www.niit-tech.com Multi-Channel Distribution in Insurance Challenges and scope Anuja Verma NIIT Technologies White Paper
CONTENTS Introduction 3 Emerging Trends 3 Customer Segmentation 4 Social Media 4 The Right Technologies 4 Challenges Faced in Multi-channel Distribution System 5 IT to Improve Multichannel Distribution 5 Multichannel Distribution Delivering on the opportunity 6 How does Technology ease the work of insurance companies? 6 - Customers 6 - Channel Partners 6 - Business 6 Conclusion 6
Introduction The Indian life insurance sector is evolving and growing substantially and is one of the key drivers of India s economy. The Indian insurance sector is moving rapidly towards international standards with new and innovative product offerings. With rising income levels, customers are demanding more sophisticated risk solutions. Life insurance was once purchased primarily as a tax-saving tool. A paradigm shift in regulation led to more customized solutions. have a deep, actionable and detailed analysis of the end users or target segments, so the distribution channel can be set up to reach the segment effectively. Inefficient customer segmentation and targeting actually ends up delivering less value to the customer and hence to the insurance company also. This whitepaper explores the need to develop an effective multi-channel distribution strategy that meets customer demands and delivers differentiating customer experience. The number of insurance holders has more than doubled to 5.32 crore policy holders in five years to 2010, with the total life insurance premium tripling to Rs 2.65 trillion during the same period. The Indian customer is offered innovative solutions that combine protection and long-term wealth creation. Improved services, sound advice and innovative products are provided through a range of distribution channels such as banks, agents, direct offices and online platforms. The emergence of a more diversified and multichannel distribution network has revolutionized the insurance sector, with increased access and better service to customers. Apart from the conventional ways of marketing an insurance policy, which include brokers, agents, kiosks, worksite marketing and direct marketing, insurance companies now explore new avenues of innovative and attractive range of distribution techniques that can be exploited to their advantage. Today, an insurance company leverages multiple channels for distributing its services to target customer segments. Distribution channels not only affect the top line and bottom line of a company but also raise concerns on the cost management of the firm. In this fluid environment, an insurance company needs to Emerging Trends In the last few years we have seen unprecedented growth in the choice of channels that customers can use to interact with the business. Insurers are now adopting a multi-channel distribution strategy to drive operational efficiency. With changing demographics of insurance buyers, Insurance companies are also using multiple types of distribution systems. Based on the needs and status of target customer segment distribution systems are chosen. A combination of all or most of the following distribution channels make it a multi-channel strategy: Broker Individual Agents Corporate Agents Micro-Insurance Bancassurance Cell Phone/PDA Kiosks Internet E-commerce Work Site Marketing Direct Marketing Internet Digital TV/Satellite Selling Supermarkets and other retail outlets Affinity Channels and Groups Insurance specific debit/credit cards Call Centers 3
Customer Segmentation Segmentation in marketing is important because it matches a customer s requirement to the offerings. This helps in creating brand loyalty as the customer will be happier to purchase a product that is specifically targeted to his or her needs better than competition. This spells more gains for the business as people are willing to pay more for a product which are tailored to their needs. Segmentation, thus, leads to customer retention as well. If any agent has a concern about a new product or program, the underwriter can proactively reach out to the agent with a relevant communication as well. The recent and prolific rise in social media has created an irreversible shift in the way the distribution world is changing. Figure 1 lists all the multichannel choices that are available Here is an example of how different sets of customers can be Facebook TV Radio approached using different channels: Twitter Newspaper MySpace Direct Mail Market Segment YouTube RSS Multichannel Choices Company Website Email Wealth Full Service Brokers Blogs Friends/Family Affluent Mass Brokers Vendors Agents Insurance Agents Bundled Vendors Banks Distribution Online Forums Retails Location Customer Service Mobile Figure 1: Multi-channel options Marginal Banks Credit Unions The Right Technologies The five key and current technologies that support multi-channel distribution: Social Media Today, social media platforms have started playing a significant role in the distribution strategy of insurance companies. A Twitter account or company/brand pages on Facebook are various ways to reach out to prospective and current policy holders. The important element for such platforms is the status update which enables a company to be aware of the activities and intent of a large group of people without having to ask them. For example, for an underwriter working with 100 agents, it can get difficult to know about their achievements or updates. Here, tweets or updated status messages on social media platforms can be captured and used for monitoring performance in almost real time. Mobile: Insurance companies will adopt mobile technologies, particularly tools such as ipad for brokers and underwriters. Adoption of this technology is expected to rise in the commercial lines space. Analytics: Leveraging analytics for micro segmentation of customers will help insurers target the most profitable customers and brokers. This will in turn increase their return on investment and help retain customers and aid in cross sell and up sell initiatives. Social Media: These platforms will play an increasingly important role in influencing purchase decisions. Customers, particularly the youth, constantly communicate about their life status through social media. Insurance companies need to 4
create the technology and service infrastructure to listen to relevant 'narrative bits' by establishing effective 'listening posts'. Social media and gaming present a great opportunity to bring a 'fun' element to the sales process. Also gaming can help insurers improve their brand image. For example, Farmers Insurance in the US has partnered with the popular Facebook game called Farmville and lets players buy 'protection insurance' for their online 'crops'! Collaboration: Increased collaboration between underwriters, customers and brokers is possible through the effective use of collaboration technology. These technologies also help to personalize the conversation between the underwriter and broker and cement long term relationships. These help in reducing the sales cycle. Product Configurators: These help insurers create the building blocks for effective multi-channel infrastructure. Product configurators also help insurers launch products quickly into the market, bundle product offerings and customize quickly based on changing market demand or competitive pressures. Cannibalization: This occurs when one service of a brand is marketed more than the others. As a result, the market share of the other service is affected. IT to Improve Multichannel Distribution Technology is a transformation agent and its processes and systems have ensured efficiency in customer service and operations. Technology can be deployed to make multichannel distribution more effective. The various tasks that technology can simplify include: Data warehousing Providing access to accounts, services and assistance online: Customers can view the premium, tenure and other terms related to their insurance policies. Analytics: Insurance companies can analyze behavior patterns, needs and desires of the customers. The figure below depicts the channel integration using information technology, which allows smooth flow of information across the different elements. Challenges Faced in Multichannel Distribution System Organizations striving to deliver the right products and services to customers via the right channels at the right time are facing challenges on two main fronts. Customer Role of IT in multichannel distribution Independent agents/broker Web based channels Tele Sales Third Party Network Internet Insurance Providers IT Systems Product Policy/ Customer/Agent Brand dilution: Brand dilution can happen when insurance companies choose inappropriate channels for different customers. Direct Sales Product Infromation New offers & promotion Customer enquiry Internet Underwritting App Processing Cust. Servicing Policy issurance 5
The product information, new offers and promotions, and customers enquiry on new offers flow from the insurance company to the customer. The third party channels such as insurance agents/brokers, web based channels, tele-sale executives etc. coordinate with the customer as well as the company to get new business. Once a case has been logged in, the entire process of underwriting, customer servicing and policy issuance and application processing is done through complex systems which are developed as per the requirements of the insurance company. After a policy is issued, technology is used to regularly interact with customers and provide efficient service. online. Customers can calculate premiums, bonus amounts, tax and communicate with an insurance advisor. They can also check the status of their policies and calculate the amount of loan they can avail on their insurance policy. They can also download forms for purchasing other policies and pay their premiums online. Customers can also give details such as change of address right at the website. Channel Partners Online portals can be developed for channel partners such as brokers and agents. These portals will allow them to check their commissions and payment status. It will also give them the advantage to check claims position and track the status of the case deposited. Multichannel Distribution Delivering on the opportunity NIIT Technologies has evolved multi-channel distribution strategy to optimize the opportunities that social media revolution and multiple channel choice present and offer: Lower costs: Insurance companies have moved from single-channel distribution strategies to multi-channel distribution as the market evolved and competition intensifies. These changes have shown a significant decrease in the average cost of distribution services. Sophisticated well trained wealth management consultants target high value customers. Insurance is treated as just another financial product for others at the lower end of the customer spectrum. Personalization: Insurance companies can work on more customized selling by adding a technical sales force for selling complex products or providing personal assistance to high net-worth individuals. The various factors here are trust, customer servicing, multiple and accessible service points, good IT support and the comfort factor. How does Technology ease the work of insurance companies? Customers The portal of an insurance company can offer a plethora of services to customers that can be save their time and also purchase policies Business The insurance company can see benefits in various other spheres as well. Some of them are: Gain economies of scale from a common set of data and business rules. Reduce agent-based administrative tasks to maximize sales activity Provide analytical support to manage the producer and customer life cycle Track distribution partner activity and establish key performance metrics Conclusion The growing insurance market offers scope for better penetration and accessibility through diversified channels. Insurers have an opportunity to differentiate themselves through their distribution channels. There is substantial value to be gained in each channel. Innovative and customized products can be offered to customers through multi channels. Incremental investments over a sustained period of time across multiple channels provide the best solution. A company s ability to offer an integrated multi-channel experience will be the key to customer satisfaction and profitable growth. 6
About NIIT Technologies NIIT Technologies is a leading IT solutions organization, servicing customers in North America, Europe, Asia and Australia. It offers services in Application Development and Maintenance, Enterprise Solutions including Managed Services and Business Process Outsourcing to organisations in the Financial Services, Travel & Transportation, Manufacturing/Distribution, and Government sectors. With employees over 8,000+ professionals, NIIT Technologies follows global standards of software development processes. Over the years the Company has forged extremely rewarding relationships with global majors, a testimony to mutual commitment and its ability to retain marquee clients, drawing repeat business from them. NIIT Technologies has been able to scale its interactions with marquee clients in the BFSI sector, the Travel Transport & Logistics and Manufacturing & Distribution, into extremely meaningful, multi-year "collaborations. NIIT Technologies follows global standards of development, which include ISO 9001:2000 Certification, assessment at Level 5 for SEI-CMMi version 1.2 and ISO 27001 information security management certification. Its data center operations are assessed at the international ISO 20000 IT management standards. NIIT Technologies Ltd. Corporate Heights (Tapasya) Plot No. 5, EFGH, Sector 126 Noida-Greater Noida Expressway Noida 201301, U.P., India Ph: + 91 120 7119100 Fax: + 91 120 7119150 Americas NIIT Technologies Inc., 1050 Crown Pointe Parkway 5 th Floor, Atlanta, GA 30338, USA Ph: +1 770 551 9494 Toll Free: +1 888 454 NIIT Fax: +1 770 551 9229 Europe NIIT Technologies Limited 2 nd Floor, 47 Mark Lane London - EC3R 7QQ, U.K. Ph: +44 20 70020700 Fax: +44 20 70020701 Singapore NIIT Technologies Pte. Limited 31 Kaki Bukit Road 3 #05-13 Techlink Singapore 417818 Ph: +65 68488300 Fax: +65 68488322 A leading IT solutions organization 21 locations and 16 countries 8000+ professionals Level 5 of SEI-CMMi, ver1.2 ISO 27001 certified Level 5 of People CMM Framework Write to us at marketing@niit-tech.com www.niit-tech.com D_17_120413