Data, Digital, Direct - COVER Publications · Data, Digital, Direct Innovation insights in a face to face world . Bruce Sahd . Managing Director, CaseJohnson . 6. th. ... bancassurance

Data, Digital, Direct Innovation insights in a face to face world

Bruce Sahd Managing Director, CaseJohnson

6th African Insurance Distribution & Bancassurance Conference, 12-13 October 2016, Johannesburg

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

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?

D IGITAL, D IRECT, DATA IS THE NEW FRONTIER

DIRECT, DIGITAL, DATA & ‘THE NOISE’

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.

“Cut-out the middleman!”

“Get 20% cash back”

“No medical exam”

Is it cheaper to go direct?

Will direct pay your claim?

Can direct retain and service you?

MYTH-BUSTING ADDS COLOUR TO THE DEBATE

Source: Discovery Life. “The value of the financial adviser in life insurance. 2013

Myths ‘dispelled’ by Discovery Life: Myth 1: Direct insurance is cheaper than buying life insurance through a financial adviser Myth 2: Financial adviser commissions inflates premiums compared to direct insurers who don’t

pay commission Myth 3: Consumers will be able to maintain direct insurance premiums over the long-term Myth 4: Direct insurance products offer comprehensive cover Myth 5: Consumers do not need financial advice as information is readily available Myth 6: Financial advice is the same whether a call centre agent or qualified financial planner

provides it Myth 7: Claim pay-outs from direct insurers are transparent and certain Myth 8: Intermediaries do not add real value to consumers

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.

MYTH-BUSTING ADDS COLOUR TO THE DEBATE

Source: Discovery Life. “The value of the financial adviser in life insurance. 2013

WHAT IS HAPPENING IN DIRECT?

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

DIRECT IS MOVING UP THE PYRAMID

HNW

Middle

Mass

How far down will ‘pay for advice’ hold the line?

How far up will direct & digital encroach? 1

2

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

Digital

Advised Intermediated

Complex

Advertised Direct Simple

Client-led Bought

Commoditised

Technological landscape

FOUR FORCES ARE DRIVING CHANGE IN A DYNAMIC TECHNOLOGICAL LANDSCAPE

INDUSTRY

DISTRIBUTORS

REGULATORS

INSURERS

CLIENTS

Convenience Comparison

Choice

Remuneration Reach

Relevance

RDR POPI

Ideology

Control Brand

Margin

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?

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 counter-balance?

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)

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, off-the-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

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

THE RISE AND RISE OF DIGITAL

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"

DIGITAL INSURANCE IS A NEW REALITY

Kroodle (Dutch insurer) sells short term cover exclusively on Facebook

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 self-

selecting 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, co-founder of

Friendsurance

“Don't underestimate what people are willing to do to save money”

THE INSURANCE INDUSTRY HAS BEEN SLOW TO EMBRACE SOCIAL MEDIA

Source: KPMG The South African Insurance Industry Survey 2014

“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.”

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

ONLINE PROFILES & SOCIAL MEDIA CAN DETERMINE COVER LEVELS

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”

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.

“Wealthfront have dispelled the notion that robo-advisors are

for young people with no money,” Dennis Clark, Schwab

executive

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?

DATA IS AT THE CORE OF IT ALL

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 … And it is available to every channel !!

Tele Face to Face Web

Data Data Data

DATA CAN LEVEL THE PLAYING F IELD

No surprise then that every insurance study identifies data and analytics as an imperative strategy to adopt !!

F2F NETWORKS

ONLINE ADS

ABOVE-THE-LINE ADS

BELOW-THE-LINE

data

WEBSITE

TELE-AGENTS

FIELD-AGENTS

data

data

ADMIN PLATFORM

(POLICYHOLDERS)

data

data

data

data

data

MARKETING PLATFORM

(LEADS) data

DATA SHOULD BE USED BY ALL CHANNELS

LEAD SOURCING SALES CONVERSION

CLOSING THOUGHTS ON THREATS & OPPORTUNITIES

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

CONSUMERS MAY HAVE INFORMATION BUT NOT KNOWLEDGE

Source: EY – Key findings from the Global Insurance Survey, S. Hanlon.

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”

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.

OVERHEARD…

“Who needs data and technology when all the really important information about my clients is in my head…?”

“Affluent individuals will always want a personal relationship …”

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…”

OVERHEARD…

“Life insurance and investment is about personal relationships, not impersonal websites and call centres…”

OVERHEARD…

“Long term products will always be sold, not bought…”

OVERHEARD…

“IFA’s should pro-actively offer web-based front ends to the end-user …”

OVERHEARD…

“IFA-branded portals for clients to view their entire portfolio in one place would be a good idea…”

OVERHEARD…

“Surely self-service admin is something that could be offered to clients under the IFA’s brand…?”

OVERHEARD…

“Statements are terribly designed at present, this is a big opportunity to demonstrate value-add to clients …”

OVERHEARD…

“IFA’s have access to IT systems but they don’t properly utilise them…”

OVERHEARD…

“RDR is definitely a looming threat for IFA’s as nobody really knows how clients will respond when having to pay for advice…”

OVERHEARD…

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

OVERHEARD…

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…”

OVERHEARD…

“Every insurer should have a data strategy and a digital strategy, even if they don’t have a direct strategy”

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!”

OVERHEARD…

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

Any other questions?

To buy direct or not to buy direct …?