The New Normal: Insurance - PowerPoint Presentation

1. The New Normal:Insurance Marketing and Distribution in a Multi-channel WorldBill TysonCEOStrategic Marketing Plus, LLCMonday, October 8th 2012

2. AGENDAPart 1: Industry OverviewPart 2: Distribution Update and Sponsored ProgramsBreak at 10:15 am to 10:30 amPart 3: Best Practices: The Strategic Marketing PlanPart 4: Innovative Marketing and Distribution Approaches in the USA

3. Part 1: Industry Overview

4. The Power of A LinkSocial capital - “a sociological concept used to refer to connections within and between social networks.” “Swiss Army Knife” - like features:Advanced Search – because of the accuracy of profile information (if you lie about anything your peers, colleagues will out you), it is more powerful than Google search. Groups – these community-of-interest-networks go beyond discussions and job postings enabling relationship building around common interests. Information Sharing – through the use of “social objects” – newsworthy items, not authored by you, that you can share rapidly with those you know will find it relevant. Paying it forward – meaning the obligation placed upon everyone in LinkedIn to make introductions for and on behalf of your 1st level connections. Mapping your network – for the first time in history, you can actually map most of your network. See http://inmaps.linkedinlabs.com.

5. Insurance Industry OverviewMacro Trends Impacting Marketing and Distribution

6. 8 Key Macro Trends – Trillion $ + to 2020 – Bain & Co.The rise of the China and India Middle ClassAging Infrastructure China militarization Increasing demand for CommoditiesWorkforce training in emerging economiesKeeping the “Wealthy Healthy”Soft Innovation – quality improvements with existing products and servicesBig breakthroughs – some unforeseen (“black swans”) robots, nanotechnology, 3-D printing

7. Consumer TrendsForever recession – lingering unemployment…21st Century models are being disrupted.Total mistrust of institutions (OWS).Un-retirement – 66% expect to work after retirement.Shift from Government/Employer to WorkerObesity epidemic. Self-service and foreign tech support backlash.Life expectancy increasing - average will be 87 years by year 2029.Ownership of Life Insurance way down.

8. 4 Key Insurance Marketing ForcesFatigue, Distribution, Technology and Competitive pressures forcing business model transformation.Consumer behaviors that require new, relevant marketing, sales and integrated distribution approaches.The blurring of the lines between insurance products and services.Legal and regulatory challenges - to protect the consumer privacy and ensure equity through minimum loss ratio requirements.

9. #1 Fatigue, Distribution, Technology and Competitive Pressures

10. “The trends toward creative populism, personalized measurements, interactivity, open ad inventory platforms and greater consumer control will generate more change over the next 5 years than the advertising industry has seen in the last 50 years.”Dr. Saul J. Berman, IBM Global Media Practice

11. Market Trends – Fatigue Marketing fatigue – across products, channels and traditional media.Product fatigue – “meaningless differentiation”Little R&D at carrier and TPA levels.Product homogeneity is the norm.Channel Fatigue – increased fragmentation – “a million different niches”. Direct mail/inserts ROMI is worsening:Fatigue is across – lists, creative, formats and offers.Better segmentation leads to smaller and smaller targets. Material Costs are increasing due to energy costs (affecting paper, delivery, ink, etc. and postage). Postal delivery slower, less reliable.Do not mail, “go green” movement. Sponsored direct mail is in direct opposition to “Paperless movements” at major financial institutions.

12. IBM CMO Study – Marketing’s Biggest Challenges

13. IBM CMO Study – 7 Measures of Marketing Success“The success of my role is far more about analytics and technology than it is about hanging out with my ad agency, coming up with great creative campaigns. We must increase campaign ROI.” Rob Colwell, Executive Manager — Commercial andMarketing, Qantas Frequent Flyer

14. "We’re going through a revolution a whole lot like the Industrial Revolution. The change is that profound. As we go to market with an idea, the world is going to decide whether or not this has real value, talk about it, and then position it however they want to position it. But understand, you’re still 100 percent accountable for the outcome."John Hayes, CMO of American Express 

15. Major Trends – FatigueService Fatigue:Best practices adopted over the years adds leads to proliferation of sameness:Key Performance Indicators, ROI and Lifetime Value calculations enable “apples-to-apples” performance.Technology and automation of workflows and processes.New metric is the Net Promoter Score (NPS)Rise of Enterprise Risk Management programs to deal with common business risks

16. Distribution Trends - Affinity Traditional Associations are facing mounting pressure to become more relevant.Governmental Employee Unions – are facing cost shifting of welfare programs and cutbacks due to mounting deficits (Federal, State, Local)Trade Associations – tough to sustain membership when dues are optional.Manufactured Associations – face increased scrutiny and potential extinction.

17. Distribution Trends (continued)Employers/Worksite programs – cost shifting – from being providers (and subsidizers) to enablers of insurance for their employee/consumers. Financial Institutions – eliminating programs to avoid additional litigation and regulatory challenges. Approval process on new products takes years, not months.Channel opportunities have been reduced or eliminated:Outbound Telemarketing bans and elimination of statement inserts to trans-promotional ones (like Amex page 2 & 3 ads).Preference now goes to internal bank products.Web sites are profit centers – highest money contributors win.Card issuers – facing high degree of fatigue.Leveraging social media for loyalty programs.Mobile Commerce and Call Center platforms – emerging to compete and fill void of financial institutions and/or use insurance as a means to monetize traffic.

18. Bank Comparison of Mail 2010 vs. 2011Bank% Change 2010 to 2011Wells Fargo-29%Bank of America-53%Citibank-70%U.S. Bank21%Chase-97%

19. Technology Trends – Beyond SocialMobileAccess/Apps.“Tap and Go”, M-commerce (NFC) Mobile Financial Services – wave started by mobile banking. “Gamification” – great way to engage audiencesFrom SaaS to XaaS – “Everything as a Service” aka Cloud Computing:Cost advantagesBUT worries remain about Outages & Security Big Data – struggling to make it actionable.Cyber Disruptions – cybercrime, cyber-war and cyber-terrorism.

20. Competitive PressuresCompetition is intensifying“Pay-as-you-go” models emerging - autoNew emerging competitors have these attributes:Cool Brand, No legacyTechnology-drivenFirst mover advantagePartnerships and alliancesCustomer experience leaders – exude passion and comparative expertise.Outsourcing is intensifying

21. Competitive PressuresIn our business, there is a “Herd-like” regression towards the meanGreat awareness of competitor positions and moves particularly at publicly traded companies.Pre-disposition to make adjustments to match competitors in coverage and rates.The more tightly contested the category, the more clustered the competition:The more hyper-vigilant companies are going to be sensitive to the movements of those around themThe more poised they will be to respond in kind. (1)(1) Youngme Moon, March 2010: Different, page 41, Kindle Edition, Random House, Inc.

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23. Competitive PressuresMobile/Portability is going to be a big disrupter.Service is going to be the linchpin of the integrated channel experience. Personalization and customization is necessary to reinforce the customer relationship Must have Real-time responses to data to provide business advantage.Flexibility that dynamically aligns with customer use and behavior. Modular products and new, more equitable pricing models (“pay-as-you go/drive” auto insurance, etc.)Forester Research, 2011

24. #2 Consumer Behavior is changing…dramatically“Consumers are moving outside the purchasing funnel—changing the way they researchand buy your products. If your marketing hasn’tchanged in response, it should.”-McKinsey Quarterly, 2009 #3

25. The Traditional Sales Funnel25AwarenessConsiderationPreferencePurchaseRe-purchase (Loyalty)Familiarity

26. Has Changed To This 26HBR: The Customer Decision JourneyStart here

27. Requiring this type of intensityAdvocacy

28. Customer Journey Mapping…Let’s take a look at a Life Insurance Customer Experience Map.

29. 6Direct Mail/Email/Word of MouthWhen Mark receives his first bill and policy in the Hawkeye welcome kit through the mail, he finds an insert that offers discounts on bundled car, life, and home insurance. Mark tells Molly, and she looks online to see what car insurance at Hawkeye covers, and what potential savings could be had by bundling. Direct Mail/WebMark receives a direct mail offer from Hawkeye Family Life to buy guaranteed tem life insurance. The cost seems affordable and he has considered buying additional coverage for his growing family, beyond the plan his employer provides. Mark visits the PURL (personalized URL) that is referenced in the mail piece, enters his email address, and fills out a quote request.TV/Online/Social About a week later, Mark and Molly see a tv ad for a new car that she is considering buying. Mark mentions that he saw some car buying tips on the Hawkeye website. Molly goes onto the Hawkeye General website to check out the car buying tips . While on the website, she enrolls for the enewsletter that includes gas saving tips and other auto related articles. And since their oldest child will be driving soon, they join Hawkeye’s parents blog re: best ways to teach good driving skills to your children51Online/WOM3Later that evening when online, Mark notices an ad for term insurance from Hawkeye Life. He decides to check to see how rates compare, and when he googles “affordable term life”, he sees Hawkeye near the top of the list. Mark clicks on a couple sites to check their rates, and as he surfs the web, another Hawkeye message appears. He visits a few more sites with customer reviews and see a lot of positive feedback. All information contained herein is confidential and/or proprietary information of Epsilon Data Management, LLC. Any unauthorized use and/or any disclosure is strictly prohibited. Direct Mail/Web/PhoneIn his mailbox the next day, Mark finds a thank you note from Hawkeye for clicking on the calculator, and offers him a 5% discount if he signs up online. Mark decides to take advantage of the offer and buys a $500k term life policy from Hawkeye. During his purchase, a prompt to add a policy for his spouse at a 20% discount is offered. Mark decides to purchase a policy for her, too. The following day, a Hawkeye agent calls to set up medical exams for both Mark and Molly.4Email/ Direct Mail/PhoneAn agent calls Mark and Molly to review the final policy, and let’s them know they will receive a survey via email in the next few days. In return for providing Hawkeye with their feedback on the experience, Molly and Mark will receive 2 Starbucks gift cards in the mail.7EmailKnowing that Mark linked into the PURL, but didn’t make an initial purchase, Hawkeye Life sends Mark an email the next day that points him to the coverage calculator to help Mark determine the appropriate level of coverage based on his needs. He goes online to further investigate his options using the weblink to the calculator, and also researches the cost of an additional policy for his wife, Molly. 229Sample Life Insurance Customer Experience Map

30. “With internal and external research in hand, journey-mapping leaders need to distill their findings about: 1) how customers interact with the company, 2) what they want from each interaction, and 3) how they feel about each interaction today—the three key elements of a journey map.” [1]Bruce Tempkin, Author of the blog: Customer Experience Matters.Customer Journey Mapping…

31. “Sales Funnel” to Lifecycle. Marketing needs to reflect the new reality.Interactivity that drives engagement.The 3 “C”s – choice, consistency and continuity.Leverage Channel Synergies:How are you speaking to your customers/prospect, what channels are you using? Can you utilize more?Measure all interactions:Campaigns, segmenting internal and external data Targeting, frequency, multiple channel consistent messagingPerformance indicators help to optimize channelsKey takeaways31

32. Master use of data and analyticsLeverage insights to ensure value proposition remains strongUse multi-channel marketingStructure relevant offers that foster engagement in an efficient way to fund new growth opportunitiesAccenture 2011 Marketing Study Says…Marketers need to focus on 4 things

33. #3 The blurring of the lines between products and services.

34. ExamplesStreaming audio, video, iTunes.Zipcar – car for those who don’t want a car.Cloud Computing.Identity Theft protection.Red24 - is a leading global security company providing global risk management to employees and companies.Auto Service – Extended Warranty.Beneficiary Companion – Europ Assist.

35. #4 Legal and regulatory challenges to protect the consumer privacy (and ensure equity through minimum loss ratio requirements).

36. Regulatory Fatigue – Major Drag on Commerce:Healthcare and Financial regulatory reforms.Many Sales practices under scrutiny.Information security and privacy concerns. Longer State filing and due diligence periods on insurance and investment products and programsDiverts scarce company resources.

37. Another Way to Look at Branding

38. Critical Success FactorsThe need to generate new revenue streams to grow and replace mature programs.CVP based on True Differentiation.Improving the member/customer experience (to one that is authentic, genuine and compelling).An understanding that the consumer is in control, not the advertiser. Leveraging Data and Analytics.Multi-channel marketing proficiency.Being impactful, e.g. being proactive, innovative, relevant/authentic to younger members. All touch points and interactions executed seamlessly with thoughtfulness, relevance, accuracy and precision (at the right time).Striking a Balance between “monetizing” traffic and member/accountholder base without being obnoxious and intrusive (privacy is a big issue).

39. Part 2: Insurance Distribution Update and Sponsored Insurance Programs

40. Trends That Will Shape Next 10 YearsCarrier’s Focus on lower acquisition costs.Agent/Broker as Advisor – Subject matter expert, Choice editor, navigator, simplifier and advocate.Pricing Transparency.Regulatory intensity.More pressure on Agent Compensation through Minimum Loss Ratios.Underwriting automation via artificial intelligence.Mobility and Integrated, Real-time Communications to support agents and consumers.

41. Distribution Investment by Insurers 66% of Insurers do not consider their current distribution model as a source of competitive advantage.Key Drivers in investing in Distribution are: The emergence of new technologies (86 Percent) Changes in customer needs and attitudes (84 percent), New regulations (81 percent) and the increasing importance of advice in the distribution of insurance products (also 81 percent).66% of insurers said that all services -- including quoting, underwriting, billing, claims declaration and account management -- will be available online within the next three years; 75 percent -said that developing relationships with “non-tied” channels (independent agents and brokers, and others) was a main priority.66 percent - of insurers identified investment in training as a key priority for optimizing the performance of  their captive sales force, 64 percent - identifying specialized tools and sales support, including information technology (IT), as their main priority. Aligning IT infrastructure with a defined distribution strategy was cited by 63 percent of insurers as a key challenge.SaaS – Software as a Service applications are replacing legacy systems.Source – Accenture Study Accenture Global Survey Finds Insurers Will Invest $84 Million, on Average, Over the Next Three Years To Improve Distribution Strategy, May 24, 2010

42. 5 Common Distribution ObjectivesObtain a premium price for your product that provides superior profit vs. competition.Favorably position your company in a poorly differentiated marketplace.Achieve the right match of distribution to key product requirements (Decision support and Target Customer Segment(s)).Meet the growing demands of your customers: transparency, value, accessible, convenient, green and friendly.Leverage data and advanced analytics to determine best offer through the best channel at the right time.

43. This checklist is from Friedman and Furey, in their book The Channel Advantage, and is featured in). The Manager's Guide to Distribution Channels (Kindle Locations 1336-1338) Gorchels, Linda (2004-04-23. McGraw-Hill - A. Kindle Edition.. 9 Attributes for Product and Distribution fitDefinition – extent to which product is known and recognized.Customization – the amount of product adaptation required by customers.Aggregation – is the product stand alone or needs to be bundled (malpractice insurance and adherence to a loss control program)Exclusivity – the uniqueness of the offer. (common in sponsored or direct channels).Customer education needs – before and after the sale.Substitution – the ease with which a product can be replaced by a competitive offering (i.e. auto insurance).Maturity – the stage in a product lifecycle – more mature products require low touch.Customer risk – potential consequences of a wrong decision and/or switching costs (and associated risks).Negotiation – the degree to which the scale and complexity factor in the transaction.

44. Channel Types by Decision Support RequirementsHigh-TouchLow-TouchDirectIndirect

45. Product and Channel Fit By SegmentCost, Complexity and CPACommercialWealthy – High Net WorthMiddle MarketDirect-to-Consumer – Mass MarketCommon Distribution OptionsRisk managerConsultantBrokerAgentInvestment AdvisorBrokerAgentCPA/AttorneyAffinity GroupsDRTV/RadioVirtual Marketing - AggregatorDRTV/RadioVirtual MarketingMicro-insuranceRetail“Air-breather” trusts

46. Common Marketing Channels to Support Insurance Outbound Direct mailTradeshows/seminars/events/KiosksEmailWeb sites, Microsites, PURLSContact Centers (Telemarketing)DRTV and RadioMobile/SMS/Chat/AppsBrick and mortar storesOther (newspaper, out-of-home ads, etc.)InboundPaid search/Pay per clickSearch Engine optimizationBlogs and social mediaWord-Of-Mouth (WOM)Viral videoFacebookNewspaperDirect MailCompany WebsiteRetail LocationCustomer ServiceEmailTwitterMySpaceYouTubeFriends/FamilyRadioMobileOnline ForumsBlogsTVRSS

47. The Value Chain for Sponsored Programs

48. SponsorsMembers, Member Firms and CustomersL&HP&CGroup (Insured or Self-Insured)Individual or FranchiseCommercialor Program Business(Insured, RRGs or Captives)Wet or Dry Trusts or, to the Group PolicyholderSponsorLOBUnderwriter & ContractPolicyholderIndividualPolicy CommercialEntity Broker, MGA, MGU Agent and /or TPA GA, Broker or AgentDistributionProgram Administrator, Agent, Broker, MGU or MGA Broker, Agent and /or TPA Insurance Company, Agent, IMO or TPARRGs, Captive, Insurance company,Agent, Broker, MGU or MGA Admin./FulfillmentChannelS*Common Elements of A Sponsored Insurance Program48

49. Program SponsorsProfessional Associations (LAPD)Military and veterans groups.Financial Institutions - “Bancassurance” – Credit Unions, Banks, Virtual Banks, Lenders, Credit card Companies, Investment banks, etc.Clubs (NRA, AAA, Costco, Sam’s Club, etc.).Employer Groups (Worksite marketing)Loyalty programs.Call Centers- Monetizing large volumes of traffic.Virtual Marketers - Mobile operators, Lead generation companies

50. Additional Success FactorsTrusted BrandWin-win-win “partnerships” between the sponsor, Broker(s) and CarriersInnovation – in terms of products, services and channels (both inbound and outbound)Strict standards of performance (sales, administration and claims)Metrics, Scorecards and Business ReviewsTransparency across broker, TPA and Carrier – roles, responsibilities and compensationContent and social media supportLegal and Regulatory complianceOwnership of records50Strategic Marketing Plus, LLC. On behalf of the American Bar Association. All rights reserved, 2012.

51. Why Have a Sponsor Sponsored Insurance Program?Benefits to the Affinity GroupAdds value to Member benefits programCan help attract, engage, connect and retain membersFill a specific insurance need Advocacy role at billing/collection/claims timeGenerate Non-dues revenueCan be “turn key” with no capital requirement necessaryLow pressure salesCompetitive pricingMore relaxed underwriting vs. general marketTailor-made coverage(s)Program Vetting and Oversight by trusted organizationHigh quality service51Benefits to the MemberStrategic Marketing Plus, LLC. On behalf of the American Bar Association. All rights reserved, 2012.

52. Increased Revenues Faster and streamlined business process improvementDecreased Customer Service CostsDecreased Service CostsIncreased Customer Retention and lifetime value of membersImproved delivery of reportingDemonstrate service value Decreased Staff Recruiting CostsIncreased relevance to stakeholdersIncreased Brand AwarenessIncreased Access to Customer Profiling DataEnhanced Customer/Vendor SatisfactionIncreased Employee Recruiting Satisfaction Attractive host for acquisitionsIncreased CompetitivenessImproved relationships with partnersDirect BenefitsIndirect BenefitsTypes of ROI for Affinity Groups

53. The ABC’s of Distribution AlternativesIndividual Lines (including Personal Lines):Direct – Mutual of Omaha, GEICO, AAA, ANICO.General Agents, IMOs and DMOs.Captive Agents- State Farm, Nationwide, Liberty Mutual, etc.Independent Agents – Hanover, Travelers, etc.Group: Association and Benefits (for firms)Brokers, Agents and TPAs. Full Service Brokers that are MGA’s, MGU’s, TPAs, etc.P&C Specialty programs – Program Administrators/Brokers, MGAs, MGUs, RRGs and Captive Insurance Companies.53Strategic Marketing Plus, LLC. All rights reserved, 2012.

54. Business Models54

55. Association Insurance Program Business Model VariablesCore competencies: marketing, administration, education, information, networking, etc.Line of Business (L, A&H and P&C).Member or Customer Value Proposition.Knowledge, specialized expertise and capabilities.Capital Resource Commitments (people, processes and technology).Licensing (Agent, Broker, Captive, etc.).Partners, vendors and supplier networks.Level of risk and risk tolerance.55Strategic Marketing Plus, LLC. All rights reserved, 2012.

56. 5 of the Most Common Business Models“Turn key”, Private label – select a TPA and/or PA with insurance company relationships that can manage all facets of the program.Insurance company-run program, direct-to-member and/or member firm. (i.e. Liberty Mutual).The “for profit”, In-house agency/TPA subsidiary -with responsibilities for marketing, sales and administration. Could be limited to select, few products. Captive Insurance company run, RRG or Self-Insured program, direct-to-member and/or member firm. (i.e. NASW).Hybrid Approach – a combination of 2 or more of these other models.56Strategic Marketing Plus, LLC. All rights reserved, 2012.

57. Determining Feasibility

58. Factors to Consider in Determining FeasibilityIs running an Sponsor Insurance Program A Sponsor’s Enterprise-Level Activity?Strategy - does it have a high level of strategic importance to the Sponsor?Value creation – is the insurance program a source of perceived or real value for the membership?Brand - does the program affect the Sponsor brand and image (good or bad)?Customer experience - Is a seamless member experience required across Sponsor?Trust and Quality - Does it require Sponsor vetting, oversight and periodic performance assessments?Relevancy - Is it a service that needs to be relevant to serve a current and future membership?Risks - and rewards trade-off. 58Strategic Marketing Plus, LLC. All rights reserved, 2012.

59. Factors to Consider in Determining Feasibility – Product Portfolio LevelIs it a product nearly every member (that is the right fit for the product) will want to buy and buy through the Sponsor Insurance Program?Is there significant funding of resources (people, processes and technology) and Sponsor control over the sales, marketing, fulfillment and servicing of the product and service, since this activity can have an impact on the brand?Is there an opportunity to make a big, positive change in the customer experience (a.k.a. the ‘Wow’ factor)?Will it provide enough of a positive contribution (non-dues revenue and brand equity) to the Sponsor and partners to make it a worthwhile part of our product portfolio? 59Strategic Marketing Plus, LLC. All rights reserved, 2012.

60. Abbreviations and TermsAgent – licensed and appointed as a representative of the insurance company. Broker – licensed and appointed intermediary that represents the insured.TPA – a third party administrator that performs one or more insurance company functions: marketing, sales, medical underwriting, billing, collection, claims adjudication and/or claims payment.GA – General Agent appointed by an insurance company: (by territory or vertical)IMO and DMO – Independent or Direct Marketing Organization.MGA – Managing General Agency (same as a GA but more of a wholesaler). MGU – an MGA that also has underwriting authority delegated, sanctioned and audited by the insurance company. Program Administrator – same as an MGA, usually P&C, that also has underwriting authority delegated, sanctioned and audited by the insurance company.Program Business – specialty lines tailored to a homogeneous occupational group. (i.e. Lawyers Professional Liability).Self-insured program – a vehicle common in health insurance, where the employer assumes a certain level of risk (stop loss limit) and is supported by an administrator and stop loss provider.Captive insurance company and Risk Retention Group (RRG)- allows similar businesses to form groups to provide self-insurance for the primary purpose of assuming and spreading the liability risk exposure(s) of its group members (member-owners).

61. Additional Articles and ResourcesMet Life Association Study, March 2012“Run for Coverage” by Jeffrey Altman, Association Management, July 2001.“Does Your Sponsored Insurance Program Measure Up?” By: Ed Armstrong, ASSOCIATION MANAGEMENT, November 1998.“Building Robust Distribution to Support Strategy”, By Bill Tyson, The Savvy Strategist, October 18, 2011.“Establishing an Insurance Subsidiary”, Douglas Culkin, Association Management Magazine, October 1999.Insurance Glossary of Insurance and Risk Management Terms by IRMI.com61Strategic Marketing Plus, LLC. On behalf of the American Bar Association. All rights reserved, 2012.