Changing customer behaviour and distribution channels for insurance. September 17-18, 2009 Olivier Felique

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1 Changing customer behaviour and distribution channels for insurance September 17-18, 2009 Olivier Felique

2 About KBC KBC is a group of companies with focus on: Europe in terms of geography ( Belgium + CEE) Bancassurance in terms of business model Retail, private banking and small & medium-sized enterprises in terms of customer segments. KBC is also involved in asset management, corporate services, market activities and private equity. ( 31/12/2008) Customers (estimate) Bank branches Belgium 3,9 mio 879 Central and Eastern Europe / Russia 8,5 mio Visit our website at : Insurance Agencies Staff (FTE) rest of world

KBC is also involved in asset management, corporate services, market activities and private equity.

3 KBC s Central European Bank and Insurance entities About KBC

4 On the agenda today 1 Trends in Customer Behaviour 1a 1b 1c The Butterfly Customer Trading up vs. Trading Down Generation Y 2 3 Changing Channel use : Statistics New channel use aknowlegded

5 1a The Butterfly Customer Butterfly customers are the customers that fly from one store or supplier to another, always searching for lower prices or a different shopping experience. They have no loyalty to any particular store, and are always in search of a better deal or a new promotion. THE LOYAL PREDICTABLE RELIABLE The best deal The greatest choice New products Moving across market segments, buying luxury as well as knock-off discount products Intelligent, educated and informed : they know your product often better than yourself! Cynical and Skeptical : Disbelieve in advertising and willing to read the fine-print Rather switch than fight : Lower complaints levels as a result. Expensive to win THE BUTTERFLY CUSTOMER CUSTOMER The cheapest Endlessly interested in the experiences of others : word of mouth is trusted The closest Not embarrassed to be a Butterfly : It s a behaviourial pattern confirmed by others Butterflies know their own worth. Impossible to keep Source : The Butterfly Customer, S.M.O Dell, Joan A. Pajunen

THE LOYAL PREDICTABLE RELIABLE The best deal The greatest choice New products Moving across market segments, buying luxury as well as knock-off discount products Intelligent, educated and informed :

6 1b Trading Up vs. Trading Down High-quality, emotionally rich, high-margin products and services that consumers are willing to pay a premium for. Consumers are not actually calling it Trading Down. They are living a rich, balanced life, being careful about their money. Pleasure revenge Faith Popcorn, BRAINRESERVE Mediocre, medium-range products Mediocre, medium-range products Group of products in decline POORGEOISIE! Basic, low-cost, no frills goods and services Source : M.J. Silverstein, BCG

for. Consumers are not actually calling it Trading Down.

7 1c Generation Y : Who is it? Generation Y are the kids that grew up in the 80 s and 90 s. A SNAPSHOT GENERATIONS FOR MARKETING PURPOSES 25% - 30% of current European Population

8 Generation Y knows what they want Generation Y is educated, socially conscious and connected. VALUES AND LIFESTYLES GEN Y ON THE WEB HIGHLY EDUCATED & IDEALISTIC Most educated generation in history Value tradition Idealistic & socially conscious Individualistic SCEPTICAL Skeptical against the system : government, social security, health care, job security, big corporations, Less cynical than generation X EQUALITY AND TOLERANCE Unprecedented exposure to cultural diversity. Tolerance and Equality are valued extremely high EXTREMELY TECHNOLOGICALLY SAVVY* 1 out of every 4 free hours is spend online Multitasks ( internet, cellphone, tv, ) all the time Baby boomers were forced to adapt to IT Gen X helped to popularise it Gen Y defines how internet is integrated in every day life Source : IAB Research

system : government, social security, health care, job security, big corporations, Less cynical than generation X EQUALITY AND TOLERANCE Unprecedented exposure to cultural diversity.

9 Generation Y knows how they want it The internet and the use of it by Gen Y impacts all other distribution channels : faster, multiple-access and transparancy becomes the norm for all distribution channels. What do you mean I have to wait 3 days to get my contract?? I have to enter all these data again? Speed I am sure that on the Internet I can easily get a comparison Sounds familiar? Multiple-access points Transparency

channels. What do you mean I have to wait 3 days to get my contract?? I have to enter all these data again?

10 On the agenda today 1 Trends in Customer Behaviour 2b 2c 2d The Butterfly Customer Trading up vs. Trading Down Generation Y 2 Changing Channel use : Statistics 3 New channel use aknowlegded

11 The empowered customer is very demanding Customers are more informed, more price-sensitive and more selfsufficient than ever before. When asked about changes in their own purchasing attitudes over past 5 years ( ), x% of the customers responded that they were : More price sensitive Increased use of technology Knows more about insurance products Wants improved ease of purchase and/or interaction Demands greater transparency in agent relationship 52 Decreased loyalty to insurers and/ or agents 49 Increased preference for one-stop shopping 44 Less trust in insurer brands 29 Less focused on having personal relationship 27 % of customers Source : Capgemini Analysis Survey insurance customers

12 Price as the key purchasing driver for insurance Price is the key driver for purchasing insurance, especially in the highly competitive non-life market where customers know their power very well. % of customers indicating price, product, as their main driver for purchasing from a particular provider Service Brand/Trust Advice Product Price Packaged with another policy Recommendation ( family, friends) After-sales service Ease of Purchase Professionalism of advice Brand / Trust Product Price / Profitability UK US FR DE IT NL ES Total Source : Capgemini Analysis 2006 Survey insurance customers Life Products Non-Life Products Source : Capgemini Analysis Survey insurance customers

13 Customers do not hesitate to change their insurance provider As in other industries, also the Insurance customer has become less loyal. Non-life policies are at risk. Life insurance benefits from seemingly tighter lock-ins. % of Customers that has changed non-life or life insurance provider during the last 5 years ( ) % of customers changing Non-Life Insurance % of customers changing Life Insurance NL US FR IT DE ES UK Source : Capgemini Analysis Survey insurance customers

% of Customers that has changed non-life or life insurance provider during the last 5 years ( 2001-2005) 63 40 26 31 31 34 42 47 10 10 9

14 On the agenda today 1 Trends in Customer Behaviour 2b 2c 2d The Butterfly Customer Trading up vs. Trading Down Generation Y 2 Changing Channel use : Statistics 3 New channel use aknowlegded

15 Changing customer behaviour aknowlegded Alignment of stakeholders for maximising return on expectations CLIENT MARKETING DISTRIBUTORS HQ INSURANCE DISTRIBUTION LEADERSHIP CENTRE

16 KBC Approach : Distribution Leadership Centre The Distribution Leadership Centre is: a knowlegde centre, a facilitator/driving force, and an innovator for maximising the productivity of distribution channels on a group level. Best practices Feedback Proposals External Research - Conferences - Papers - DISTRIBUTION LEADERSHIP CENTRE BUSINESS UNITS New Distribution Formats Testcases Improvement proposals

17 3 key take-outs The Customer behaviour has changed : New & higher expectations Driven by technological innovations Across distribution channels The statistics prove it. Face it, and decide on your future value proposition for the client.

Across distribution channels The statistics prove it.

18 Thank you!

Multi-Generational Workforce

Multi-Generational Workforce Louise Anderson, CPIM CEO/President Anderson Performance Improvement Secretary- Incentive Marketing Association Education Committee Chair - Incentive Marketing Association