Case Study for Agency
03-1013231-372

Situation

Blue Cross Blue Shield of Illinois (BCBSIL) is one of our agency’s
long-standing client relationships. When they turned to us in 1987,
BCBSIL was faced with the problem of decreasing margins in the Medicare
Supplement Market. This was primarily due to a dramatically aging
market, rising termination rates, and increasing claim losses. It was
becoming increasingly difficult for BCBSIL to field a competitively
priced product.

Marketing Challenge

As a result of these trends and market conditions, BCBSIL created a
Direct Markets Division to focus on the Individual market. Its mission
was to:

· Leverage the BCBSIL brand
· Reduce the age of prospective Medicare Supplement policyholders
· Increase market share in the Under 65 (then later in the Over 65
markets)
· Achieve financial growth objectives
· Enhance management control of the business

BCBSIL retained our agency to assist in meeting these objectives and to
create an integrated marketing and administration system that would:

· Be market-driven as opposed to product-driven
· Develop and maintain long-term customer relationships
· Decrease losses within existing and future business

Application of Solution

Our first initiative was to work with BCBSIL to age rate their products
to allow younger market segments to pay lower rates for coverage. For
younger age segments, BCBSIL now had the most competitively priced
plans in the market.

Next, we created marketing programs geared specifically toward the
younger market including Turning 65, 65-1/2, and 66 segments. Then, in
an effort to become more responsive to market needs, BCBSIL needed to
increase its distribution channels. The goal was to offer the right
product at the right price through a channel that is most comfortable
for the prospect.

Over the years, several marketing channels were added to the mix.
One-step open market campaigns, direct response television and radio,
and newspaper advertising have all proven to be cost-effective
distribution channels.

As BCBSIL’s media mix broadened, the number of inbound telephone calls
regarding Medicare Supplement increased dramatically. To react to
higher call volumes, Direct Markets needed to build its own marketing
and administration system. In partnership with BCBSIL, we developed a
Teleservicing system which enabled the Teleservice rep (TSR) to "walk
the prospect through the sale" using detailed scripting to match the
most appropriate product with the prospect’s specific needs.

In addition to success in the Over 65 market, BCBSIL – with our help –
also entered the Under 65 market where we faced many of the same
marketing challenges. In approaching this market through direct
channels, we utilized a "wide net" approach employing direct response
television and radio to cost effectively target and acquire new
customers.

It is unusual for a company to successfully incorporate a strong direct
channel and an agency force within the same market, but BCBSIL has
proven to be the exception. Today, 40% of all applications are
submitted by Producers. We partnered with the agency force through
direct response methods and work to ensure that they have the most
effective selling tools and education needed to close the sale.

Results

The results of our partnership with BSBSIL are impressive:

· Generation of 375,000 new policies representing 580,000,000 in
revenue
· Direct Markets has become the most profitable division in the entire
BCBSIL organization
· Success of the unique multiple sales distribution channel structure
continues today