader range of plans with lower premiums. As a result, observed Gartner's Galimi, insurance firms are seeking to install CRM programs that will not only attract new customers, but will also retain existing policy holders.
The shift to a more consumer-centric market has been bolstered by the rapid growth in consumer directed healthcare. As part of the managed care movement, CDH accounts were introduced in the 1990s to promote greater individual involvement by consumers in their healthcare choices, including insurance plans.
Such plans include flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs). To further promote individual participation, the Bush Administration added health savings accounts (HSAs) in 2003. By 2008, there were 30 million CDH accounts, according to an October 2009 study issued by the Aite GroupAite Group.
"There is just a lot more shopping going on both inside employer plans and in the individual market now," Kunai Pandya, a market analyst with the Aite Group, told CRM Buyer.
Vendors Emerge to Serve the Market
Health insurance firms seeking either to upgrade or initiate CRM programs have a number of options themselves for choosing software and IT providers who can meet the requirement for more intensive consumer-oriented programs.
The emergence of CDH plans "has given rise to multiple healthcare vendors providing outsourced or licensed services around the administration of CDH accounts and investing a lot of time, money and resources in building robust solutions to support the needs of financial institutions and health plans entering greenfield CDH segments," says the Aite Group study.
"Health plans and financial institutions are seeking new revenue streams by offering HSAs, HRAs and FSAs for fees and deposit revenues," the study notes, "but they do not want to make capital investments with these offerings."
As a result, vendors providing outsourced, licensed or Software as a Service (SaaS) solutions are highly attractive to health insurance firms, according to Aite.
For the study, Aite researchers analyzed the offerings and capabilities of eight vendors in terms of their expertise in CDH programs:
Metavante (now part of Fidelity National Information Services);
DST Health Solutions;
"Some of these companies are pretty big, like Metavante, and others are small. It doesn't really matter at this point how big the vendor is in terms of the quality of offerings. All of them have shown a responsiveness to the market," Pandya told CRM Buyer.
Software and service providers who cater to the CDH market need to provide special capabilities dealing with financing, regulation, administration and customer support, including account rollovers and the integration of CDH accounts with Individual Retirement Account vehicles, the Aite Group report notes.
The BPO Route: Quicker, Less Investment
Health insurance firms seeking to quickly upgrade their CRM capability would be wise to consider using business process outsourcing (BPO) firms, according to a report authored by Gartner's Galimi.
"Most health insurer CRM strategies are incomplete -- focusing on the technology rather than on member acquisition, retention and service," Galimi noted in the report.
"Economic pressure is forcing many health insurers to consider BPO for CRM initiatives that focus on business growth, including member acquisition, member retention and enhanced customer service," she added.
BPO support can help health insurance firms attract new customers by providing market segmentation and prospect data analysis, and by helping to set up telesales, telemarketing and Web sales capabilities, suggests the Gartner study.
In terms of retaining existing customers, BPO assistance can help insurance firms analyze member churn data, develop models that can show the risk exposure of existing customers, and provide outreach services such as generating appointment reminders and explanations of benefits.
Insurance firms can do a better job of supporting their customers through better data analysis and by providing handholding services such as coverage gap notices, and wellness and fitness hints. Importantly, CRM programs can provide insurance firms with feedback data that measures the effectiveness of consumer support efforts by providing retention rate scoring and ROI assessments.
Attitude Check: Value the Customer
The use of CRM technology, whether it is developed in-house or through a BPO provider, will only be effective if the insurance firms make a commitment to a truly consumer-oriented business model. Viewing the business as simply involving the generation of premium income on one side, and the processing of claims on the other, will not work in the future.
Health insurers must keep their customers in mind when outsourcing CRM processes, and assess whether these customers perceive that the process they seek to outsource is of high or low value, the Gartner study advises.
"Before health insurers begin to outsource CRM services, they have to know why they are outsourcing them. If health insurers do not explore why the organization seeks to outsource, then they will not know how their sourcing decisions align with, support and affect the organization's overall strategic business objectives," Galimi cationed in the report.
"Once health insurers determine why they want to outsource, they need to consider how their outsourcing efforts will affect their customers. This lack of vision can lead to problems for customer-facing processes and related processes that drive, or are driven by, customer interactions. Customer backlash is a challenge and pitfall that needs to be avoided," Galimi emphasized.
"Failure to accurately assess and anticipate a customer's reaction to the outsourced service is a primary issue," she concluded. "Executives in charge of sourcing decisions, marketing, sales and service need to use a customer-centric approach to plan and execute their CRM BPO decisions."