At Allianz Elementar, SAS® delivers improved customer knowledge, helps focus sales activity and protects profits

Allianz Elementar, a leading Austrian insurer and part of the global Allianz Group, is using SAS software to target its sales efforts more effectively, improving loyalty and reducing lapse among its most profitable and "at risk" customers.

Headquartered in Vienna, Allianz Elementar Versicherungs AG (Allianz Austria) provides a wide range of products including life, health, auto and property insurance. Austria's fourth-largest insurer in market share and the market leader in non-life insurance, the company employs 3,000 people and is part of the financial services giant Allianz AG. Allianz Austria operates through various channels, including a direct sales force, agents and brokers. Private and institutional clients are mainly handled through its nationwide network of full- and part-time sales agents. Like many other businesses in insurance and other industries, it has to fight to maintain and grow market share in a deregulated, highly integrated and competitive business environment. In the face of falling margins, retaining customers and protecting profits are top priorities.

Allianz Austria has been using SAS for 10 years to support the business, and in particular to enable a shift from a product to a customer-focused approach. It has become the standardized tool for analytics and reporting and, more specifically, SAS Enterprise Miner  is used for customer scoring and segmentation and to support activities such as cross-selling. Recently, these capabilities have been deployed to address the problematic issue of customer retention.

"We've spent the last few years building our analytics and scoring capabilities," says Wolfgang Lindner, Project Manager for Campaign and Portfolio Management, Allianz Austria. "These were then used to conduct further analysis of our customer portfolio in order to create campaigns that increase value. This latest project focused on customers who, on the one hand, are highly profitable and who, on the other, are also the ones most likely to lapse. It made sense to invest in such customers because they have a higher value together with a higher likelihood of cancellation. Our objective was to focus the sales force to set actions specifically aimed at them, as reducing lapse rates by 25 percent would have a clear impact on profits. SAS is a strategic partner in achieving this."

The resulting campaign was called the Profit Protection Program (PPP).

The Profit Protection Program
"The original PPP in 2003 covered non-life products and private customers," Lindner continues. "When we evaluated the results, they were good." So good, in fact, that PPP was integrated into Allianz Austria's sales targets for 2004. "Using results from SAS, our sales force has been able to focus on a precise segment of customers, and has thus achieved higher profitability. The sales process is able to become more efficient and effective." He says that of the customers identified using the PPP, a 10 percent renewal rate was realized that would not otherwise have been achieved. When Allianz Austria compared the lapse rate of this target group to a comparison group, it saw a 25 percent lower turnover rate.

One critical aspect of the project was implementing value components in the sales chain. "A typical problem with insurance companies is that the sales force is only paid by turnover and not due to profit," says Lindner. "We wanted to change our philosophy so that profit components were included in sales targets and objectives. This would help us to provide a common goal across the business: making more profit."

He says Allianz Austria was soon able to attribute increased profits and cost savings to the SAS-based program. "It's relatively easy to calculate quantitative benefits – for example, in terms of the turnover and profit from this customer segment that we might otherwise have lost. Looking at profit overall, the initial impact was around two percent of the total economic value added, which is quite a significant performance for six months."

Lindner points to qualitative as well as quantitative benefits. "It was interesting to see how sales people reacted when we provided them with results – for example, giving someone a list of 50 customers of whom five or six are likely to cancel. Sales people were able to say, 'Well, I haven't visited that customer for three or six months.' Feedback was good. We've clearly taken the first steps in making sales targets dependent on profit rather than turnover alone. This was also the first instance of Allianz Austria putting CRM (customer relationship management) systems into the sales process, one of the program's main aims." 2004 saw the PPP approach expanded using a larger sample of customers.

"I think customers benefit too," adds Lindner. "Incorporating CRM into the sales process means we can do the right things for a customer. If you come from the position that you believe the best option for someone is to be insured with Allianz, both the customer and the company benefit if they stay with us."

Speed and accuracy
Using SAS provides Lindner with confidence in the accuracy of his analysis. "We have a very good SAS data warehouse, which means we can trust our data," he says. The warehouse includes customer demographics such as age and gender; insurance contract data such as product holdings, premiums and length of time a product has been held; claims data; and sales data, such as the channel used to buy a product. Allianz Austria augments this with social demographics that cover areas such as spending capacity.

"We are also able to check the consistency of our models, monitor the outcomes, and so on," Lindner continues. He describes it as a process of constant improvement and refinement. "If we make predictions and then track how successful they are, we can check back and update the models as necessary. Of course, another benefit of Enterprise Miner is that we can develop sound models using different methods, like decision trees, regression analysis and neural networks. We can combine these approaches and judge the performance of our models."

Bringing customer data to life
"Allianz Austria is very pleased with SAS," adds Lindner. "From a technical point of view it's very good to have one solution within the business. It's also a high-performance system, even if you need to analyze data relating to one or two million customers. The key asset is that we can take raw data and turn it into knowledge to help the business. SAS Enterprise Miner and SAS Enterprise Guide mean we can bring customer data to life." He says these approaches are gradually changing the way Allianz Austria does business, helping it renew its sales process and change its sales philosophy – with a clear focus on profits.

As for the future, Lindner observes that "In terms of the PPP, we want to combine what we've already achieved – identifying profitable customers and looking at customer lapses – with other variables such as a customer's propensity to buy another product. We want to make our activity even more focused on the individual customer, which can only provide further benefits to our sales people."

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