The health insurance industry, especially in the U.S., has a long way to go before it achieves a high level of performance in the use of customer relationship management (CRM) tools. However, pressure is coming from market forces — including new government healthcare reform policies — that will compel improvements in health insurance CRM, whether insurance companies want it or not.
A new wrinkle in health insurance that is just now emerging as a major factor — and one that will be more important in the future — is Consumer Directed Healthcare (CDH), which entails a much greater degree of consumer involvement in selecting and managing their health insurance options.
There aren’t yet any reliable estimates of the value of potential CRM software and services targeting the health insurance sector. There are now well over 200-million health insurance policy holders in the U.S. — either in group or individual plans. In order to retain these customers — as well add more — insurance firms will have to improve their performance in customer relations — opening up a major market for CRM software and service providers.
In the past, health insurance companies didn’t need to cultivate and nurture policyholders. A substantial number of customers came from selling a group policy to one entity — a company — which resulted in generating hundreds or even thousands of policyholders in one transaction.
“In those days, the insurance companies just tried to land the whales so there wasn’t much focus on the individual customer or policyholder,” Steven Auerbach, president of Connextions, told CRM Buyer.
“Now the insurance providers are paying a lot more attention to individual fish,” he added.
More Emphasis on Consumer Choice
One reason for paying more attention to individual policyholders is that companies with group plans are providing more choices within those plans. When an employee chooses a low-priced plan with high deductibles and copayments, the employer shares the cost of a lower-priced plan, and that reduces fringe benefit costs.
Another reason is that some employers, as a cost-cutting measure, are dumping their healthcare plans altogether, leaving their employees to fend for themselves in the purchase of health plans. Then there are all the people who have been recently laid off. Many of them still have the ability to buy heath insurance, but they will be replacing group policies with individual plans.
“There’s just been an evolution, finally, to higher levels of consumerism in health insurance,” Kunai Pandya, a market analyst with Aite Group, told CRM Buyer. “You’re finding younger people in the low-risk category seeking only basic coverage with high deductibles and doing more shopping for policies, and the emergence of CDH accounts has been huge.”
In an October 2009 report, Pandya assessed the importance of CDH plans to the CRM market. CDH accounts were introduced in the 1990s to promote more consumer involvement in a critical part of their personal finances. In 2003, the Bush administration pushed the process along by adding health savings accounts (HSAs) to the existing repertoire of flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).
The adoption of CDH accounts has grown by an astonishing 71 percent compound annual rate in the last four years. By 2008, there were 30 million CDH insurance accounts, consisting of 6 million HSAs, 7 million HRAs and 16 million FSAs, according to the Aite Group study.
“This has given rise to multiple healthcare vendors providing outsourced or licensed services around the administration of CDH accounts,” the study notes, “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.”
In large part, the healthcare insurance sector has not fully embraced CRM to deal with conventional customers, let alone the growing wave of CDH accounts. By gaining business through group plans, insurers had little motivation to nurture individual customers.
“In general, the insurance sector did not embrace IT as quickly as other industries, including CRM,” observed Aite’s Pandya. Most IT systems adopted by the sector were related to processing policies and paying claims, without much orientation to customer relations.
Consumers Wary of Insurance Firms
“For a long time, [health insurance] was a much simpler business with a lot of manual processing,” said Rick Pro, healthcare principal at SAS Institute.
“Then, about 12 years ago, managed care began to take hold, and the insurers became more cost-conscious and aware of the benefit of automation,” he told CRM Buyer.
“In terms of CRM, the more visionary insurance firms began to show an interest maybe two or three years ago — and now, suddenly, in the last 18 months, we’ve noticed an increased interest on the part of health insurance firms to catch up in CRM,” he added.
The sector hasn’t fully exploited CRM, said Connextion’s Auerbach, but a major reason for that was inadequate or inappropriate technology.
“We found that the investments in technology may have dealt with broad consumer-related issues like billing, collections and statements, from an administrative angle, but the technology and orientation wasn’t really suited to customer contact and servicing in a true CRM context,” he explained.
Even insurance companies that have put significant effort and investments into customer contact through the Internet have come up short. The reason is more institutional than technology-based.
“We have found that there is great distrust of the insurance providers at this point,” Gartner analyst Joanne Galimi told CRM Buyer. “For example, consumers visiting an insurance Web site are reluctant to even make inquiries about a disease or injury for fear the insurance company will use the information against them in terms of increased premiums or eligibility.”
In a recent survey, Gartner found that U.S. consumers preferred to visit Web sites like WebMD instead of insurance company portals.
“Despite continued investment in Web portal functionality for consumers, healthcare insurers are not getting much return on investment (ROI),” says the Gartner report. “The evidence for the lack of consumer adoption of the healthcare insurer Web site and ROI is compelling, and healthcare insurers have the ability to respond to it in intelligent ways to meet consumer expectations.”
The health insurance sector should take a broad-based approach to CRM, the study recommends, including the use of multiple channels, (i.e. call centers, Web sites, email); greater evaluation of the effectiveness of communications; and, importantly, much greater attention and sensitivity to consumer attitudes.