Data, Digital, Direct

Transcription

1 Data, Digital, Direct Innovation insights in a face to face world Bruce Sahd Managing Director, CaseJohnson 6 th African Insurance Distribution & Bancassurance Conference, October 2016, Johannesburg

2 CASEJOHNSON IS AN INNOVATION PARTNER Innovation Partner advise & implement Specialist combination Consultant & Project Manager Focus = data-centred insurance distribution strategies in emerging markets 3 P s Approach = Plan Pilot Profit Country experience = SA, Ghana, Nigeria, UAE, Lebanon, India, Sri Lanka 7 in 10 respondents say that they believe partnerships, not in-house efforts, will characterize the future of innovation for their organization Source: KPMG A New World of Opportunity: The insurance innovation imperative Oct 2015

3 DIGITAL, DIRECT, DATA IS THE NEW FRONTIER Intermediated selling still dominates worldwide!! But: technological advancements and changing consumer behaviour So insurers increasingly want to: own client relationships under their brand, target specific risk profiles with simple tailored products, and control upsell or cross-sell activity. Many consumers still see value in face to face (often independent) financial advice So, there is clearly room for both What are the key innovation insights for traditional insurers?

4 DIRECT, DIGITAL, DATA & THE NOISE Cut-out the middleman! Is it cheaper to go direct? Get 20% cash back Will direct pay your claim? No medical exam Can direct retain and service you? Direct distribution of life insurance is non-intermediated selling, with paperless/electronic application, and underwriting done on a pre-approved basis using personal data or automated at point-of-sale.

5 MYTH- BUSTING ADDS COLOUR TO THE DEBATE Myths dispelled by Discovery Life: Myth 1: Myth 2: Myth 3: Myth 4: Myth 5: Myth 6: Myth 7: Myth 8: Direct insurance is cheaper than buying life insurance through a financial adviser Financial adviser commissions inflates premiums compared to direct insurers who don t pay commission Consumers will be able to maintain direct insurance premiums over the long-term Direct insurance products offer comprehensive cover Consumers do not need financial advice as information is readily available Financial advice is the same whether a call centre agent or qualified financial planner provides it Claim pay-outs from direct insurers are transparent and certain Intermediaries do not add real value to consumers Source: Discovery Life. The value of the financial adviser in life insurance. 2013

6 MYTH- BUSTING ADDS COLOUR TO THE DEBATE Key Findings by Discovery Life: 1. Initial premiums of direct life insurance companies are 9% more expensive. 2. Limited premium guarantees create uncertainty for consumers and increased unsustainability. 3. Benefits are not comprehensive and do not address consumers needs at every life stage. 4. Restricted maximum cover amounts render them unsuitable for high income earners. 5. Poor claims payment record. Source: Discovery Life. The value of the financial adviser in life insurance. 2013

7 WHAT IS HAPPENING IN DIRECT?

8 DIRECT IS GROWING NOW: Only 7% of life cover in SA is sold direct BUT: Direct is growing and is already bigger than bancassurance in terms of value Life offices hesitant (Spice, Connect, Frank) Growing activity - 1Life, Outsurance, Instant Life, Frank, Different Life, MiWay Life Investment products are next in line Telemarketing is sold, Internet is bought Smartphones will have a huge impact

9 DIRECT IS MOVING UP THE PYRAMID 2 How far down will pay for advice hold the line? HNW 1 How far up will direct & digital encroach? Middle Mass

10 INSURANCE DISTRIBUTION IS EVOLVING Man from the Pru in 1800 s Telemarketing in 1970 s Digital in late 1990 s Technological advances on 2 fronts - Information (data, analytics, cloud) - Communication (phone, web, digital) Clients, insurers, regulators all forcing change Underpinning all distribution models is DATA Face to face Direct Advised Intermediated Complex Advertised Direct Simple Digital Client-led Bought Commoditised

11 FOUR FORCES ARE DRIVING CHANGE IN A DYNAMIC TECHNOLOGICAL LANDSCAPE CLIENTS REGULATORS Convenience Comparison Choice INDUSTRY RDR POPI Ideology INSURERS DISTRIBUTORS Control Brand Margin Technological landscape Remuneration Reach Relevance

12 CLIENT BEHAVIOUR IS THE MOST IMPORTANT FORCE TO UNDERSTAND Why are clients attracted to direct and digital ways of doing business? Information (24/7 any time) Functionality (quotations) Convenience (at home) Personalisation (tailored for me) Comparisons (window shopping) Lowest price (client can decide) Brand trust (they will pay me) No obligation (its just a website) Immediate/ quick (on my terms) Event-triggered (as it occurs to me) Drivers of behaviour will vary depending on what the client wants to do: Research for information? Make buying decisions? View their portfolio?

13 REGULATION IS (INADVERTENTLY) MAKING DIRECT MORE APPEALING RDR ushers in pay for advice which seems likely to drive more people online POPI requires client opt-in which seems likely to stem the growth of direct marketing Ideology plays a major role too will we always follow the UK? Post-2008 will an increasingly heavy hand continue to be seen as a necessary counterbalance? Compliance remains a disproportionate burden for all players, especially IFA s? RDR is going to be a major growth driver for our business (large direct insurer)

14 PRODUCTS ARE BECOMING SIMPLER AND MORE COMMODITISED PWC noted in their 2014 Insurance Report that products sold through direct and digital channels have achieved relevance through standardised, simpler product design The first generation of products sold over digital channels have tended to be relatively simple, offthe-shelf options. Implication: these products are less complex, less advice-intensive, easier for the client to make his own decision Source: PWC, Insurance 2020, 2014

15 ADVISERS DON T SEEM READY FOR CHANGE CoreData research study in 2014 Of the 11,500+ key individuals registered with the FSB in 2013: - Only 5,209 were planning for change - The remaining 6,290 weren t Source: CoreData research: Prepared for change? The South African advice industry. April 2014

16 THE RISE AND RISE OF DIGITAL

17 STILL EARLY DAYS FOR DIGITAL INSURANCE EY had some KEY FINDINGS in their 2013 survey Insurance in a Digital World : Insurers acknowledge their digital immaturity Ambitions are high, but not yet in line with digital capabilities Insurers are constrained by culture Insurers want more direct control and better customer experience Channel conflict can be reduced by treating distributors as digital customers Data analytics is critical to future digital success Insurers should commit to the mobile and social future And some RECOMMENDATIONS Frame the case for investment and plan a strategy Build the analytics infrastructure and the implementation capabilities Embed a culture of innovation so that everybody sees the opportunities Source: EY "Insurance in a digital world: the time is now"

18 DIGITAL INSURANCE IS A NEW REALITY Kroodle (Dutch insurer) sells short term cover exclusively on Facebook

19 SOCIAL MEDIA STRATEGIES ARE EMERGING Friendsurance is an online peer-to-peer insurance broker Founded in Berlin in 2010 (Australia in 2014) People invited to use social media to invite friends into selfselecting groups to reduce marketing, admin, claims costs & risk Two people connect & agree to support each other with an amount in case of claim (max 30 but grows as network grows) Insurers are there to cover the claim amount that exceeds the network support (or provide payback) Payback of 50% of insurance fees is possible with 10 or more connections in the network People who invite low-risk friends enjoy lower cost of insurance Benefits = less fraud, better risk selection, lower sales costs, lower admin cost, risks self-managed Probably the most disruptive and innovative thing you can do in the insurance world Tim Kunde, cofounder of Friendsurance Don't underestimate what people are willing to do to save money

20 THE INSURANCE INDUSTRY HAS BEEN SLOW TO EMBRACE SOCIAL MEDIA It seems, in the online universe, the industry appears to be as conservative and traditional as it is in popular opinion. Risk considerations and the nature of the insurance business have sorely limited the industry s exploration of these media platforms. Source: KPMG The South African Insurance Industry Survey 2014

21 ONLINE PROFILES & SOCIAL MEDIA CAN DETERMINE COVER LEVELS Case Study: Aviva life insurance US operations of Aviva traditionally used medical tests to ascertain customers lifestyle patterns, which determined insurance coverage, but pathological tests are costly, manipulated, not user-friendly Aviva analysed the online behaviour of 60,000 insurance applicants from their online shopping, social media activities Categorised as runners/hikers; dieters or couch potatoes. Predictive modelling to estimate longevity Coverage decided on the basis of lifestyle pattern life expectancy Benefits achieved: Social media analytics are considered more efficient and customer-friendly Insurers expected to save approximately $125 per applicant by eliminating conventional medical tests Facebook page 'likes' and Tweets are better indicators of lifestyle risks such as high blood pressure Source: KPMG The South African Insurance Industry Survey 2014

22 DIGITAL TECHNIQUES CAN INFLUENCE CONSUMER BEHAVIOUR IN GOOD WAYS Web-based tools (age-progressed renderings) were tested to see if it could encourage people to prepare for the future and boost sales of savings products - Age-progressed renderings of participants - Use slider to decide how much to save - Low amount = frowning - High amount = smiling - Participants saved twice as much as control group ($172 vs $80) Source: Hershfield et al (2011). Increasing Savings Behaviour Through Age Progressed Renderings of the Future Self. Journal of Marketing Research.

23 IS ROBO- ADVICE A VIABLE DIGITAL ALTERNATIVE? Direct investing, direct indexing Offers consumers direct access to portfolio management tools Wealthfront founded the category in 2008 Charles Schwab resisted but then launched a robo-advisory in 2015 Wealthfront average investment = $90,000, but new pilot attracting HNW (min. $500,000) is already 1/3 of AUM Google has adopted Wealthfront advice as an employee benefit for all its staff Will HNW clients ever adopt robo-advice without human adviser involvement? Wealthfront have dispelled the notion that robo-advisors are for young people with no money, Dennis Clark, Schwab executive

24 DATA IS AT THE CORE OF IT ALL

25 DATA CAN LEVEL THE PLAYING FIELD Data strategies help us know: 1. Who our existing customers are 2. Who our future customers should be 3. What products they will need 4. When they will need it 5. How best to reach them 6. How much they can afford 7. If they are a high or low risk This is incredibly valuable Tele Web Face to Face And it is available to every channel!! No surprise then that every insurance study identifies data and analytics as an imperative strategy to adopt!! Data Data Data

26 DATA SHOULD BE USED BY ALL CHANNELS LEAD SOURCING SALES CONVERSION data F2F NETWORKS data data WEBSITE ONLINE ADS data MARKETING PLATFORM data TELE-AGENTS ADMIN PLATFORM ABOVE-THE-LINE ADS data (LEADS) data (POLICYHOLDERS) FIELD-AGENTS BELOW-THE-LINE data data

27 CLOSING THOUGHTS ON THREATS & OPPORTUNITIES

28 CLIENTS WANT PERSONAL & DIGITAL TO WORK TOGETHER Digitally active insurance customers want to use a combination of face-to-face meetings, telephonic interactions and digital platforms. Source: Bain & company. Leading a digital transformation in insurance, 2014

29 CONSUMERS MAY HAVE INFORMATION BUT NOT KNOWLEDGE Ernst & Young - In an era when many consumers feel bombarded by push communications and suffer from a general sense of information overload, it is particularly interesting for customers to express a desire for more communication from a company Source: EY Key findings from the Global Insurance Survey, S. Hanlon. JP Morgan - Our research indicates that the most powerful trigger for paying for advice is a recognition by an individual of the limits of their own knowledge on a particular finance issue Source: JP Morgan. Winning propositions: the consumer market post RDR. August 2012, S. Hanlon.

30 OVERHEARD Who needs data and technology when all the really important information about my clients is in my head?

31 OVERHEARD Affluent individuals will always want a personal relationship

32 OVERHEARD Nobody is better placed than the IFA to know when a key event has happened in the clients life that triggers a financial need

33 OVERHEARD Life insurance and investment is about personal relationships, not impersonal websites and call centres

34 OVERHEARD Long term products will always be sold, not bought

35 OVERHEARD IFA s should pro-actively offer web-based front ends to the end-user

36 OVERHEARD IFA-branded portals for clients to view their entire portfolio in one place would be a good idea

37 OVERHEARD Surely self-service admin is something that could be offered to clients under the IFA s brand?

38 OVERHEARD Statements are terribly designed at present, this is a big opportunity to demonstrate valueadd to clients

39 OVERHEARD IFA s have access to IT systems but they don t properly utilise them

40 OVERHEARD RDR is definitely a looming threat for IFA s as nobody really knows how clients will respond when having to pay for advice

41 OVERHEARD When commercial insurance started to go direct it was a wake up call for those who thought big ticket insurance never would

42 OVERHEARD IFA s shouldn t simply target high net worth individuals, they should use technology and data to find those who value advice and are prepared to pay for it

43 OVERHEARD Every insurer should have a data strategy and a digital strategy, even if they don t have a direct strategy

44 OVERHEARD It s not that insurers don t know what to do innovation-wise, it s that they don t know how to do it!

45 OVERHEARD Implementing innovative projects is the part that insurers struggle with the most, mostly because its not in their DNA

46 Any other questions? To buy direct or not to buy direct?