1.

1 INTRODUCTION

The Customer Relationship Management (CRM) literature recognizes the

long-run value of potential and current customers. Increased revenues, profits,

and shareholder value are the result of marketing activities directed toward

developing, maintaining, and enhancing successful company customer

relationships. These activities require an in-depth understanding of the

underlying sources of value that the firm both derives from customers, as well as

delivers to customers. CRM principles provide a strategic and tactical focus for

identifying and realizing sources of value for the customer and the firm and can

guide five key organizational processes: making strategic choices, creating value

for customers, customer acquisition, customer retention, service quality and

loyalty or rewards programme.

1.2 DEFINITIONS OF CUSTOMER RELATIONSHIP MANAGEMENT

The various definitions by the pundits of CRM show how the CRM

paradigm is being interpreted and explained. We reproduce below some of these

definitions:

Customer Relationship Management (CRM)1 is a business strategy to

select and mange customers to optimize long-term value. CRM requires a

1
Official Definition of CRM by the CRMGrur.com website
 2

customer –centric philosophy and culture to support effective marketing, sales

and service processes. CRM applications can enable effective customer

relationship management, provided that an enterprise has the right leadership,

strategy, and culture.

CRM2 extends the concept of selling from a discrete act performed by a

salesperson to a continual process involving every person in the company. It is

the art/science of gathering and using information about your customers to build

customer loyalty and increase customer value. With the current state of

information technology, and high customer service expectations, it’s practically

impossible to consider these process issues without addressing technology, but

it’s important to remember that customer relationships-human relationship- are

the ultimate driving force.

CRM3 is about developing and implementing business strategies and

supporting technologies that close the gaps between an organization’s current

and potential performance in customer acquisition, growth, and retention. What

does it do for an organization? CRM Improves Return on Assets. The asset in

this case is the customer and potential customer base.

2
Larry Tuck, Editor, Sales and Marketing Management Magazine
3
Martin Brendle, CRM Talk Expert
 3

A close look at the definitions reveals that the business strategy, business

process and technology are the common factors. CRM illustrates the changing

role that information technology is increasingly assuming in the world of

business and the global economy at large. The use of technology is steadily

shifting away from its past focus on the products and services and the efficiency

gains they offer. Rather, organizations are perceiving technology as a merging of

products and services that seamlessly enable new approaches to business

activities and redefine how people work and interact with each other. In the

future we can expect to see less clearly defined distinctions between what we

today consider ‘products’ and ‘services’.

The idea behind customer relationship management is to have a single,

enterprise view of the customer for the purpose of cultivating high –quality

relationship that lead to improved loyalty and profits. This means being able to

identify all the products, services, and intermediary relationship that customers

have with the organization, as well as knowing all the interactions that have

taken place between the customer and the company since the start of the

relationship. It means being able to maintain consistency of experience for the

customer through all forms of interaction (such as inquiry, order, delivery, and

service). The distinguishing feature of modern CRM is the emphasis on an

enterprise view of the customer, not simply a departmental view.

 4

1.3 ORIGINS IN CUSTOMER RELATIONSHIP MARKETING

The foundation for the development of CRM is generally considered to be

relationship marketing, defined as marketing activities that attract, maintain, and

enhance customer relationships4. Gronroos (1990)5 argues for the importance of

relationship in the marketing context. He proposes a definition for marketing,

namely, that marketing is “to establish, maintain and enhance relationship with

consumers and other partners, so that the objectives of the parties involved are

met. This is achieved by a mutual exchange and fulfillment of promises”.

However, although the terms “CRM” and “Relationship marketing” are relatively

new, the phenomenon6. Marketers have always been preoccupied with defensive

strategies aimed at increasing customer retention, thereby increasing revenues

and profitability7. For example, writing in the Harvard Business Review, Grant

4
Berry, Leonard L. (1983) “Relationship Marketing”, In Emerging in Perspectives
on Services Marketing, ed. Leonard L.Berry G.Lynn Shostack, and Gregory Upah,
pp. 25 – 28 Chicago: American Marketing Association.
5
Gronroos, Christain, (1990) Service Management and marketing: Managing the
Moments of Truth in Service Competition Free Press/ Lexington Books,
Lexington, MA.
6
Gummesson, (2002) Total Relationship Marketing: Marketing strategy Moving
from the 4ps – Product, Price, Promotion, Place – of Traditional Marketing
Management to the 30RS- The Thirty Relationship of a New Marketing Paradigm
2nd Edition, Oxford: Butterworth – Heinemann/Elseviwer.
7
Fornell, Claes, and Biger Wernerfelt (1987) “Defensive Marketing Strategy by
Customer Complaint Management: A Theoretical Analysis, Journal of Marketing
Research, 24, (November), pp.337-346.
 5

and Schlesinger8 argue that the gap between organization’s current and full-

potential profitability is enormous, and suggest that managers ask themselves:

“How long on average do you customers remain with the company? (and) what if

they remained customers for life? During the same time period, a growing

literature has focused on the “service profit chain” linking employee satisfaction,

customer satisfaction, loyalty, and profitability9.

1.4 STRATEGIC CHOICES

In a recent executive roundtable discussion, executive from IBM, Yellow-

Roadway, Luxottica Retail, Mckinsey & Company and Cisco Systems stated that

there were immense opportunities for the transformation of organization through

the integration of business processes and the use of technology to generate

competitive advantage, cost saving efficiencies and an enhanced customer

experience. Executive in Europe and North America strongly believe that

8
Grant, Alan W.H. and Leonard A. Schlesinger, (1995), “Realize Your Customer’
Full Profit Potential”, Harvard Business Review, 73 (5), pp.59-72.
9
Heskett, James L. W. Earl Sasser, and Leonard A.Schlesigner, (1997), The
Service Profit Chain: How Leading Complies Link Profit and Growth to Loyalty,
Satisfaction and Value. New York: Free Press.

Reichheld, Frederick F. (1993) “Loyalty Based Management” Harvard Business

Review, Vol.71, No.(2), pp.64.73.

Liljandar, Veronica, (2000) “The Importance of Internal Relationship Marketing

for External Relationship Success”, In Relationship Marketing: Gaining
Competitive Advantage through Customer Satisfaction and Customer Retention,
ed. Thorsten Hennig – Thurau and Ursula Hansen, pp. 159- 192.
 6

successful organizations require a cross – functional process – oriented approach

that positions CRM at a strategic level10. This notion is consistent with empirical

evidence showing that firms’ prior strategic commitments (as opposed to their

general market orientation) have impressive effects on the performance of their

CRM investments in a retailing context11.

1.5 CREATING VALUE FOR CUSTOMERS

A common trait of many studies is a focus on measuring CRM’s impact

on the end results, such as profits and shareholders value, without studying the

relations among processes and connections among variables12. Return on

investment is certainly a measure of success, but – without a profound

understanding of how relational processes can operate effectively – success from

CRM initiatives is elusive. Although the specifics will be unique to each firm,

10
Brown Stephen W. (2005) “When Executive Speak We Should Listen and Act
Differently”, Journal of Marketing, Vol.69, No.4, pp.1- 4.

Christopher, Martin, Adrian Payne, and David Ballantyne (1991) Relationship

Marketing: Brining Quality, Customer Service and Marketing Together, Oxford:
Butterworth – Heinemann.

Payne, Adrian, and Pennie Frow (2005), “A Strategic Framework for Customer
Relationship Management”, Journal of Marketing, Vol.69, No.4, pp. 167-176.
11
Srinivasan, Raji, and Christine Moorman, (2005) “Strategic Firm Commitment
and Rewards to Customer Relationship Management in Online Retailing”,
Journal of Marketing, Vol.69, No.4, pp.193-199.
12
Boulding, William, Richard Stelin, Michael Ehret, and Wesley J.Johnson (2005)
“A CRM Roadmap: What We Know, Potential Pitfalls, and Where to go”,
Journal of Marketing, Vol.69, No.4, pp.155–166.
 7

prior research provides a conceptual framework for understanding how relational

processes create value for customers. Specifically, research on the antecedents of

service quality, customer satisfaction, trust, and commitment provide insights for

managers13.

1.6 CUSTOMER ACQUISITION

Customer acquisition is a first step in building a customer base. Targeting,

acquiring, and keeping the “right” customers entails a consideration of fit with

current from offering, future profitability, and contribution to the overall business

risk. Many firms do not employ appropriate criteria to identify profitable

customers and their marketing programs are broadly communicated to potential

customers who may or may not be profitable. Consequently, customer

acquisition can be a costly and risky process – especially because new customers

may not represent a good fit for the organization’s value proportion, a

phenomenon that can often occur if acquisition is done outside previously

targeted segments. Customer – product fit becomes important because campaigns

aimed toward new customers – that change the positioning of a product – can

13
Berger, Paul F., Ruth N. Bolton, Douglas Bowman, Elten Briggs, V.Kumar,
A.Parasuraman, and Creed Terry (2002), “Marketing Assets and the Value of
Customer Assets, A Framework for Customer Asset Management”, Journal of
Service Research, Vol.5, No.1, pp. 39–54.
 8

alienate existing customers. Mittal and Kamakura14 discuss the nature of the

relationship (or fit) of the customer and the brand, finding that customers with

different characteristics have different satisfaction thresholds, and, therefore,

different probabilities of repurchase. This leads to the more general observation

that customer acquisition influences the diversity of the customer portfolio-

thereby influencing business risk- but this aspect of CRM is rarely studied in

marketing15.

Lack of focus during acquisition activities is very likely to result in

adverse selection whereby the prospects that are least likely to be profitable are

mostly likely to respond to marketing efforts. For credit companies, the problem

is particularly worrisome because they must verity the suitability of all

respondents, thus incurring screening costs. Cao and Gruca16 address the problem

of adverse selection by using data from a firm’s CRM system to target prospects

likely to respond and be approved. This approach increases the number of

customers who are approved while reducing the number of ‘bad’ customers.

14
Mittal, Vikas, and Wagner A.Kamakura (2001) “Satisfaction, Repurchase
Internet, and Repurchase Behavior, Investigating the Moderating Effect of
Customer Characteristics”, Journal of Marketing, Vol.38, No.1, pp.131-142
15
Johson, and Salnes (2005) “Diversifying Your Customer Portfolio”, MIT Sloan
Management Review (Spring 2005), pp. 11- 14.
16
Cao, Young and Tomas S.Gruca, (2005), “Reducing Adverse Selection through
Customer Relationship Management, “Journal of Marketing, Vol.69, No.4, pp.
219- 229.
 9

Their analysis is post facto and the marketing message is not altered. But their

results show 30 per cent to 75 per cent improvements compared to traditional

models that take into account either response likelihood or approval likelihood

but not both. This method can be extended to new customer acquisition and

better targeting of costly promotions to migrate customers to higher levels of

lifetime value.

1.6.1 Customer Retention

Even though the optimal mix of marketing programs is unique to each

business model, customer retention is often easier and cheaper than customer

acquisition, especially in stable markets with low growth rates. An organizational

emphasis on customer retention also makes sense when discount rates are low17.

Hence, customer retention has received considerable attention from marketers. In

fact, many organizations have considered the management of CLV as equivalent

to the management of customer retention, and have ignored the contribution of

other sources of CLV. Research confirms that consumers with higher satisfaction

levels and better price perceptions have longer relationships with firms. In a B2B

context, suppliers who have long-term relationships with customers are able to

achieve significance sales growth and higher profitability through differential

17
Gupta, Sunil, and Donald R. Lehmann, (2005) Managing Customers as
Investments, The Strategic Value of Customers in the Long Run, Upper Saddle
River, NJ: Wharton School Publishing.
 10

reductions in discretionary expenses18. However, customer retention and

defection are complex process19.

1.7 SERVICE QUALITY

The marketing literature has linked service quality to profitability in six

ways: as a mediator of key service attributes (e.g. responsiveness), through direct

effects of service quality on profitability offensive effects, defensive effects,

links between perceived service quality and purchase intentions, and via

customer and segment profitability. Zeithaml20 provides an excellent summary of

this vast literature, so we do not review it in this chapter. In an early paper, Rust,

Zahorik, and Keiningham21 provide a framework for evaluating service quality

improvements. They illustrate its application and show how it is possible to

spend too much (or too little) on quality. Subsequently, Rust, Moorman, and

18
Kalwani, Manohar U., and Narakesari Narayandas, (1995) “Long – Term
Manufacture Supplier Relationship: Do They Pay Off for Supplier Firms?”
Journal of Marketing, Vol.59, No.1, pp. 1 – 16.
19
Akerlund, Helena, (2005), “Fading Customer Relationships in Professional
Services”, Managing Service Quality, Vol.15, No.2, pp. 156- 171.
20
Zeithamal, Valarie A (1999) “Service Quality, Profitability and the Economic
Worth of Customers: What we Know and What we Need to Learn”, Journal of the
Academy of Marketing Science, Vol.28, no.1, pp. 67- 85.
21
Rust, Roland, T. Anthony, J. Zahorik, and Timothy, L. Keiningham, (1995),
“Return on Quality (ROQ): Making Service Quality Financially Accountable”,
Journal of Marketing, Vol.59, No.2, pp.58-70.
 11

Dickson22 consider how financial returns from quality improvement arise from

revenue expansion, cost reduction or both. On the basis of their empirical work,

they conclude that firms that adopt primarily a revenue expansion emphasis

perform better than firms that adopt a cost reduction emphasis or a combination

strategy.

1.8 EVOLUTION OF CUSTOMER RELATIONSHIP MARKETING

One of the important marketing tools in the developed countries is

relationship marketing. The customer relationship marketing is a comprehensive

approach for creating, maintaining and expanding relationship with the

customers. It has emerged as one of the most widely prescribed solutions for

diminishing market share and sluggish growth of many industries in general and

banking and financial sector in particular. The customer relationship

management is a simple philosophy, which places the customer at the heart of the

business processes, activities and cultures for improving customer satisfaction

and maximizing profits. In one of the encompassing definitions, customer

relationship management is described as “the establishment, development,

maintenance and optimization of long term, mutually- valuable relationship

22
Rust Roland T. Christine Moorman and Peter R. Dickson (2002), “Getting Return
on Quality : Revenue Expansion, Cost Reduction, or Both?” Journal of
Marketing, 66 (4), pp.7-24.
 12

between the customers and the organization”. It is a comprehensive approach for

creating, maintaining and expending relationship with the customers.

The concept of customer relationship management is very important to

the insurance sector. The essence of the business has been described by Mr. Peter

drucker as “the purpose of the business is to attract and retain a good customer”.

Good customer service is the best brand ambassador for any insurance. The

entire business process consists of highly integrated efforts to discover, create,

arouse and satisfy customer’s needs. The modern business has realized it and is

making all out efforts to become ‘customer-centric’ across the globe. Hence, the

customer relationship management is not a once-for-all affair but a continuous

process. It is the integral approach of dealing with customers by deploying the

advanced information technology.

The customer relationship management is the information technology face

of the business process that aims to establish enduring the mutually – beneficial

relationship with customers in order to drive customer retention, value and

profitability. It is meant for a common and equal good of the two stakeholders,

businesses and their customers. It calls for capturing pertinent data about the

prospective and current customers in respect of their buying pattern, shopping

behavoiur and usage habits. Using these data designing and providing services as

per the needs of the customer has become the focal point of customer
 13

relationship management. So, the customer relationship management is a tool for

delivering a variety of marketing dreams such as:

- To target and serve customers on an individual basis, it permits one to one

marketing as opposed to mass marketing.

- It helps in establishing durable relationship with customers.

- It is to dis-intermediarize channels of the wasteful barriers and distortions.

- It helps in reducing marketing cost progressively.

1.9 INSURANCE INDUSTRY IN INDIA

The insurance sector, once the domain of state-run insurance companies

was thrown open to private enterprises on December 7th, 1999, with introduction

of the IRDA (Insurance Regulatory and Development Authority) Bill. The

business of insurance is not new to India; it has been around for over a century.

The opening ip of the sector gave way to the world known names in the industry

to enter the Indian market through tie-ups with the eminent business houses.

What was once a quite business is becoming one of the hottest businesses today.

In a span of less than a decade, a dozen insurance companies have set

shops in India. The FDI in insurance is currently 26 percent. The reason for

increase in FDI from 26 percent to 42 percent is that the initial expense of setting
 14

up the business and processes will require a greater amount of capital, which the

foreign equity investors is more than capable to provide.

With just an estimated 8 percent of the Indian population having

insurance policies and most of them underinsured, the life insurance companies

see a double-digit growth in the forthcoming years23.

Key market players

Life Insurance Corporation of India still leads the market in terms of new

premium income. ICICI Prudential Life Insurance leads in a market share among

the private players.

23
The Hindu : Business Line, “Insurance Service”, - A Business Line Feature,
September 2003.
 15

TABLE: 1.1

INSURANCE INDUSTRY IN INDIA AND KEY MARKET PLAYERS

Sl.No. Company Market Share

01. LIC 92.03

02. ICICI Prudential 2.96

03. Birla Sunlife 1.21

04. HDFC Standard 1.08

05. Max New York 0.62

06. SBI Life 0.59

07. Tata AIG 0.48

08. Allianz Bajaj 0.44

09. OM Kotak 0.25

10. ING Vysya 0.14

11. AVIVA 0.10

12. MetLife 0.05

13. Reliance Capital-AMP Sanmar 0.04

14. Sriram insurance N.A

*N.A – Not Available as it is a latest entrant.

Competition is not in terms of the insurance product designed. The only

differentiation is the quality of the life advisors and the level of service that is

offered to the customers at each point of contact.

 16

Insurance Products

Insurance is now treated as a protection – cum – savings product rather

than a tool for tax savings. The private players have introduced unit-linked

products, which are aligned to market returns. Today along with the traditional

whole life insurance, the consumer also has a choice of term, group, child

endowment, and pension products from the basket available with the public and

private players.

Today, the focus of the insurance companies is need-based selling of

insurance products, which reflects important life events such as children’s

education, marriages , death, disability, critical illness and retirement plan.

Distribution – on Meeting Customers

A potential buyer of a life policy needs answers to a few questions:

• Do I really need a life policy?

• How much should I insure my life for?

• What solutions are available that suits my needs and my wallet?

These questions, if answered convincingly can ensure sale. It is the

intermediary who has to do all of this. The insurance agent concept still

continues to be popular with the players but they are also distributing their
 17

insurance products through the corporate agency channel, bancasuranace and

brokers.

As per the rules prescribed by IRDA, 100 hrs training for all the channels

of distribution is mandatory, so as to bring professionalism of insurance selling

in India. As far as bancasurance is concerned, IRDA has stipulated that a

particular bank can distribute the products of only one life and one non-life

insurance company.

1.10 NEED FOR CUSTOMER RELATIONSHIP MANAGEMENT IN

THE INSURANCE INDUSTRY

The important factors that establish the need for the customer relationship

management in the insurance industry are detailed below:

Intensive Competition

There is intense competition among the private sector insurance, public

sector insurance and foreign insurance and they are all taking steps to attract and

retain the customers. New technologies, research facilities, globalization of

services, the flood of new products and the concept of all the facilities under one

roof to provide better customer service leading to customer delight have come

today.
 18

Well Informed Customers

The customers in the insurance industry today are well informed. With the

introduction of new technology, the world has become a small village. Thus, if a

insurance company wants to have more customers, it should develop a good

relationship with its present customers and try to maintain the same in the future

also.

Decline in Brand Loyalty

In the present scenario, brand loyalty is on the decline. The customers are

switching over frequently to avail the better facilities from other insurance

company. Newer and superior products and services are being introduced

continuously in the market. Thus, the insurance companies have to upgrade their

products, improve customer service and create bonds of trusts through proper

care of customer needs and regular communications. With the help of the

customer relationship management, strong customer loyalty and a good image

for the organization can be developed.

Improved Customer Retention

In the intensely competitive insurance industry, retention of existing

customer is vital, which can be achieved through the process of the customer

relationship management.
 19

1.11 CUSTOMER RELATIONSHIP MANAGEMENT IN LIC

In case of life insurance the market is more premium based and the profits

margins are high. There is lot of scope for product innovation and these days the

products are getting customized based on the customer liking and need. The

customers themselves have become demanding and exceedingly fickle in making

final decision. In order to arrive a standard strategy to target customers life

insurance companies have started employing tactics of direct is selling,

combinational sales, remote selling using various media. However personalized

approach in case of life is still the most popular one.

Also in the case of Life insurance the premiums are generally renewed for

the long –term basis and hence the customer is likely to stay for a longer

timeframe. The approach of CRM in this context is to have a more sustainable

advantage against the competition and then concentrate towards acquiring newer

customers.

Another noticeable difference is in the customer touch point. The life

insurance companies have more or stable process for arriving at the mutual

benefits, policy administration, granting claims or managing complaints. The

factors for making decisions are fairly simple and chances of variables going

awry are rare. Therefore front office applications are less complex and the data
 20

collection is also standardized. Therefore CRM implementation in life insurance

can be extremely effective if done in the right way.

Premiums are High Compared to Non-Life: CRM can be used to

effectively counter the extra premium points that bother the customer and make

the policy more customers friendly.

Market is Huge: CRM has a role to segment the market into various

customer profiles and target the right customer segment with the right kind of

policies. This would be in mutual benefit of customer as well as the company.

Claims are few but of large value: claims management is one of key

areas where customer dissatisfaction is high. Customers are changing the

companies’ just because of the long process involved in it claim settlement.

CRM has a high role to play in terms of minimizing delays and making effective

use of acquired information for quick settlement. In turn maintaining the

customer retention easy

Product Innovation: Customers have become more market savvy and

already looking for newer products. So whenever they find a product suiting their

need they shift. Life insurance companies have to be vigilant in this regards have

to effective address the concerns of the customer proactively. They need to

constantly innovate and provide value added service to the customers. CRM

would be providing the framework make it more effective.

 21

Retention of Sales Force: This is primarily important in case of Life

insurance as the personalized touch and the customer contact in through the sales

agents. These hold the key in acquiring the large customer base on the basis of

word-of-mouth. Life insurance companies have to effectively implement CRM to

address the internal customer’s problems which in turn satisfy them to give more

business.

1.12 CRM EFFECTIVENESS IN INSURANCE PROCESSES

Integration of policy administration system and CRM implementation

would be useful for understanding the front office process management.

Customer –Centric Approach

The element of focus is the end-customer, not policies. The CRM

implementations need to associate all the relevant information, including owned

policies to the customer. With access to complete customer information,

including customer demographics, annotations and a complete product portfolio,

one can have the additional ability to identify and advance cross –selling

opportunities, customer life stage events and expiration data tracking (i.e. x-

dating). As a result of its customer – centric design, insurers can either use the

solutions inherent to customer management capabilities, or connect with another

CRM solutions of their choice.

 22

Strategy Enabling

The CRM architecture should help in perpetually evolving the business

functionality and implementing digital innovation to support key strategies.

Business and CRM should work in unison to continually and incrementally

provide added value without undertaking lengthy and costly projects for every

change. This capability is essential to enabling rapid time to market for new

policies, for adapting to new business rules and for the spontaneous capture of

additional customer and risk data.

Customer Relationship Management

Customer –centric would allow a comprehensive and complete data view

of all customer information allowing for complete portfolio selling and

management. For example, when viewing a customer, agents or representative

can see at a glance if an auto customer does not have homeowner insurance, if a

homeowner’s insurance customer also has life insurance polices, or whether a

small commercial customer might be a good prospect for your new medical

policy. You can also relate customers to specific associations or other groups to

manage special marketing campaigns, as well as document relevant contacts of

an account for communication purposes.

 23

Operationally Efficient Policy Processing

With streamlined policy processing achieved through reduced paper,

workflow management and shorter processing times for new business and

changes, CRM solutions would offer a cost efficient means for managing an

insurer’s business. The system follows user configurable business process

definitions in automatically performing the right activities for each type of policy

at each stage of its lifecycle. And real-time processing of all transactions means

no more waiting for overnight batch cycles and time-consuming follow-ups.

Security ad Authority Controls

CRM integration would implement certain security measure as well. One

can have different profiles and privileges to administrators’ soc each works

within their authority limits for binding and transaction processing, and

automatic task management efficiently handles escalation for approvals when

required. Producer, and internal user, access to specific customers and policies

can also be controlled.

Advantages of Integration are Many

1. New business based on the existing customer information.

2. Allowing exploring rate differences for coverage, limit and deducible

options one can get the scenario analysis in making the rates / quotes more

effective for conversion into a policy.

 24

3. Mid –term changes can be put in place.

4. Provision for multi – view reports

5. Renewals are made easy

6. Underwriting is effective and more streamlined.

Technical hurdles:

Some of technical hurdles one has to address are mainly in the areas of

product configuration and understanding the implicit needs of the customer.

1. The policies govern only the explicit portion in their documentation.

2. The customer centric though possible may not easy considering the legacy

systems in place.

3. Data availability is scarce and the sales team is concentrating on business

first and data later approach.

4. Even the multi-channel multi-tiered systems may be tedious to handle at

the beginning of life cycle.

 25

Practical ways to tackle these hurdles

1. Bring in training and customer focus within the organization.

2. Implementation challenges need to be brainstormed at various forums and

need of the hour is to arrive at an effective strategy and no a complex

system.

3. Policy foundation needs to questioned and the underwriting process

problems need to be addressed with due care.

4. Explore options for customer contacts and also bring in the customer

closer to the organization rather then keep away.

1.13 STATEMENT OF THE PROBLEM

Relationship marketing is the process of building long term mutually

beneficial relationship with customers. The financial institutions in the developed

countries are using this marketing tool very effectively by taking full advantage

of information and communication technologies.

Life insurance corporation which was operating in a bureaucratic style prior

to 1991 had to undergo large scale transformation with the opening up of the

economy. The sector has been facing the unprecedented challenges with the

wave of liberalization, privatization and globalization of theIndian economy. The

LIC in India are under intense pressure in today’s volatile market place. Steep
 26

competition, globalization, growing customer demands are forcing the LIC find

new ways of improving profitability. On the other hand cost- cutting measures

have forced LIC to manage operations with a few customer relationship

managers and product specialists. Industry consolidation also posses fresh

challenges to this sector.

Even today, LIC in India rely on the legacy of customer information

system. In such a scenario, it is difficult to have a complete customer view across

divisions. They face unprecedented challenges to sustain their growth path for

survival. The challenges include customer retention, reduction of transaction

costs, risk management and regulation compliance.

The strategic tool that was chosen to face these challenges was

information technology. Most of the insurance sectors went through adoption of

various stages and forms of information technology over the years and the

process is still continuing. The rapid growth in information technology and its

potential serve the customers in a new way awakened the marketers and enabled

them to transform these challenges into new opportunities. Under these

circumstances, customer satisfaction became an important aspect of the business.

The search for new strategies began to meet not only the high expectations of

policy holders but the need to retain them. The competitive world witnessed

many insurance sectors participating in the race to optimize their profits. It

 27

increased the pressure leading to the adoption of advanced technology and better

skilled work force. Therefore, business model changed from insurance sector –

centric approach to customer –centric approach. The customer became not only

an essential but also the most important part of the business.

In the service sector the Insurance services are the backbone. In insurance

services, LIC is the most important segment. This is so, because LIC catalyst and

life of customer. It is an integral part of all the businesses and social activities.

This rapid transformation of services in the insurance system has led to the

evolution of a highly competitive and complex market, where there is a

continuous refinement of services. Hence the increased role of LIC in India’s

economic development on the one hand and the changes in the business climate

on the other hand has put increased pressure on them. These changes are

compelling the banks to recognize themselves in order to cope with the present

conditions. Hence they even try to provide services at the customers place itself.

As the insurance sectors are trying to provide all the services at the

customers doorstep, the customer has become the focal point either to develop or

maintain stability in the business. Every engagement with the customer is an

opportunity to either develop or destroy a customer’s faith in the LIC the

expectations of the customer’s have also increased many folds. Intense

competition among the insurance sector has refined and has redefined the
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concept of the entire insurance system. The insurance sectors are looking for new

ways not only to attract but also to retain the customer and gain competitive

advantage over their competitors. Every insurance industry like other business

organizations is deploying innovative sales techniques and advanced marketing

tools to gain supremacy.

Therefore a study on the customer relationship management practices in

the insurance industry is need to explore the benefits of the customer relationship

management practices in the insurance industry, perceptions as well as the level

of acceptance of the customer relationship management by the insurance and the

factors which discriminate the various aspects of the customer relationship

management and their outcomes in the private and the public sector banks. These

aspects have not been explored so far in the district of Sivagangai. Hence the

present study is making an attempt in this direction to solve the stated problem.

1.14 OBJECTIVES OF THE STUDY

The specific objectives of the study are

1. To discuses the demographic profile of the selected (customers)

respondents and its relationship with level of utilization of services of
LIC.

2. To study the perception of service quality dimensions

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3. To identify and analyze the factors which influence the service quality of
LIC.

4. To examine the gap between expectations and perception on service

quality of LIC.

5. To study the customers perception on factors influencing customer

relationship management

6. To ascertain the perception of LIC employees on impact and benefits of

CRM

7. To offer suitable suggestions for improving the CRM in LIC.

1.15 HYPOTHESES OF THE STUDY

To give a specific focus to the objectives, a few hypotheses have been

formed to be tested by using appropriate statistical tools. They are

1. The level of utilization of policyholders is independent of age, sex, marital

status, education, family size and occupation.

2. The awareness and income of the policyholders do not influence the level
of utilization of services of LIC.

3. There is no significant relationship between tangibility and customer

satisfaction.

4. There is no significant relationship between reliability and customers

satisfaction
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5. Responsiveness will have significant impact on customers satisfaction

6. Assurance will have significant impact on customers satisfaction

7. Empathy will have significant impact on customers satisfaction

8. Convenience will have significant impact on customers’ satisfaction

9. There is no association between demographic variables and service quality

perception of CRM.

1.16 LIMITATIONS

The present study is confined to cross-section data collected from the

insurers of LIC in Sivagangai district during 2014-15. Thus, the results and

findings can be generalised only to certain extent. Some respondents were neither

motivated nor interested in expressing their perception about CRM in LIC.

Potential limitation is related to the measurement of behaviour loyalty. The

variables of this research were measured by Likert five points scales and the

deviation of each point are hypothesized to be equal but this is not true.

1.17 SCHEME OF THE WORK

The present study on “Customer Relationship Management (CRM)

Practices in Life Insurance Industry - A study with reference to Sivagangai

District of Tamil Nadu" has been organized under seven chapters.

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The introductory chapter discusses Introduction CRM’s, Definition, origin

in relationship marketing, Evaluation of Customer Relationship Marketing,

Indian Insurance in India, Need for Customer Relationship Management in the

Insurance Industry, CRM Application in Life, Statement of the Problem,

Objectives of the Study, Hypotheses, Limitations and Scheme of the work.

Chapter II reviews the literature of past studies relating to CRM.

Chapter III deals with Methodology adopted for the present study and

profile of study area, Sivagangai district.

Chapter IV analyses the demographic profile of the sample respondents

(insurers) and level of utilization of LIC product.

Chapter V deals with service quality, perception and customers’

satisfaction in LIC.

Chapter VI analyses the components of customers’ relationship

management in Life Insurance.

Chapter VII presents the summary of findings, Suggestions and

conclusion.