1 Digitization of intermediated insurance distribution An Efma Think Tank supported by Roland Berger Summary Paris, June 6th 2013
We have analyzed the Digital maturity of a REPRESENTATIVE SAMPLE of European insurers 10 COUNTRIES 23 INSURANCE GROUPS
How DIGITAL TECHNOLOGIES such as internet, social network, multi-screens CREATE A NEW WORLD full of opportunities New customer BEHAVIORS Impact on VALUE PROPOSITION of insurers Impact on OPERATING MODEL of insurers Insurers TRANS- FORMATION routes
Insurers and their distributors need to ADAPT TO NEW "HYBRID" CUSTOMERS purchasing behaviors INSURANCE NEW BUSINESS BY TYPE OF ACCESS 100% point of sale 100% 80-85% 100% 50-65% 3 CLIENT SEGMENTS ARISING WITH INTERNET > 100% INTERNET: autonomous clients, focused on price and looking for online contract management > 100% POINT OF SALE: traditional clients, very attached to brick & mortar network Hybrid 100% Internet 30-40% 10-15% < 5% 5-10% 2012 2016 Note : share of non-life individual new business, France Need for MULTI- ACCESS > HYBRIDS: clients willing to benefit from internet advantages (simplicity, rapidity, ) while keeping brick & mortar network advantages (advisory, reassurance, )
Insurers are working on 5 BUILDING BLOCKS to DIGITIZE their VALUE PROPOSITION Align CUSTOMER EXPERIENCE with other industries' standard Develop DIGITAL LEAD SOURCING Digitize EXISTING SERVICES Propose NEW DIGITAL OFFER Leverage CUSTOMER DATA
DIGITAL LEAD SOURCING Lead sourcing is still an EMERGING PRACTICE for most insurers with agents network Lead sourcing maturity Dynamic lead purchasing Active lead purchasing Insurer 1 > Large range of lead generation sources (>100) including leads marketplaces, with sophisticated ROI approach enabling to dynamically select/purchase the most attractive leads > Wide use of various leads generation sources (several aggregators, affiliate partners provided with tailored lead generation widgets, ) DO YOU BUY LEADS FROM AGGREGATORS OR OTHER LEADS GENERATOR? Brokers 75% Agents Limited lead purchasing Insurer 2 Insurer 3 Insurer 4 > Qualified leads bought from a few aggregators and a few other leads generation sources (e.g affiliates) 50% No qualified lead purchasing Insurer 5 Insurer 6 Insurer 7 > Leads generated only on insurer web site > Investments limited to SEO (Search Engine Optimization), SEM (Search Engine Marketing), advertising banners, : traffic generation but no purchase of qualified leads 0% 2012 2016
DIGITAL LEAD SOURCING Most insurers plan to significantly TRANSFER LEADS and CLIENTS in the years to come Client acquisition leads / clients transfer modalities Do you (% of positive answers) TRANSFER INTERNET LEADS TO YOUR DISTRIBUTORS? SELL THESE INTERNET LEADS TO YOUR DISTRIBUTORS? Brokers Agents Brokers Agents 0% 75% 80% 100% TRANSFER INTERNET CLIENTS TO YOUR DISTRIBUTORS? 0% 50% 30% 56% SELL THESE INTERNET CLIENTS TO YOUR DISTRIBUTORS? Brokers Agents Brokers Agents 0% 50% 88% 56% 50% 0% 22% 38% > On AGENTS channel, most insurers (80%) transfer their leads to their agents but only 30% of them sell them. Only half of them transfer clients to their agents > On the BROKERS channel, insurers currently have no leads/ clients transfer activity but plan to develop it 2012 2016
DIGITIZE EXISTING SERVICES Internet role in SERVICING is STILL LIMITED but is expected to increase significantly Touch points by access evolution 2012-2016 Servicing 2012 2016 Contracts management 23% 2% 75% 31% 23% 46% > Still very limited role of internet for servicing activities Claims notification 7% 29% 64% 34% 26% 40% > Stronger role of callcenters for servicing than for acquisition or multi-equipment Claims monitoring 3% 31% 66% 30% 27% 43% > Expected strong rise of internet use in servicing Internet Call-centers PoS 1) 1) PoS include agencies/branches as well as nomad sales forces and brokers Note: non weighted average from a sample of 12 European insurers (with agents, brokers and bankinsurers)
LEVERAGE CUSTOMER DATA EMAIL MARKETING is almost unanimously recognized as the key PRIORITY for multi-equipment digitization Multi-equipment leverage on email E-MAIL ADDRESS KNOWLEDGE Share of clients of whom you know the e-mail address? 65% 26% 55% 100% 50% USE OF E-MAILS Do you realize direct e-mail marketing campaigns 1)? % of yes 44% 81% > Still very limited knowledge of customers email address but strong willingness to significantly improve it on the next few years > 2 insurers with high share of email address (>60%) : multi-year implementation of specific action plans to collect email address (e.g. with incentives for distributors) > Some insurers have stopped paper mailing on mass market clients and replaced it by email direct marketing (advantages : cost reduction, improved time to market, improved segmentation, ) 2012 2016 Average Highest 1) excluding non customized newsletters sent to clients 2012 2016
LEVERAGE CUSTOMER DATA SOCIAL NETWORKS data can be combined with ANALYTICS capabilities enhancement LEVERAGE DATA ON SOCIAL NETWORKS IMPROVE ANALYTICS > Transform an email address into a COMPLETE DIGITAL IDENTITY for each customer contact using information available OVER 100 SOCIAL NETWORKS such as Twitter, Facebook and LinkedIn > Impact on UNDERWRITING : some US life insurers waive medical exams for some prospective customers partly because marketing and social data suggest they have healthy lifestyles (sport practitioner, non smoker, slim, ) > Impact on CLAIMS : new tools based on social links used to improve fraud detection > Kaggle : platform for ANALYTICS OUTSOURCING via predictive modeling competitions. presentation of datasets and problems by insurers competition by voluntary data scientists teams to produce the best solutions > INTERNAL ANALYTICS TEAMS : strong reinforcement by some US and European insurers (with hires of data scientists) to uncover new insights hiding in data (to improve loss forecasts, devise more accurate pricing, better detect fraud, )
DIGITIZATION OF OPERATING MODEL requires to act on 5 main building blocks Set-up a DEDICATED MULTI-SKILLED TEAM for better governance Invest in new IT CAPABILITIES Adapt DISTRIBUTION MODEL Go for DIGITAL FRONT TO BACK PROCESSES Develop ONE-TO-ONE MARKETING capabilities Source: Roland Berger
INVEST IN NEW IT CAPABILITIES Almost all digitization initiatives require NEW IT CAPABILITIES IT capabilities enhancement needs Market knowledge Product development Communication & Advertising Sales Contracts and claims mngt. PROCESSES DIGITIZATION > Big DATA SOURCING & STORING (on customers, competitors, ) > Big data ANALYTICS > Online PRODUCTS RANGE broadening > Products MODULARIZATION / CUSTOMIZATION > NEW digital products / SOLUTIONS > Marketing ROI MODELS / dashboards > Web SITES ENHANCEMENT > MULTI-ACCESS integration > Distribution INTERFACES enhancement > Distributors equipment with NEW TOOLS > Digital SERVICES development > FRAUD DETECTION digital tools implementation > DOCUMENTS digitization COMMENTS > New IT capabilities required both in terms of competences and tools for marketing and product development but with rather limited investments > High IT investments required for processes digitization (esp. contracts and claims management) even if no significantly new competences/ tools are required > Decisions on IT capabilities insourcing / outsourcing to be made on each step of the value chain > If insourced, key strategic decision on building IT capabilities from scratch or modernizing existing tools
ADAPT DISTRIBUTION MODEL Digitization will have significant IMPACTS on PROFILES, MOBILITY, TOOLS and ORGANIZATION How much do you expect to your distributors network footprint and activities due to digitization by 2016? COMMENTS POS EMPLOYEES PROFILES POS IT TOOLS POS EMPLOYEES MOBILITY POS WORKING ORGANIZATION > Digitization should have significant impacts on : Complete Complete Strong increase Complete PoS employees profiles (more commercial, experts, advisory capabilities, internet savvy) Significant Some Nil Significant Some Nil Increase No Reduction Strong reduction Significant Some Nil PoS IT tools (eg. tablets) employees mobility (visits to clients) working organization (more customer centric, more results oriented, more performance monitored) : bubble size proportional to number of insurers : average
TRANSFORMATION ROUTE Most insurers show a willingness to become digital at a RAPID PACE of TRANSFORMATION General assessment of digital transformation route WHAT PACE OF TRANSFORMATION DO YOU EXPECT TO EXECUTE TO IMPLEMENT YOUR TARGET DIGITAL MODEL (BY 2016)? Very quick pace Quick pace Slow pace One shot 2-3 step s Several incremental s COMMENTS > Willingness to execute digital transformation as quickly as possible : drivers : adaptation to customer behaviors, catch-up with competitors or differentiation increase, pressure on costs reduction Very slow pace Steady / continuous however, transformation usually slowed down by IT legacy systems (high investments needed) : bubble size proportional to number of insurers : average
TRANSFORMATION ROUTE TRANSFORMATION PRIORITIES need to be defined to succeed SHORT TERM PRIORITIES (2013-2014) MEDIUM TERM PRIORITIES (2015-2016) VALUE PROPOSITION 1 2 Align CUSTOMER EXPERIENCE with other industries' standard Develop DIGITAL LEAD SOURCING 4 5 Propose NEW DIGITAL OFFER Leverage CUSTOMER DATA 3 Digitize EXISTING SERVICES OPERATING MODEL 1 2 Set-up a DEDICATED MULTI-SKILL TEAM Invest in NEW IT CAPABILITIES 4 5 Go for DIGITAL FRONT-TO-BACK PROCESSES Develop ONE-TO-ONE marketing 3 Adapt DISTRIBUTION MODEL
We CAN NOT PREDICT the FUTURE but We CAN PREPARE it!