Survival in the politically charged and financially challenged health insurance industry will demand almost clinical attention to customer vital signs.
Paul Sanderson, who holds the key position of customer servicing manager at health insurer MBF, faces the challenge of an industry struggling with a reputation for being a poor value 'grudge purchase' for many customers.
Paradoxically, federal government incentives to drive the take-up of private health cover have delivered the practical challenge of maintaining service levels through the insurer's increasingly pressured 300-person call centre. MBF found itself operating with call volumes growing at up to 60 per cent a year within a market poorly educated about its insurance offerings.
"The health model is a political football; it's always changing, [with membership rates] going from 70 to 80 per cent in the pre-Medicare period (before 1984) to 30 per cent national membership in private cover post-1984," Sanderson said. It is now estimated that 40 to 45 per cent of the population has private health insurance.
"Underpinning this is that private health customers [feel they] aren't getting value for money.
"Our punters get six or seven bills when they go into hospital and doctors can charge [what] they like," he added. "So customer satisfaction at the end of the day just hasn't been there; private health is [seen as a] low-value, grudge purchase."
The biggest customer service issue, as Sanderson sees it, is that people don't understand MBF's products and ancillary components.
"Our goal is to help them navigate the system. We want to achieve best practice via the percentage of calls answered, through service philosophies like 'do it right the first time' and achieve first-time resolution."
These challenges, and an extensive study tour through the US and UK of customer relationship management (CRM) successes drove MBF towards a $5 million investment through systems integrater Graham Technology to build a GT-X customer-facing system for real-time service and analysis. Companies visited on the study tour were Trustee Savings Bank (TSB), Telecom Eirann and Scottish Power in the UK, and Blue Cross Blue Shield, the largest private health insurance group in the US, with a 98 per cent customer retention rate.
George Davidson, systems integration manager at MBF, describes the IT team's role in the CRM project as central, and one that was primarily driven by the requirements of the business.
"Within MBF there is no such thing as an IT project; all projects are business projects," Davidson says. "CRM is all about knowing your customer and servicing them the way they want".
"The issues raised can only be weighed, evaluated and answered by the business," he added. "While technology can facilitate the delivery of CRM functionality, the true mark of success is that the CRM solution must fulfil a business need. We were lucky to have users who had a vision of how the enterprise could present itself to the members. Without them we would have been far less focused."
"IT is an enabler for the business and, as is the case with the new CRM system, proposes the use of technology to address business needs," Davidson adds. "IT alerted the business to the possibilities presented by new technologies and helped the business define and deliver the project."
Davidson adds that the key technological challenges facing MBF's IT team was figuring out how to interface the CRM solution with the existing 'legacy' systems. Many of these systems were developed in-house 15 to 20 years ago and had been subject to extensive modification in the intervening years. The systems operate on a Fujitsu mainframe environment and an "extremely proprietary" operating system and database. The only user interface to this environment was via character-based terminals.
"MBF had previously never deployed a mission-critical system on any platform other than Fujitsu," Davidson said. "With the CRM system, we had to deploy a fairly complicated, integrated environment spanning Sun Solaris, NT on Dell, and Lucent platforms."
He acknowledges some "ground-breaking work" done by FAST (Fujitsu Australia's consulting wing), and Tibco, to provide a messaging middleware-based integration pathway into the back-end Fujitsu mainframe systems. The work of integrating the Lucent platform and Tibco middleware is claimed to be 'a world-first'.
MBF's CRM solution is built on a three-tier architecture, structured to have business rules executing outside of the mainframe, whilst using it as a data server. This design choice underpins part of MBF's future IT strategies for migrating out of the Fujitsu mainframe domain.
For Sanderson, the main hurdle was achieving staff acceptance of change analogous to stepping out of a Model T Ford and slipping into the driver's seat of a Porsche.
"Change management was critical," he says. "We made MBF's business people part of the study tour. Also, some 50 per cent of our staff had a hand in designing the [CRM] technology, the layout and scripting it. All people were kept informed of the project and given complete training and certification".
For Sanderson the 'pay off' for MBF's CRM investment is clear.
"From hurdle rates and pay-back periods, we'll achieve pay back within 18 months," he said. "There'll be a four-to-one return on investment over five years." He estimated that without the customer-facing system, MBF would have hired 100 more call centre operators at a cost of "millions" of dollars.
The benefits will accrue from getting closer to the customer and improving services levels. Davidson also identified "residual IT-specific benefits" in that the introduction of CRM has launched MBF into new technologies and implemented new integration models that are being used in other arenas.
* CRM - GT-X from Graham Technologies
* CTI (Computer Telephony Integration)
- PassageWay from Lucent Technologies/Avaya* Workforce management tools - TCS * In-house intranet - IIS from Microsoft* Corba Application Server - Interstage from Fujitsu* Messaging middleware - Tibco* PABX- Definity from Lucent/Avaya* IVR (Integrated Voice Recognition) - Conversant from Lucent/Avaya* ACD ( automated call distributor) - LucentSTEPS TO CRMSanderson's and Davidson's advice to others considering CRM:
* CRM has to be part of the ethos from the CEO down * There must be a CRM plan with vision and strategy* Clearly communicate the objectives to your team, project and IT sponsors, and in-house recipients of the solution* CRM is not just about existing customers but potential customers. The first interaction with the customer is so critical* To better understand the customer interaction, sit with the right people in the call centres and even listen in on the customer calls* Be very careful when buying functionality. For example, you can end up managing a software solution with amazing functionality; however, it needs to be supplied by vendors with a great track record for delivering the business benefits* Get out there and have a look at what the world is doing and at what's happening in Australia. Australia is not behind the world; we're leading in call centre practices and CRM strategies. Talk to the analysts and pick companies doing CRM well and visit them via the project people and the IT frontline. MBF set its project objectives by analysing case studies and documenting key learning from companies like ScottishPower in the UK and Blue Cross Blue Shield, a US health insurer with a 98 per cent customer retention rate* Never underestimate the legacy of your legacy system. MBF looked at its mainframe and thought 'that looks good', but found it needed to get down and dirty with integration work, cleaning and gathering customer data. Customer data issues added one to two months to the project implementation* Focus on the task of bringing the project to budget. MBF invested more than $5 million in the CRM system. It's a package with CTI, middleware, workforce management tools and an in-house intranet - not just a CRM engine* Co-locate your project team vendors and IT teams and put in a project director who is 'married' to the business-owner