Extract from. Études et Dossiers No March 2009 Hong Kong

Transcription

1 International Association for the Study of Insurance Economics Études et Dossiers Extract from Études et Dossiers No th CEO Insurance Summit in Asia March 29 Hong Kong This document is free to download from The Geneva Association website, November 29 Working Paper Series of The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance The Geneva Association - General Secretariat - 53, route de Malagnou - CH-128 Geneva Tel.: Fax: secretariat@genevaassociation.org -

2 The Geneva Association Working Paper Series Études et Dossiers appear at irregular intervals about 1 12 times per year. Distribution is limited. The Études et Dossiers are the working paper series of The Geneva Association. These documents present intermediary or final results of conference proceedings, special reports and research done by The Geneva Association. Where they contain work in progress or summaries of conference presentations, the material must not be cited without the express consent of the author in question. This document is free to download from The Geneva Association website, please visit: Layout & Distribution: Valéria Kozakova The Geneva Association - Association Internationale pour l'etude de l'economie de l'assurance

3 The Ultimate Question Nick Palmer Bain is the leader in customer loyalty HKG 924-PL-CEO Insurance Summit Final.NP

4 Loyalty leaders outperform on both costs and growth Costs Growth Loyalty drives... 25% 25% 22 Repurchase 2 2 Buy additional products Referrals Constructive feedback Average Loyalty Leader Average Loyalty Leader HKG 924-PL-CEO Insurance Summit Final.NP 3 While management recognises the importance of the customer Percent of respondents that perceive element to be critical 1% Customer focus Segmentation Delivering superior experience Source: Bain/EIU Customer Led Growth study HKG 924-PL-CEO Insurance Summit Final.NP

5 few companies are actually providing a superior customer experience Percent of companies 1% Percent of companies (Financial Services Sector) 1% 8 8% 8 77% Delivery gap 4 Delivery gap 2 8% 2 6% Companies that believe they provide a superior proposition Companies whose customers agree Companies that believe they provide a superior proposition Companies whose customers agree Source: Bain Customer Led Growth Diagnostic Questionnaire, N=355; Satmetrix Net Promoter TM Database, N=374; N=136 for Financial Services Sector Results HKG 924-PL-CEO Insurance Summit Final.NP 5 Focusing on more revenue per customer leads to bad profits which alienate customers Hotel: Phone bill bigger than room bill Banking: Returned check fee: USD $35 Cellular: Best deals for new customers Airlines: Rental Car: USD $1 change fee Gasoline 3X retail price Typical firms book bad profits from 25 to 5% of customers to make the numbers. HKG 924-PL-CEO Insurance Summit Final.NP

6 Tools for managing profit are far stronger and better understood than loyalty metrics Tools for managing Profit Tools for managing Growth/Loyalty 1+ years track record with accepted standards Widespread understanding throughout organization Six sigma process Limited track record with no clear standards Qualitative understanding throughout organization Ad hoc survey processes How do you elevate tools for managing loyalty to the same level of rigor and importance as financial metrics? HKG 924-PL-CEO Insurance Summit Final.NP 7 Polling question What percent of CEOs mention customer satisfaction in their phone calls with stock market analysts (Wall Street Transcript)? -% -2% -4% -6% -8% -1% HKG 924-PL-CEO Insurance Summit Final.NP

7 Only 3% of CEO transcripts mention customer satisfaction % of 24 CEO interviews with following topic mentions 1% 1% 94% Financial metrics Growth 3% Customer satisfaction No. transcripts: 1,22 1, Source: The Wall Street Transcript, CEO interviews 24 HKG 924-PL-CEO Insurance Summit Final.NP 9 In addition, watch out for traditional satisfaction surveys; 8% of defectors ARE satisfied Percent of Defectors 1% 1% 8 6 Satisfied 4 2 Neutral or dissatisfied HKG 924-PL-CEO Insurance Summit Final.NP

8 What is The Ultimate Question? Would you recommend us to a friend or colleague? Probes both dimensions of loyalty. Head Best features Best service Best price Heart They know me They value me They listen to me They share my values HKG 924-PL-CEO Insurance Summit Final.NP 11 How to calculate SM Extremely likely 9-1 %Promoters 7-8 minus -6 Extremely unlikely %Detractors Net Promoter Score () HKG 924-PL-CEO Insurance Summit Final.NP

9 correlates well with micro behavior EXAMPLE: US BANK 6 Anticipated Change Retention Cross/up-selling in Business Referrals Average tenure (in years) Average annual spend $15K Intend to increase business 4% Average number of referrals (per year) Promoter Passive Detractor Promoter Passive Detractor Promoter Passive Detractor. Promoter Passive Detractor HKG 924-PL-CEO Insurance Summit Final.NP 13 Source: Bain experience Insurance example correlates well with actual customer behavior Insurance Co Retention/Defection Cross/up-selling Referrals Average gross premiums canceled per customer per year % Average newly written gross premiums per existing customer per year 1% Average gross premiums generated through referrals/discouragements per customer & year 1% Promoter Passive Detractor Promoter Passive Detractor -1 Promoter Passive Detractor Promoters (9 & 1) act upon their loyalty: They stay longer, buy more and attract new customers Source: Bain client example (all values indexed, Promoter=1%) HKG 924-PL-CEO Insurance Summit Final.NP

10 and it is a strong predictor of top-line growth US life insurance example Insurance gross premium growth % (3 year period) R² =.77 6% Asia life insurance example Insurance gross premium growth % (2 year period) R² =.92 8% Europe life insurance example Insurance gross premium growth % (2 year period) R² =.62 15% % % % Source: Bain Net Promoter Diagnostic HKG 924-PL-CEO Insurance Summit Final.NP 15 Hong Kong financial services companies growth closely correlates with Retail banking revenue growth % (3-5) 5% Credit card receivable growth % (4-5) 5% Insurance gross premium growth % (3-5) 8% 4 3 Bank B Bank A 2 Bank F Bank G 1 Bank E Bank C Bank D Bank H % Card B 1 Card D Card G Card C Card F Card E % Card A Insurance A 6 4 Insurance B Insurance D 2 Insurance C Insurance E % Note: Retail banking revenue=net interest income + non-interest fee income. Life insurance gross premium includes both annual and single premiums. Source: Bain Hong Kong survey 26, Annual reports, Analyst reports, HKOCI, Bain analysis HKG 924-PL-CEO Insurance Summit Final.NP

11 This is the best customer relationship metric I ve seen Jeff Immelt CEO, General Electric January, 24 HKG 924-PL-CEO Insurance Summit Final.NP 17 Opportunity for life insurance companies to improve, throughout Asia 2% Life insurance Best performing companies in any industry score >5% globally 7% % -24% -27% -31% -35% -5% -6 US Germany Hong Kong Korea Australia Singapore UK Note: Industry average scores are unweighted average Source: Bain Net Promoter Diagnostic HKG 924-PL-CEO Insurance Summit Final.NP

12 Life insurance: wide variation in scores among HK insurers 2% From 3-5 leader grew 3.38x faster than avg Hong Kong Life insurance -2 6% 3% -14% Weighted industry average -23% -4-19% -23% -24% -28% -37% -44% Unweighted industry average -24% -6-8 Company Promoters Passives Detractors n -64% AHang BSun CHSBC DAIA Prudential E Manulife F GAXA China H Zurich I Winterthur J Seng Life Life Life China Life Life 41% 34% 3% 34% 25% 25% 22% 21% 12% 9% 24% 34% 26% 29% 27% 27% 28% 21% 32% 18% 35% 31% 44% 45% 48% 48% 5% 58% 56% 73% Note: Vertical sample size 351 Source: Bain Hong Kong survey 26 HKG 924-PL-CEO Insurance Summit Final.NP 19 Insurance: Service, reputation and product are the key drivers for 1% What is the main reason for giving a score 9-1 (for promoters) / -6 (for detractors)? Percentage of response 168 Others Product Reputation Customer service Promoters Distribution network Investment return 212 Others Investment return Product Reputation Customer service Detractors Distribution network Components of major responses Customer service -Product knowledge -Agent turnover - Attitude/courtesy - Responsiveness - Processing time Reputation - Track record - Commitment to local community Product - Product range/variety -Pricing - Service charge/commission Others -Promotion - Policy transparency - Policy constraints - Clearness of terms Note: Reponses with no comments are excluded; each respondent may give one or more reasons Source: Bain Hong Kong survey 26 HKG 924-PL-CEO Insurance Summit Final.NP

13 is more than a metric it is also a discipline as a metric plus as a discipline Reliable measure of the health of the customer relationship On the CEO agenda Actionable - Drives customer-centric decision-making throughout the organization - Clear accountability for improvement - Linkable to individual customers - Economic value established Auditable - Right sample-- with high response rate - Right question, right customers - No gaming, credible process Tracked over time, by product, by segment & versus competitors Processes that drive customer loyalty & organic growth Know the lifetime value of a detractor vs. a promoter Understand what practices grows Promoters and breeds Detractors Enable closed learning loops between employees and customers to drive continuous improvement in the customer experience Consistently improve propositions to increase loyalty, growth & profits among target customers Track key touch-points in the customer experience to eliminate defects, recover from service failures & deliver wow moments HKG 924-PL-CEO Selling Insurance Presentation Summit Introduction Final.NP 21 7 elements of full potential system Key success factors Reliable metric Root cause analysis tied to profitability Closed feedback loops Enablers Effective leadership Embedded into management rhythm Infrastructure HKG 924-PL-CEO Insurance Summit Final.NP

14 Case study: Insurance Co faced growth challenges Insurance Co -Multi business line -Global footprint -Multi distribution Business Lines P&C Insurance Growth challenge -Major markets stagnating -Deteriorating image with customers -High churn across all countries -High cost to serve Life/Health Insurance Financial Services CEO change opportunity -New CEO strengthens role of center -New CEO prioritizes customer focus Asset Management HKG 924-PL-CEO Insurance Summit Final.NP 23 Bain approach: Create real change via burning platform and frontline pull for customer focus Burning platform via - competitive rankings - economics analysis Universal customer loyalty language via metric CEO pilots at critical touchpoints -Measurement -Individual customer feedback dialogs Critical customer touchpoints Frontline employee empowerment and mindset HKG 924-PL-CEO Insurance Summit Final.NP

15 Customer grid used to decide actions at client and segment level High Detainees Angel candidates Angels Profitability Low Insurgents Agnostics Missionaries Detractor Passive Promoter Low High HKG 924-PL-CEO Insurance Summit Final.NP 25 Touch-point-specific initiatives focused on interactions with highest potential to delight High Critical for promoter creation Potential to delight Policy renewal Information request & first contacts Claims management Advice & quotation Policy adjustments Policy issue Low Low Potential to anger Critical for detractor avoidance High HKG 924-PL-CEO Insurance Summit Final.NP

16 Claims handling example: Created a scoring, feedback and learning process Event: Claim closed Scoring External call center follows up with customers to record score after a claim is closed Feedback Frontline at Insurance Co empowered to call back customers to get more detailed feedback and provide remedies for situations Learning Customer feedback used to adjust behavior of individual frontline members, and also aggregated to form the basis for system-wide improvements HKG 924-PL-CEO Insurance Summit Final.NP 27 Results: Frontline empowerment based on feedback led to significant increase Development at Claims Handling Touch-point feedback provided basis for refining claims handling guidelines to empower frontline employees (in %) 3% 25% 3% With less guidelines, frontline can treat customer more as individuals leading to higher employee motivation and significant improvement % 18% 17% initiative Refinement of claims handling guidelines to empower frontline Months 1/2 Months 2/3 Months 3/4 Months 4/5 Months 5/6 HKG 924-PL-CEO Insurance Summit Final.NP

17 Driving results Measuring is relatively straightforward, but using it to drive economic value is not must lead to a so what for the organization -If a low score why? What needs to be fixed and is it worth it? -If a high score why? Do we get economic value in return? If so, can the why be institutionalized? programs and initiatives must be cost-effective and profitable Using to drive growth and profitability requires: -Understanding the value of promoters and detractors (quantified with hard numbers) -Designing the right customer experience -Making tough customer decisions who gets which benefits and programs -Making real changes to front-line employee behaviors and attitudes -Measuring not only but leading operational drivers of the score -Developing on-going feedback loops HKG 924-PL-CEO Insurance Summit Final.NP