2007 World Insurance Report

Transcription

1 2007 World Insurance Report London Roadshow 7 February 2007 Chartered Insurance Institute

2 Agenda: Welcome Introduction to EFMA Introduction to Capgemini World Insurance Report Introduction and Background Key Findings Questions & Answers Networking opportunity 1

3 Introduction to EFMA

4 EFMA Roadshows EFMA and Capgemini team up each year for a series of reports: And soon to come, the World Retail Banking Report

5 EFMA Roadshows EFMA also publishes other reports such as: Key Success Factors in Central and Eastern European Banking The Big Business of Small Banking How does Internet impact customer behaviour in retail financial services Marketing Innovations in Credit Cards European Mortgage Distribution.and organises local roadshows. Dedicated face-to-face presentations can also be organised for EFMA members. 4

6 About EFMA The Association Members have 1,900 different brands 80%of the largest European financial groups Banks, Insurance Companies, Consumer Credit, Payment Systems, etc.. Members in Europe, the Americas, the Middle-East and Africa, Asia Membership Services Information database International magazine (Efmag) Online access to information (EfmaWeb) Studies, surveys, reports Working groups, in-house brainstorming workshops Conferences and other events Convention, Congress, Conferences, Seminars, Study Days, Study Tours (more than 30 per year) Training (more than 30 per year) Local Roadshows (more than 40 per year) 4,000 bankers and insurers met each year, from more than 50 different countries 5

7 EFMA Roadshows The World Insurance Report is the fruit of a close collaboration between Capgemini and EFMA. More information is available from our dedicated website 6

8 Introduction to Capgemini

9 Capgemini: Consulting, Technology and Outsourcing Financial Services Consulting Services Technology Services Outsourcing Services Wealth Management Retail Banking Insurance Payments Customer Relationship Management Finance & Employee Transformation Supply Chain Transformation Consulting Enterprise Architecture Information Architecture Legacy Transformation Application Development & Integration IT Transformation: Strategy & Architecture Business Intelligence Infrastructure & Security Open Source Package Implementation Portals Applications Management Business Process Outsourcing Infrastructure Management Transformational Outsourcing 2005 Revenue by Discipline (Total 7 billion) Professional Services Outsourcing Services 16% 38% 13% Consulting Services 33% Technology Services 8

10 Introduction to the World Insurance Report

11 The World Insurance Report completes Capgemini s stable of Global Reports focussing on Financial Services 10 years 3 years 2 years 1 st Year But why now? 10

12 The 2007 World Insurance Report (WIR) focuses on seven countries which account for 60% of all direct insurance premiums written globally Scope for 2007 World Insurance Report North America Europe U.S. France Germany Italy Netherlands Spain U.K. The report covers the theretail insurance market, including both life lifeand andnon-life segments, but butdoes not notinclude Health insurance. 11

13 The report is based on a comprehensive body of research which includes surveys and in-depth interviews with customers, distributors and insurance executives Breakdown of Primary Research Conducted for the WIR The Insurer In-depth, qualitative interviews with over 50 global insurance executives The Customer Extensive, online surveys conducted with over 10,000 insurance customers The Distributor Comprehensive phone interviews with over 350 insurance distributors Our analysis focuses on on understanding the relationships between insurers, distributors and their customers, and on onhow to toimprove it. it. 12

14 The WIR tells us that sustainable success in complex markets is dependent on three major factors 1. Customer Satisfaction is Not A Guarantee of Customer Loyalty To Retain Profitable Clients Insurers Must Master their Enterprise Data to Segment and Understand Customers Better 2. Insurers who Support Distributors with Easy Data Access and Updated Tools Deliver More Value to Customers 3. To drive profitable growth, Insurers will need to be more effective in aligning their pricing and product strategies with the needs of their target customers, while enabling their distribution network s capabilities accordingly 13

15 Key Findings from the WIR: Knowing the insurance customer better Partnering with distributors Driving profitable growth UK-specific insights Conclusions 14

16 The profile of the typical insurance customer is taking a new and definitive shape, resulting in a more empowered and less loyal customer In the relationship between customers, distributors and insurers, the customers are becoming increasingly strong and demanding 15

17 Given the little interaction customers have with insurers, delivering a consistent, high-quality experience is essential for future success Given that we have generally more demanding customers, the insurers have relatively few memorable interactions with their insurer. Insurers and distributors therefore must focus on the moments of truth. 16

18 Despite the few annual interactions, customers are generally satisfied with their insurance interactions.. Few customers showed significant levels of ofdissatisfaction.. 17

19 .yet the level of business churn is often quite high, particularly with General Business Customer Satisfaction is isnot enough to toguarantee loyalty. 18

20 Price is the overwhelming driver for customer turnover for both nonlife and life products So the challenge to the industry is how to offer an alternative to price commoditisation....or how to live with it Source: Capg emini An alysis,

21 Accurate customer segmentation is a requisite for effectively meeting customer needs Product Inclined Ad vice from a trusted advisor is paramount, and they will use an advisor when purchasing any product, * including very basic ones. These customers also appreciate after-sales service. Customers focus on product first and foremost. Depending on the complexity of the product, they may use an advisor or conduct research themselves before buying. Service Inclined Relationship Focus 30% Relationship Focus Product Focus 19% Non- Committal 19% Price Focus 31% There is no overriding focus on price or relationship. Each customer makes each decision based on market circumstances. However, they all value after-sales service more Price than product specifics. Focus Likely to relinquish advice for a cheaper price. In fact, they will actively pursue a better price, even though they recognize that product specifics might suffer. Beyond price, they are more included to focus on service than product. Understanding what is isimportant to tocustomers will inform the approach to todealing with them in inthe most effective manner 20

22 Key Findings from the WIR: Knowing the insurance customer better Partnering with distributors Driving profitable growth UK-specific insights Conclusions 21

23 Distributors are often the primary medium of customer interaction with the insurer Customer Distributor Insurer Customers primarily interact with their insurers through their distributors Many customers value the input they receive from distributors Nevertheless, many distributors believe they are missing significant opportunities to grow their business More effectively tapping into the full potential of oftheir customers Insurers can potentially partner more closely with their distribution force to: Helping distributors to tofocus on growing their business Managing transactional activities more effectively However, it itrequires some work to improve the partnerships between insurers and distributors (even tied agents) Legal constraints Organisational & Cultural Barriers Collaboration enables greater focus on onmore complex needs-based selling and service across the theentire customer life lifecycle. Source: Capg emini An alysis,

24 Attracting and retaining distributors requires an understanding of what is important to them...but also what is important to their clients 23

25 Distributors felt that increased focus on providing client advice will help them to increase customer spend Focus on the advisory selling model more than at atpresent Reducing the transactional aspects of ofthe business Helping distributors understand and spend more value-adding time with their customers Positioning distributors to toattain the maximum share of ofcustomer wallet meeting unmet needs Increasing the overall size of the market 24

26 Very few distributors are highly satisfied with the tools and services provided to them by insurers, although most find them adequate Issues related to todirect-sales support are arethe thecause of ofmost dissatisfaction among distributors: lead generation support; sales collateral/literature; and call callcentres. 25

27 It is by Insurers and Distributors collaborating that the overall level of business can grow and the customers needs met More flexibility to offer deals Better tools - single view of client Training on product sales techniques Better tools - track client behaviour and preferences Increased commission for bundled/x-sales Improved sales support - lead generation and support Improved service (call centres, service reps etc). 32% 31% 31% 29% 33% 33% %age of Respondents 39% 0% 10% 20% 30% 40% 50% Maximize profit from existing customer relationships whilst serving the customer better The ability to work with insurers to understand how a good deal can be crafted for all parties Multi-product discounts Sound product understanding The single customer view will remain a challenge for insurers Building a unique customer database Implement tools to cleanse, analyze, and distribute this data The benefits should eventually be selfevident Leveraging sales and service models Utilizing technologies to help make better use of the moments of truth 26

28 Key Findings from the WIR: Knowing the insurance customer better Partnering with distributors Driving profitable growth UK-specific insights Conclusions 27

29 Driving Profitable Growth Within the focus areas of the WIR, we found two main sources for profitable growth within the insurance industry: Effective implementation of a Multi-Channel strategy Reduction in sales and servicing costs for low-margin business Meeting the requirements of customers who are increasingly using multiple channels Drives higher levels of retention Enhanced cross-selling to existing customers 28

30 Customers increasingly wish to use multiple channels to interact with insurers and distributors to suit their convenience and needs 29

31 Customers are generally happy with the nature of the interactions that they have through different channels However, a poor experience can often lead to significant dissatisfaction and the potential loss of business We must get this RIGHT. 30

32 Distributors recognise that customers have the choice of multiple channels, but tend to regard alternatives as threats Evidence* shows that customers who use multiple channels successfully tend to stay with the insurer for longer. A well-developed multi-channel strategy is isa pre-requisite in inorder to toavoid channel conflict and to to derive the benefits. *Capgemini UK Multi-Channel Finance research 31

33 Customers prefer to purchase multiple products from one insurer if the price is right and the process is convenient For insurers to tosucceed in incross-selling, they must understand how to to turn customer s inclination to tobuy multiple products into an actual purchase. 32

34 The potential for cross-selling is also far greater than insurers realize or have been able to achieve Investment Transactional CDs / Money Market Savings / Current Account Car Insurance ISA Stocks/Equity Mutual Funds, Unit trusts Personal Liability Home Insurance Protection Savings-based Life products Pension Life Insurance Advisory 30% of customers say they would buy a pension from the same insurer from which they buy life products 38% of customers surveyed indicated a preference for buying their life insurance with their home and car insurance, a significant opportunity 33

35 Turning Customers Inclination to buy Multiple Products into increases business represents a significant Growth Opportunity.. Internal Difficulties? Operational complexities involved in inselling and servicing multiple products seamlessly to toa customer Systems and pricing models that stand in inthe path of of bundling deals. Consolidation Activity Companies are looking to to reap multi-product benefits from consolidation But consolidation of of organisations does not guarantee benefits Increased Cross-Selling? Shifting Business Models Bancassurance model is is maturing Partnerships are happening Partial outsourcing of ofoperations Open-funds, fund supermarkets and wraps Changing Customers Less time on their hands More complex financial needs Increasingly favour one-stop shopping as a way to tosimplify their lives and finances But not without some significant challenges! Source: Capg emini An alysis,

36 Key Findings from the WIR: Knowing the insurance customer better Partnering with distributors Driving profitable growth UK-specific insights Conclusions 35

37 Particularly in non-life business, the UK shows by far the lowest level of loyalty to insurers perhaps this should be no surprise 36

38 UK customers focus on price and product features more than other aspects of the purchasing process This implies that UK consumers tend to toconsider most insurances as as a commodity at atoutset 37

39 The UK leads the countries surveyed in terms of the preference for buying online and has the lowest level of insurer interactions 38

40 The UK domestic and regulatory environment cannot be disregarded UK non-life policies do not renew automatically - although this is becoming more common with directly sold products In France, non-life contracts may only be switched for 2 months around renewal. Increasing numbers of price-based internet aggregators are further commoditizing the lower end of the business. The high-profile problems that have rocked the industry in recent years has contributed to a jaundiced view of the industry amongst consumers. 39

41 Key Findings from the WIR: Knowing the insurance customer better Partnering with distributors Driving profitable growth UK-specific insights Conclusions 40

42 There are several key approaches that insurers can take to compete in tomorrow s insurance market Increasing the emphasis on customer-centricity Changing the nature of the relationship with the distribution network with improved sales and service tools Implementing integrated multi-channel strategies Replacing or reengineering legacy technology for enhanced flexibility Improving operational efficiency 41

43 So, what should you be asking yourselves? What needs to be done to improve our understanding of our customers, and to attain a single view of our customers across their entire life cycle of needs? How well do we really manage our approach to multi-channel business? How collaborative is the current relationship we have with our distributors? Do we sufficiently understand the challenges that will face our distributors over the next 5 years? How effective and seamlessly integrated are our current organizational processes, product management and technology? 42

44 Questions & Answers Chair: Panel: Jean-Luc Mery David O Toole Malcolm Harrington Alan Young Andrew Hood

45 2007 World Insurance Report London Roadshow 7 February 2007 Chartered Insurance Institute