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Asia-Pacic

Voice of the customerTime for insurers to

rethink their relationshipsGlobal Consumer Insurance Survey 2012


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Contents

Executive summary 2

01Life and pensions (including investments) 5Our survey explores the following myths:

1.Customers have low condence in the life and pensions industry

2. Life insurance is sold, not bought

3. Personal interaction is essential

4. Its hard to cross-sell to existing customers

5. Providers cant inuence persistency

02Non-life insurance 21Our survey explores the following myths:

1. The future is online

2. Its only about price

3. Good claims experience builds loyalty

4. Customers dont respond to cross-selling

5. Insurers cant inuence customer retention

Global methodology 36

Contacts 37


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1

Faced with the unprecedented challenges of troubled nancialmarkets, changing regulatory oversight and economicuncertainty, there is a risk that some insurers may not belistening and responding to the most important voice of all that of their customers. For any insurer hoping to navigatethrough this difcult time, understanding how customerbehaviors and attitudes are changing is critical. Previousassumptions and received wisdom about customers may nolonger be reliable, and those insurers who are able to respondbest to what customers want now are most likely to succeed.

In light of this, Ernst & Young conducted a groundbreakingsurvey of insurance customers. Working with the research rmIpsos, we set out to test the received wisdom by interviewing9,000 consumers of life and non-life personal insuranceproducts in Australia, China, Hong Kong (special administrativeregion of China), Indonesia, Malaysia, Singapore, and SouthKorea between August and October 2011, as part of a globalsurvey covering 23 markets in seven regions around the world.1

Global ConsumerInsurance Survey 2012 Asia-Pacic

1For a full description of the global methodology used to create this report, please see page 36.

24,000Global customers

7Global regions

23Markets

Australia

China

Hong Kong (SAR)

Indonesia

Malaysia

Singapore

South Korea


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2

The Asia-Pacic region is one of enormous growth and opportunity for insurers. It is also one ofsignicant diversity. In developing countries, agency sales forces dominate and play a vital social role inmaking products accessible to low earners. The development of insurance markets in western-developedcountries, however, indicates that the emergence of more independent, but also expensive, distribution

channels often ultimately leads to the demise of traditional agency sales forces.

In the emerging markets of Asia-Pacic, the race is on between insurers to secure new customers byselling them their rst insurance product. In the more developed Asia-Pacic markets, the battlegroundis shifting to focus on securing a greater share of the market and increasing retention by deepening thecustomer relationship and cross-selling.

Australia, perhaps the most mature market in the region, presents an unique dynamic with compulsoryretirement savings. The Australian challenge is to overcome customer misconceptions of their insuranceprotection as part of their superannuation plan, create products that complement and ll gaps that existin this cover.

Similarly, the region exhibits a wide diversity in non-life insurance. Distribution channels in particularvary greatly across the region, spanning traditional agents and intermediaries through to the continuedstrength of bancassurance and a continued emergence of direct and online channels. As a result, Asia-Pacic insurers face a complex array of market dynamics and customer preferences.

Despite this diversity, some consistent themes have surfaced from our research that present bothopportunities and challenges for insurers.

Asia-Pacic life and pensions key ndings

The good news is that customer condence in the insurance industry has been less affected by thenancial crisis and recession than other nancial markets. However, there is no room for complacencybecause a signicant minority of customers still are not certain that they have the right products tomeet their needs.

Customers are demanding simpler and easier-to-understand products. Among the rapidly growing number with internet access, there is a very signicant increase in

customers who are conducting their own research and who expect clear and transparent informationfrom insurers.

With some notable exceptions, customers in most markets surveyed perceive that insurers do verylittle to try to retain their business. Accompanying this perception is a desire among customers formore, and improved, communication from insurers (as opposed to agents or intermediaries).

Customers perceive that the insurance industry is falling behind other consumer-focused businesses inrewarding loyal customers.

Alongside these opportunities there is an underlying threat that an increasingly well-researched andaware customer base, combined with potential for regulators to apply retrospective regulation, will

increase the long-term mis-selling risk for those insurers who are not diligent in maintaining leadingpractices with well-trained agents.

We believe that a major opportunity exists within the agency market for insurers to shift the focus of theirstrategy from product protability to customer protability. This is similar to the journey taken in maturemarkets such as Australia and elsewhere in the world.

Executive summary


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In emerging markets, a focus on customer lifetime value starts with selling new customers their rstinsurance contract. A sharper focus may be needed on investing to acquire new customers who are more

likely to convert into loyal customers aiming to get it right the rst time rather than chasing customervolume at all costs. In more developed markets, this investment may already have been considered,but rejected on short-term cost grounds. We appreciate the cost implications of these recommendations,but consider the goal of sustainable and more protable business from loyal customers makes themworthy of debate.

Asia-Pacic non-life insurance key ndings

For non-life insurers, the region presents a variety of challenges, including: competing with strongdomestic players with well-known brands and entrenched distribution channels; operating regionallyacross markets that exhibiting many common traits and have important local nuances and accessingconsumers who are more familiar with bancassurance and agency distribution than their counterpartsaround the globe.

Although entering the Asia-Pacic markets presents a great growth opportunity, it is hard to enter andbuild a sustainable market presence here. Our key ndings in this region are:

Consumers in Asia-Pacic highlight that, for them, insurers need to have an integrated multichanneldistribution platform. Increasingly, this platform will include a fully transactional online presence butnot one that operates in isolation of other channels.

Many respondents indicated that price is not the most important purchasing criterion, providedinsurers can offer a strong brand proposition and consistent and strong customer service in a mannerthat is convenient to the consumer. In fact, if insurers can do all these things, consumers in Asia-Pacicsay they are prepared to pay a premium for the product.

Somewhat surprisingly, yet consistent with other parts of the globe, consumers expect great claimsservice, but this will not guarantee their loyalty. However, failing to deliver a great claims experience

will drive consumers to switch, which is important in a region where in non-life consumers do not switchinsurers lightly.

Where consumers do switch insurers, they say that more could have been done to retain them and thatthey would prefer to buy multiple products from the same insurer if it is convenient and represents agood value.

We hope you will nd this research useful in considering how you shape your business going forward.

If you would like more information and to review the detailed ndings please, contact your usual clientservice partner or go to www.ey.com/insurance.

Graham HandyInsurance Practice Leader, Asean Financial ServicesErnst & Young Advisory Pte. Ltd.

Executive summary

3

Lifetime customer value analysis Simpler or more clearly explained products Customer loyalty programs

Greater reward to both agent and customer formultiple products

Increased and improved customer contact Increased cross-selling, loyalty and overall protability

Customers

New(rst product)

Incremental(additional contributions, riders)

Loyal(multiple product, large shareof wallet)

Customer and Agent maturity model

Agents

New(sell to family)

Referral(sell beyond family)

Successful and retained(cross sell and up sell to existingcustomers to build wider networkor attract new customers)
http://www.ey.com/insurancehttp://www.ey.com/insurance


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We set out to explore

customers attitudes andbehaviors today, to separatemyth from reality and providesome hard evidence of whatcustomers want now.


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01Life and pensions (including investments)

While there is some truth in the received wisdom around how life and pensionsproducts are bought and sold, the reality is more complex. Understandingcustomers current attitudes and behaviors will help insurers determine whatthey can do better or differently to attract consumers, deepen and retainrelationships and unlock greater customer lifetime value.

Our survey explores the following myths:

1.Customers have low condence in the life and pensions industry

2.Life insurance is sold, not bought

3.Personal interaction is essential

4.Its hard to cross-sell to existing customers

5.Providers cant inuence persistency


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Myth 1

Customers have low condencein the life and pensions industry

Received wisdom is that the nancial crisis has created mistrustof nancial services, and a perception that all nancial servicescompanies are untrustworthy. Our research indicates that this isnot the case in the insurance sector.


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7

Asia-Pacic customers are generally satised

and condent

Our research shows that customers in the Asia-

Pacic region have a positive view of the insuranceindustry, suggesting that it may have been lessaffected by the nancial crisis than banks, in termsof undermining customer trust.

With regard to their overall opinion of the sector,respondents generally view the insurance industrypositively. Thirty-six percent of customers havea favorable view, while only 19% have anunfavorable view.

However, while insurance remains a trustedindustry, 42% of customers agreed that, comparedwith other consumer-facing businesses, it lagsbehind in service quality, while only 18% disagreedwith this. When asked how the industry compareswith others on rewarding loyalty, 49% agreed theindustry lags behind others, while only

15% disagreed.

Seventy-seven percent of the customers surveyedfelt that they had bought appropriate productsfor their needs. However, this is no cause forcelebration as 21% of the respondents indicatedthey were not condent that the product theybought was the right one for their needs. Reasonsfor this lack of condence included:39% said that they did not have enough information

about how well their policies were performing37% said they did not fully understand the terms

when they rst bought the policy

26% said that their needs had changed since rstbuying the policy

There is room for improvement in meeting

customers needs

The fact that 21% of customers are not condentthat the product meets their needs clearly shows

that insurers need to be doing more to meet theircustomers requirements. Similarly, the meansatisfaction score for customer service is 6.8 outof 10 across the region, which clearly shows somescope for improvement. This level of dissatisfactionmay be the result of two underlying factors.

The sales processWhen customers dont fully understand the termsof the product at the point of purchase, this is areection of the sales process and the techniquesemployed. Bancassurance, for example, is apopular distribution channel across the regionand the sale process within this channel is oftencompleted quickly, with little or no subsequentfollow-up from the insurer (although this problemis tempered by the relative simplicity of typicalbancassurance products).

The service process

There are two factors to consider here. Firstly, the

training and competency of the agency force andsecondly the growing orphan policy issue (wherethe agent who sold the policy is no longer with theinsurer). Follow-up service is becoming a key issueto make sure customers understand not only howtheir products are performing, but that their needsare being met. While insurers are making inroadsinto dealing with this problem by assigning orphanpolicies to new agents, there is often little incentivefor the new agent/adviser to contact or build arelationship with the customer.

In the mature Australian market, regulatory

changes brought about by the Future of FinancialAdvice (FOFA) hope to address the sales andservice issues with the nancial advice industrymoving down the path of full-service nancialadvisory, including changes to remunerationstructures that will encourage appropriate andadequate servicing of clients.

Life and pensions

77%of customers arecondent theirproducts meets

their needs.

Customers views of the insurance industry

0% 10% 20% 30% 40% 50% 60% 70% 80%

Asia-Pacific*

Indonesia

Malaysia

China

Singapore

Hong Kong

Australia

South Korea

*Total percentage for the overall region.

Favourable

Unfavourable


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8

How condent are customers that the products purchased

are the right ones for their needs?

Life and pensions

83% 11%

Australia

82% 15%

Singapore

71% 27%

Hong Kong

Indonesia

85% 14%

27%

China

70%

6%

Malaysia

93%

Asia-Pacific*

21%

South Korea

59% 38%

77%

21%of customers arenot condent thatthe products theypurchased meetstheir needs.


Very/fairly

Not very/not at all


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9

Implications for insurers

These ndings are positive for the industry, butare not grounds for complacency. Customers

judge insurers against other consumerindustries: they expect comparable standards

of service and rewards for loyalty, like thosethey already receive from non-nancial servicescompanies. Insurers need to continually evolvecustomer propositions to meet changing needsand expectations, particularly for improvedinformation and transparency.

Closing the gap between sales and serviceIrrespective of market, providers need to besure they have product communications that aresimple and transparent about the benets thatthey will deliver. They should provide regular,simple reporting for investment products andinsurance products and be certain that the

terms of the products are easily understoodat the research phase so customers can feelcondent that what they are buying meets theirneeds. Insurers need to close the gap betweentheir sales and service process; for instance,follow-up welcome calls might be made onthe completion of each sale regardless of thechannel used.

For many insurers in Asia, the focus needs to beon agency retention; insurers need to ensurethat the right types of agents are recruited andthat they are adequately trained. Products need

to be simplied so that the agent understandswhat they are selling and how products betweeninsurers differ. Insurers should try to make sure

that agents stay with the business for longerand that if and when they leave, that the focusis on retaining the policy initially and thenretaining the customer. These principles, while

not new, also apply to more mature marketslike Australia, particularly as the IFA marketgrapples with the new remuneration rules. Therisk in these markets, in particular Australia,is that discontinuance rates may continue toto increase on the back of a more regularservicing business model.

A successful adoption strategy is key to

orphan problemThe gap in understanding is most prevalentwhen the customer is orphaned and asuccession plan or adoption by another agentor intermediary has not been successful. Since

two-thirds of agents are usually no longeractive within two years of joining an insuranceprovider, the strategy for ensuring a successfulhandover of these relationships is key. Not justfor the providers potential future sales (seeIts hard to cross-sell to existing customersonpage 16), but also to ensure an ongoing regularassessment of customers changing needsand assurance of the suitability of their overallinsurance portfolio. For those markets wherethe agency channel dominates, it is clear thatthe current reassigning process is not working.Successful insurers will review their current

approach to this key area of their business.

Life and pensions

Reasons why customers are not condent that the product is the right one for their needs

I did not fully understand the

terms when I first bought

the product

37%

It hasnt performed as well as

other insurance products

23%

None of the above

6%

My needs have changed

26%

Dont know

3%

I think I received poor advice

16%

I do not have enough

information about how well

my product is performing

39%


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Myth 2

Life insurance is sold,not bought

Received wisdom is that because of a lack of customer knowledgeand condence, life insurance products are sold to consumers thepurchasing decision is not customer-driven. Our research indicatesthat many customers intend to be much more involved in thepurchase decisions in the future.


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Customers expect to do a lot more researchin futureAcross the Asia-Pacic region, customers arebecoming more actively involved in the processof buying life insurance and pensions; deciding ontheir needs, researching possible solutions andmaking informed decisions as to the best providers.

It should be noted, however, that the surveywas conducted online and that as a result, ourrespondents are obviously skewed toward thosecustomers with internet access.

Historically, 59% of customers did little or noresearch before purchasing, but our researchshows a marked shift in customers intentionsto conduct more research in future with theregional total increasing to 73% intending to doa fair amount or great deal of research in future.These gures are very similar to the ndings inEurope, where 73% of consumers currently do noor little pre-purchase research, but where 65% say

they will do so in future.

The survey results show that while insurance is

still being sold there is increasing ownership ofthe process by customers themselves. Customersexpect agents and intermediaries to do thenecessary research, but if this trend continues,then perhaps we can expect a greater degree ofchallenge from an increasingly educated customerbase. This is likely to be matched by a greaterdemand for sources of quality research.

Across the region there are interesting cultural

and technological variations in the range of source

material customers use for their research. In China(65%), Hong Kong (57%) and Singapore (61%),personal recommendations from friends and familyare the most important source of informationfor buyers by a considerable margin, while inSouth Korea and Australia the insurance agent orintermediary is seen as key. However, it is evident

that there is a migration towards online sources,particularly amongst the young or more afuent.This trend was particularly apparent in South Korea(67%) and Australia (56%), where respondents arealready conducting online research. While it couldbe argued that as an online survey our surveypopulation may have a predisposition to conductingonline research, our experiences suggests thistrend is real.

The difculty in mature markets such as Australiais that it is often difcult to nd out the details ofmost products online. Advisers will continue tohave a role as they often have product information

available to them on specialist comparator servicesnot available to the public.

There is a high level of consistency across theregion in the most important factors informing thepurchasing decision. Product features, nancialstability of the insurer and product performanceare the regions top three factors in the purchasingdecision. This implies that even where arecommendation is given, customers perceivethemselves as accepting that recommendationbased on nancial stability, product features, andperformance, all of which are researchable items.

Customers doing a fair amount or great deal of research before purchase

Life and pensions

0% 20% 40% 60% 80% 100%

Asia-Pacific*

Australia

China

Hong Kong

Indonesia

Malaysia

Singapore

South Korea

59%of customers did littleor no research beforepurchasing, but our

research shows amarked shift (of atleast 30 percentagepoints in everymarket) in customersintentions to conductmore research in

the future.


Previous

Future


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12

Life and pensions

Which of the following sources of information would you use when researchingthe purchase of a new policy?

Direct contact with bank orinsurance company people

(call center, branch)

38%

Bank or insurance companywebsites

38%

Advice from intermediaryor agent

51%

Information from an employer

11%

Online comparison website

47%

Family or friends wordof mouth

52%

Online blogs/communities

19%

Financial press/media

26%

Advertising/direct mail fromproduct provider (bank orinsurance company)

24%

Other online sources

23%

Dont know

2%

Other

3%

Which top three factors are the most important when purchasing your policy?

Their reputation for customerservice

Financial stability of theinsurance provider

Performance of the productProduct features

I am already a customer ofthe insurance provider/theinsurance agent

The brand of insuranceprovider

It is recommended bymy insuranceagent/intermediary

Recommendation fromfamily/friends

Dont knowIt is recommended by mybank

None of the aboveI have discussed the decisionwith an insurance specialist

26%39%48%55%

13%18%21%23%

1%2%6%13%


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13

Life and pensions


Provision of simple and transparent onlineinformation is vitalCustomers understand the value of research andexpect in the future to do more research before

purchasing. When undertaking this researchthey will look at a variety of information sources,including online, which we consider will becomethe new version of family and friends.

With an audience of increasingly well-informedbuyers, providers need to focus on givingcustomers access to more knowledge and detailabout their product range. This informationneeds to be transparent and consistent acrossvarious information sources; it needs to besimple, customer-centric and easy to access.

Customers will undertake research to double-

check and validate the product that has beenrecommended to them and, given the currentlack of online product comparison sites, willmost likely do this through insurers websites.As a result, insurers need to understand whois visiting their sites and what they are doingonce they get there. This highlights the needto design their websites to be focused less onbrand, and more on customer advocacy. Thesite should be search friendly, explain productsin a simple manner and provide customers withthe ability to compare alternative products.

Intermediaries will continue to play a key roleAgents and intermediaries will continue toplay the key role in providing customers withinformation about products that meet theirneeds. This is partly because of the complexity

of risk insurance products and partly becauseagents and intermediaries are recognizedas product specialists who understand howproducts work and what products properly align

with different circumstances. However, in ourview, the tied agency network, as it traditionallyoperates across Asia, will come under pressure.Customers are becoming more sophisticatedand have indicated a preference for multi-tiedagents or independent intermediaries. Thispresents a threat to the traditional agency, a

journey that developed markets have alreadynavigated. Customers will demand the bestproduct to meet their needs and not the mostavailable product. Insurers, need to look at waysthey can offer alternative products through theagency network.

Looking ahead, insurers also need to makebetter use of social media to assist them in: Understanding and responding to key

trigger events that are occurring in theircustomers lives

Being aware about what is being said aboutthe company on social media sites andresponding accordingly

Building a brand Connecting better with their customers

Insurers should also give more consideration tofurther simplifying product literature, making

terms and conditions transparent and ensuringoptions, costs and benets are understandable.This will help customers with their agent, tomake informed purchasing decisions based onwhat is best for their needs.

52%of customers consultfriends and familywhen researchinga new policy.


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Personal interaction remains important formost customersGiven the prevalence of agency and intermediarydistribution channels across the Asia-Pacic region,it is not surprising that personal interaction is stillvery important. Customers see personal interaction

as essential, with 89% of respondents across theregion saying that it is essential, very or fairlyimportant.

The 8% of respondents who didnt think personalinteraction was important were predominantly fromthe developed markets of Australia and South Korea.When asked, these customers felt comfortable thatthey had sufcient knowledge around the productsthat they want to buy without needing assistance,which we see as evidence of a self-directed customersegment. This is supported by the fact that inAustralia superannuation is typically purchased

through the workplace with little or no interactionfrom agents/advisers, and the market placeunbundles products, which makes them easierto understand.

The reasons why the majority of customers regardpersonal interaction as important vary across theregion, but three factors are consistently cited asamong the most important. Customers feel:They need expert assistance to make important

nancial decisionsProducts are too complicated and technicalThey dont know what products are best for

their needs

Customers want more personal contactOur research shows that insurers could makegreater efforts to contact customers to determinetheir needs. Across the region 44% of respondentsdisagree or are unsure if the level of personalcontact with their provider is meeting their needs.

The main reason for this dissatisfaction citedby 44% of respondents across the region isthat customers feel product providers are morefocused on selling products than on meeting theirneeds. Among the different methods of contactingcustomers, survey respondents show a markedpreference for phone contact.

The level of preference customers show for phonecontact surprised us, but we believe that this isconsistent with the general desire for more personalcontact. Across the Asia-Pacic region, phone andonline communication consistently score as highly

as face-to-face contact. These results provide usefuldata points for insurers to consider, given thataffordability is clearly a primary concern forany provider.

Respondents indicated that clarity and transparencywould help to improve service quality. The top threeservice areas where customers would like to seeimprovements are:Ensuring the communication process is clear and

transparentImproving the claims processProviding the name of a contact for the customer

to deal with

89%of respondentsacross Asia-Pacicsay personalinteraction is

important oressential.

Personal interactionis essential

Received wisdom is that personal interaction is essential to educatecustomers about their nancial needs and explain which productsto buy. Our research indicates that this largely remains the case, butsome customers are becoming more self-directed.

Why is personal interaction important to you?

Myth 3

I need assistance with the

paperwork and general admin.

Other

3%

Dont know

1%

Products are too complicated

or technical

49%

I dont know what products

are best for my needs

43%

I dont know the insurance

companies

10%

I dont know how to measure

the products performance

28%

31%

I feel I need expert assistance

to make important financial

decisions

60%


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15

Life and pensions


Interacting proactively around key customer

life events is vitalCustomers are telling us that they regardpersonal interaction as important, that they

are happy to talk with product providers andtheir agents and intermediaries, but they dontwant a conversation that is sales focused.Customers want the focus of the discussion tobe on their needs, they want more time spentreviewing their needs and they also value expertassistance in helping them make importantnancial decisions.

There are some straightforward, but potentiallycostly, initiatives that insurers can undertaketo shift their focus from product protabilityto customer protability. Insurers need tointeract with customers at the right time, which

means recognizing the life events that willmake customers open to advice and tailoringtheir service strategy and product offeringaccordingly. Insurers will increasingly beexpected to make timely approaches, acrossevery channel, that are tailored to customerschanging needs, triggered by events such asmarriage, house purchase, job moves or startinga family.

Providers need to work in partnership with

distribution channelsAgents and intermediaries will continue to bean integral part of the personal interaction

and insurers need to make sure that they areequipped with the appropriate knowledge toidentify solutions for their customers. Insurersalso need to integrate personal interaction withthe sales channel and ensure that servicingand sales are in sync. Insurers need to followup sales, regardless of the channel that thecustomer purchased through. For example,within 30 days of a sale, insurers shouldconsider making a welcome call to gatherfeedback about the sales process. By doingthis, insurers will connect better with theircustomers, create greater customer advocacyand identify dissatised customers earlier in

the process.

A sample of initiatives that could be undertakenincludes: Better training for agents to explain product

terms and conditions Improving the clarity of marketing materials Providing the name of a contact person Establishing a clear communication plan for

the claims process Running consumer education sessions to

explain product terms and conditions Better integration of online resources with

personal contact points

What would be your preferred means of contact from your provider?

By phone

32%

In person Online/web

By letter By text/SMS

21%

7%15%

24%

Other

1%


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16

Customers are prepared to buy multipleproducts from the same providerIn emerging markets, sales are often focused onattracting new customers, who may be buying aninsurance product for the rst time. In contrast,in developed markets, with higher penetration

rates, growth comes mainly through the ability tocross-sell to existing customers. But regardlessof whether they are operating in a developed oremerging market, insurers want to improve theirability to cross-sell to existing customers.

Our research shows that cross-selling activityin Asia-Pacic is at a signicant level, and muchhigher than for any other region. Thirty-sevenpercent of consumers surveyed in the region havebought more than one product from a provider,compared with 19% in Europe and just 16% inthe Americas. However, the regional statistics

conceal some interesting variations by country. InChina, more than half of respondents have boughtmore than one product from the same provider,reecting the dominance of a small number oflarge insurers, and signicance of the tiedagency network. Australia scored lowest at13% reecting the comparatively lower levels

of face-to-face interaction, unbundled productstructure, broader choice of distribution channelsand the fact that many insurers are not able tomarket to their advisers customer base as part oftheir adviser agreements.

Convenience and trust drive cross salesAcross all markets, ease of purchase and trustin the provider are the dominant reasons forpurchasing an additional product. On average, 43%of consumers say that it is easier to buy from aknown provider, while 42% say they would repeatpurchase from a trusted source.

Interestingly, advice from agents is rated morehighly in the regions developed markets than inits emerging markets. This may reect marketdynamics within emerging markets, where agentsare focused on initial sales to new customers, while

in developed markets advisers and agents, bothindependent or multi-tied, are often incentivizedfor volume sales through insurance providers.In Australia, however, recent regulatorychanges are set to altered these types of agentincentivization schemes.

Its hard to cross-sellto existing customers

Received wisdom is that customers are reluctant to buy moreproducts from the same provider. Our research shows thatwhile current cross-selling levels are low, customers are willingto buy more products.

Myth 4

52%China

49%Hong Kong

48%Singapore

37%Malaysia

37%Asia-Pacific*

29%South Korea

26%Indonesia

13%Australia

Since buying your policy have you bought any additionalproducts from the insurance company?

37%of customers havebought more thanone product fromthe same provider.


Percentage purchasing


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It was easier to buy from a

provider I already know

43%

I received additional services

without additional cost

24%

The product I already had was

outperforming the market

20%

My agent advised me to buy

from this provider

31%

I received other rewards for

buying additional products

from this provider

19%

I received a discount for

buying additional products

23%

I trust the provider

42%


Insurers need to make the contact, product

and reward structure rightThe survey shows that customers are willingto consider repeat purchases from their

existing providers when they trust theprovider and when it is easy to buy. Discountsand incentives in other words, rewards forloyalty may also help, particularly in theregions emerging markets. Insurers have tobuild a trustworthy brand and make sure theiragents are acting as their advocates.

If you are not servicing your current customers,then all potential cross-selling opportunities arelost. Therefore, the rst point of action shouldbe to correctly serve your existing customers.

Using existing knowledge of the customer,

inputs from social media (status change, birthof children, new jobs etc.) and demographicindicators, insurers should be able to build asolid prole of their customer base and developa targeted contact plan. This should be a planfor distributing the latest product, and insurersshould look at moving the focus from productprotability to customer protability.

To do this requires signicant investment inboth the technologies to obtain and retainthis customer data, and in the reward andremuneration structure particularly for the

agent/intermediary channel.

Insurers need to integrate the agencydistribution channelIt is not as hard to cross-sell as received wisdomwould suggest, particularly in markets where

tied agency distribution continues to be asignicant sales channel. Questions thoseinsurers in markets dominated by tied agencychannels need to be asking themselves include: How many orphan policyholders do I have? How many of my orphan policyholders are

being serviced by agents? What are my entry products and are these

effectively securing new customerswho are likely to become loyal customers?

Am I selling customers secondary products orcoverage extensions? And am I receiving

additional premium contributions or nothing at all?

If nothing, does this reect a lack of need orineffective customer contact?

What is making it hard for my distributors toengage with my product offering andwhat can I do to make it easier?

How do I reward a service contact as opposedto sales contact?

In mature markets, the cross-sell opportunitywould appear to revolve around having a deepunderstanding of clients needs and havingregular enough contact to capture opportunitiesas those needs become revenant or change.

17

Life and pensions

What factors played a part in your decision to purchase an additional product from the provider?


20/40

Providers cant inuencepersistency

Received wisdom is that providers feel they have little ability to makea material difference to persistency. Our research shows that insurerscan improve customer retention by better meeting customerschanging needs.

Myth 5


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19

Changing customer needs drives switchingbehaviorIn growing markets, particularly those with largelyintermediated sales, insurers have tended to havelimited contact with end customers and havefocused on growth rather than retention. Despiteretention not being the main focus, surprisingly,

our survey found that only 10% of respondentshave changed policy providers in the past veyears. This is signicantly lower than we wouldhave expected and suggests that customers aremore reluctant to switch providers than other datapoints would indicate. To a certain extent, thisreects apathy within the customer base, whereit is easier to stay with the current provider ratherthan change.

For those who have changed product providers,there are two dominant factors behind thedecision, the rst of which is recommendationby the agent. In Australia, this is the main reason

for change, reecting market dynamics wheremulti-tied agents and IFAs tend to develop deeper,longer-term relationships with their customers,compared with less developed markets whereattracting new customers is the primary goal.

The second factor causing customers to switchproviders is a change in their needs that theprevious provider was unable to meet.

Customers perceptions are that insurers putlittle effort into retentionIn the agency-driven markets, where there is so

much exposure to defecting agents encouragingtheir clients to consider other options, it is evenmore important that the provider is perceived to bemaking an effort to retain customers and policies, orto defend protability in the event of exit (surrendercharges). However, when we asked customers howthey perceived insurers retention efforts, theydelivered a clear message that the industry does apoor job in most markets.

Not enough customers feel their previous providersmade enough effort to keep them, despite the factthat greater effort by insurers is likely to improveretention. Besides being offered a better deal,

customers say that more frequent contact, moretransparency and a belief that future service willimprove would have caused them to reconsidera move.

Life and pensions

Indonesia AustraliaSouth KoreaSingapore

36% 12% 32% 8% 17% 17% 11% 0%

Hong Kong MalaysiaChina

49% 23% 46% 9% 39% 13%

Asia-Pacific*

37% 10%

47%of customers acrossAsia-Pacic saidtheir providers hadtried to persuade

them to stay.


How much effort did your previous provider make

to persuade you to stay with them?

Fair amount

Great deal


22/40


Invest in customer retentionIn the Asia-Pacic region, it is untrue that noeffort is made to retain customers. But it is clearfrom our survey results that insurers retentionefforts are neither consistent nor sufcient.Customer inertia has favored providers in thepast, but switching behavior appears set toincrease in the future. The survey shows thereis a real opportunity for insurers to inuencepersistency, and that they should consider aneffective customer retention function essential.

Focus on keeping the customer, not the policy

There is a difference between trying to keepthe policy and trying to keep the customer, butmany of the existing systemic processes todayare focused on keeping the policy. New ideasare often rejected because of their impact onproduct protability.

Keeping the customer involves a greaterengagement by the provider particularly whena departing agent is involved. For example, morethan a quarter of the South Koreans changedproviders because their agent recommended

them to do so. Our survey indicates thatcustomers would welcome more depth and morefrequency of contact with the provider, and donot see this as conicting with the role their

agent plays. If this contact is established duringthe early stages of the policy, the retentionconversation has a better chance of feelingcredible and valued.

Efforts at retention need to be made well beforethe customer lapses, not at the point they areconsidering leaving. An effective retentionprogram requires signicant investment inunderstanding your customer base and thetrigger points for switching providers. Our

experience shows that most insurers alreadyhave the necessary data to focus their retentionefforts on those most vulnerable and valuable.This makes the business case for investmentmore palatable. However, few use it this way.

The focus of customer retention programsshould be on the majority of the customer base,through regularized customer contact pointsand loyalty programs. In markets dominated bytied agency networks, retention efforts shouldalso focus on trying to retain agents in an effortto reduce the impact that orphan policies arehaving on customer protability. In more mature

markets, insurers should focus on the lapsereasons for those customers where a change isnot adviser driven.

20

There are some notable exceptions within theregion, with some countries making particularefforts to retain customers. In Malaysia, 52% ofrespondents think they make some effort. In China,72% of customers said that their providers hadtried to persuade them to stay. It is possible thatthe branch model, in which consumers are required

to go to the insurers ofce to surrender theirpolicy, drives the effort put into renewal in China,as customers are therefore physically presentand the insurer has an opportunity to try to retainthem. Australia is at the other end of the spectrum,with 63% of customers saying that insurers makeno effort to retain their business. There remains alarge pool of people who have never contacted,and an even larger pool that are only contactedonce a year at the most.

Switching is set to increaseThe survey indicates that switching behavior mayincrease in the future as customers become moredemanding that products and services meet theirneeds and expectations.

We also asked those customers who havent

switched providers why they have stayed with theircurrent insurer. Overwhelmingly, the responsesacross the region cited the same four key factors:that its easier to stay; the customer sees no reasonto change; they are happy with the level of servicethey are receiving; and are happy with the way theproduct is performing.

Life and pensions

10%of respondentshave changed policyproviders in thepast ve years.


23/40

02Non-life insurance

While there is some truth in the myths around how non-life insuranceproducts are bought and sold, the reality is more complex. Understandingthe nuances helps insurers understand what they can do better or differentlyto attract consumers, deepen and retain relationships and unlock greatercustomer lifetime value.

Our survey explores the following myths:

1.The future is online

2.Its only about price

3.Good claims experience builds loyalty

4.Customers dont respond to cross-selling

5.Insurers cant inuence customer retention


24/40

22

Myth 1

The future isonlineReceived wisdom is that the use of internet resources is growingrapidly and in the future, online will be the dominant channel for

research and transactions. Our research indicates that online isan important part of the future, but only as one component of anintegrated channel management strategy.


25/40

23

Comparison sites becoming more popularThe importance of online channels for research andtheir expected continued growth is clear across oursurvey. Thirty-nine percent of respondents acrossAsia-Pacic are using online comparison sites,blogs or other online sources to research theirpurchases. Interestingly, the engagement of these

channels is much higher in Asia-Pacic thanin Europe (32%) or the Americas (23%). Thismost likely reects the different demographicprole in Asia-Pacic and a higher level oftechnological familiarity.

However, it is interesting that, despite the highrates of internet adoption in most parts of theregion, the internet remains only one of a rangeof sources to which buyers go to seek informationand recommendation. As the chart below shows,

one factor rated highly by customers across allthe countries surveyed in Asia was word-of-mouthrecommendation from family and friends. Thisconrmation from a trusted third party is a verystrong driver in many countries, but particularly inChina, Indonesia and Hong Kong, where it was themost prevalent form of research before purchasing.

In Australia, online comparison sites are themost utilized research tool, reecting theemergence in recent years of comparison sites,primarily for health insurance. However, for motorinsurance where online comparison tools arenot as common due to the high concentrationof the market and traditional bias toward directchannels customers tend to do their researchdirect with the insurance companies.

Non-life insurance

Top three channels used for research by consumers in Asia-Pacic39%of respondentsacross Asia-Pacicare using onlinecomparison sites,blogs or other onlinesources to research

their purchases.

Australia China Hong Kong Indonesia Malaysia Singapore

0%

30%

40%

50%

60%

10%

20%

South Korea

Family or friends

Online comparisonwebsite

Advice fromintermediary or agent

Direct contact withbank or insurancecompany people

Bank or insurancecompany websites

Information froman employer


26/40

24

Channels used for purchasing by consumers in Asia-Pacic

Non-life insurance

Online sales lag behind other channelsComparing the channels used for actual purchasesto those used for research across the region,customers more frequently choose to go directto insurance companies or through agents andbanks. In fact, in Hong Kong, China, Indonesia andMalaysia, banks are among the preferred channels,

reecting the established strength and importanceof bancassurance in these markets.

Online sales signicantly lag behind internet usefor research purposes, with only 14% of consumersin Asia-Pacic reporting they have bought throughan internet site so far, against 49% that haveconsidered it. This level of internet purchasing iscomparable with Europe (also 14%) but exceeds theAmericas, where only 7% of consumers have usedthe internet to make a purchase.

This relatively low level of online purchasingactivity is unsurprising since many insurers do

not include full transactional capabilities on theirwebsites. For example, in China, many largeinsurers have found motor insurance e-businessto be difcult due to technical problems linking togovernment databases.

Equally, even in the mature markets suchas Australia and South Korea, insurers havebeen relatively slow to adopt full transactionalcapabilities online, although this is changing asinternet-only insurers become established.

Another factor that may be slowing the speed

of growth of online engagement is the relativestrength of the agent as a buying channel inAsia-Pacic. This has led to a strong preferencefor personal interaction across all countries inthe region during many phases of the productlife cycle, particularly when extending cover,making a claim, or dealing with other customerservice issues.

However, as insurers become better at creatingonline sales processes that give customerscondence that they can purchase a reliableproduct quickly, there can be little doubt thatmore customers will migrate to this channel across

the region. Our expectation is that, near term,a combination of convenience and increasedfamiliarity with transacting over the internet willdrive growth in online sales.

14%of consumers inAsia-Pacicreport they havebought throughan internet site.

Asia-Pacific* Australia China Hong Kong Indonesia Malaysia Singapore South Korea

0%

10%

20%

30%

40%

50%

60%

70%

80%


Insurance company Insurance agent/intermediary Bank

Third-party online site Asset provider Non-nancial provider


27/40

25


Insurers need to maintain a multichanneldistribution strategyThe survey ndings indicate that customers usea range of channels to research and purchase

their products, so in Asia-Pacic insurers needto maintain a multichannel distribution strategy.

We would expect the online channel tobecome an increasingly important part of thedistribution suite, and anticipate that the rateof change in this area will be much faster than ithas been in other markets.

Insurers need to build direct relationshipsInsurers also need to focus on their customersinteractions with family and friends, and provideopportunities for customers to connect aroundtheir brand. This may provide an interesting

opportunity to exploit social media and internet-based relationships as many consumers in theregion may see these as extensions of theirtraditional social networks.

As a result, we believe that leading companiesshould look to social media and mobiletechnology to enable customers and their peergroups to share information and opinions oninsurance products and providers. Insurersmight also look at how banks have startedinteracting with their customers using mobiletechnology. The banks have some of the

most visited mobile sites and, while insurersmay believe that they dont have the sameopportunities as banks to interact regularlywith clients, there are plenty of differentways in which to engage with their customersthroughout the policy period.

For example, some more innovative interactionswith customers include: Using GPS and mobile technology to provide

customers with local area safety updateswhen they are parking their car

Providing details of accident-prone areaswhen traveling

Offering hail and storm warnings to driversor travelers

Real-time feedback on driving quality Providing tips on healthy lifestyle activities

through mobile phone applications

Bold moves will be essential to realize gainsMaking an online service work effectivelyfor insurers will not be without signicantchallenges. Companies will need to consider how

they will integrate online and ofine channelsseamlessly to meet changing customer needsover the product life cycle. Ensuring accurateand easy-to-use recordkeeping across threeor four different communication methods is atechnology challenge for many organizations.Certainly, when consumers decide they wantpersonal interaction, whether face-to-face, bytelephone or web chat, they want a promptresponse. Consumers do not want to squandertheir time on an insurers own processinefciencies or internal requirements.

For sizable incumbent insurers, building

a rst-class online proposition could beslowed by working with legacy systems and apowerful agency network. However, insurerscannot take the time to approach this processiteratively or in small steps they will needto make bold moves to integrate informationand communication across channels and todeliver the simple and easy online executiontheir customers expect. Such action isparticularly important given the strength thatbancassurance has in the region, in signicantcontrast to others that we surveyed. Manybanks in this region are well ahead with plans to

fully integrate their online and ofine offeringsacross the full product suite. Should theysucceed in this strategy, we believe that it mayplace insurers at a disadvantage in terms ofmeeting customer expectations.

Non-life insurance


28/40

0% 10% 20% 30% 40% 50% 60% 70%

South Korea

Singapore

Malaysia

Indonesia

Hong Kong

China

Australia

Asia-Pacific*

26

Price is important, but so is brand valuePrice is an important component of value, but itis not the only one. This is particularly true whenlooking at Asia-Pacic, where the tariff structureoperating in various markets (for example healthinsurance in Australia or motor insurance inMalaysia, China and South Korea) means thatdifferentiation on issues other than price plays an

important role across the region.

A number of drivers affect buying behaviorWhile our research shows that price is one of themost important components for buyers in Asia-Pacic, with 55% of regional respondents citing itas a factor in their considerations, 54% also saidthat buying from a well-known or trustworthybrand is important. Customer service (39%) andnancial stability (42%) were also mentioned byrespondents as a the key criteria. The chart belowshows that these four criteria are consistently

mentioned by customers, irrespective of thechannel through which they purchased their policy.

Buying drivers vary by countryGiven the tariffs that exist in some markets,consumer attitudes also vary from one country tothe next. For example, in Malaysia and China (bothtariffed markets) around half of respondents said

that price was a factor they took into consideration,and that other considerations such as brand,nancial strength and reputation were similarlyimportant. This picture is in sharp contrast toAustralia, where tariffs lifted and, as a result, 62%of respondents cited price signicantly more thanany other consideration.

Brand plays an important roleOne of the standout features of the survey is thelarge number of respondents within the Asia-Pacic region who rated brand as a key buying

Its only aboutpriceReceived wisdom is that non-life insurance products arecommoditized, and price, therefore, is the only criterion on which

they are purchased. Our research indicates that price is an importantcomponent of value, but that customers also place substantial valueon other factors such as brand and service.

Myth 2

Top factors driving purchasing behavior in Asia-Pacic

54%of consumers saidthat buying froma well-known ortrustworthy brand

is important.


Price Brand Service Financial stability


29/40

51%

32%

17%

69%

20%

11%

Are you prepared to pay an additional premium for a nancially stable brand?


Price is important, but so are serviceand brandUndoubtedly, price is an important factor whenconsidering an insurance purchase in Asia-Pacic. However, across many of the countries

we surveyed in this region, good customerservice and a strong trustworthy brand are alsokey considerations. So, while the data suggeststhat insurers do not necessarily have to bethe cheapest, it also suggests that to chargepremium prices, insurers need to have clarityon their brand proposition and consistencyin the execution of their customer service,irrespective of the channel through which theproduct is bought.

This offers some potential challenges to newentrants without a strong local name or track

record that want to create a compelling localoffer that is not entirely based on price.

Exploit local opportunitiesAlthough tariffed markets typically do nothighlight price as a point of differentiation forobvious reasons, this does not mean there areno opportunities to differentiate on price inthese markets. In Malaysia for example, takaful

operators are increasing their share of motorpremium by offering discounts under the tariffregime that traditional insurers cannot. Thissuggests that underlying customer behavioris more consistent across the region than

the headline data might suggest and thatderegulation across a number of markets inAsia-Pacic will undoubtedly generate someinteresting opportunities and challenges forinsurers in the next three to ve years.

Service is important in winning andretaining businessOver time, we would expect to see the removalof tariffs in many of the regions markets;however, in the near term while they remainin place customer service will continue toplay an important role in winning new business

and retaining existing customers. Insurersneed to be sure they have clarity around theirservice proposition and focus on those areas ofinvestment that are going to provide the mostsignicant returns, for example, understandingcustomer needs, clear communicationthroughout the claims process and introducingsimple and easy to understand products.

27

consideration. It was also interesting that there wasvery little difference between customer responsesin mature economies, such as Australia and SouthKorea, and emerging economies, such as Malaysiaor China, in the importance they attached to brand.This strong afliation to the concept of brand isalso reected in the fact that 69% of respondents

from emerging economies and 51% from developedeconomies said that they would be prepared to payan additional premium for a product from a strongor nancially stable brand.

This highlights an often overlooked factorin pricing. In our view, insurers frequentlyover-simplify the pricing equation and missan opportunity to charge a premium based ontheir market position and brand proposition particularly on renewal. Clearly, the price pointcannot be so high that it causes consumers to

question the value, but insurers could exploit theinformation that 55% of consumers say that theyare prepared to pay a premium for a brand theyknow and trust.

Non-life insurance

* Aggregated unweighted data

Emerging markets*

Yes No Dont know

Developed markets*

Yes No Dont know


30/40

Good claims experiencebuildsloyalty

Received wisdom is that if providers offer a good claims experience, customerswill be delighted and this will drive loyalty and help build brand value. Ourresearch shows that while a good claims experience doesnt necessarily buildloyalty, a bad claims experience substantially increases the risk of non-renewal.

Myth 3


31/40

29

Asia-Pacific* China Hong KongAustralia

Indonesia Singapore South KoreaMalaysia

34%

62%

39%

20%

45%

26%

6%2%1%

44%

14%2%

1%0%

26%

5%3%2%2%

31%

21%

4%

42%

2%

28%

18%

44%

6%2%2%

16%

22%

10%

48%

2%2%

33%37%

19%

8%1%2%

39%

17%

6%2%2%

Satisfaction with the claims experience across theAsia-Pacic region varies widely. In South Koreaand Hong Kong, around 33% of respondents arenot satised with their claims experience, butin Australia and Malaysia, the proportion dropsto 10%.

Speed of claims processing is the topperformance measure for consumersIn terms of areas for improvement, speed of claimsprocessing tops the list in most countries andis seen to be substantially more important thanother factors by consumers in Malaysia, Indonesia,South Korea and Hong Kong. In Australia (wherethe majority of customers who responded to thesurvey had household insurance claims) 24%think claims could have been dealt with faster,but 27% cite a better level of communication andan overwhelming 47% say nothing could beimproved. This information indicates that the levelsof satisfaction around the claims experience in this

country are quite high.

Poor claims experience encourages switchingPeople expect a great claims experience, anddelivering an efcient and quick response willvalidate a policyholders view that they havechosen the right insurer. However, a poorexperience will make a customer change insurer:16% of regional respondents say that they arecertain that they would look elsewhere as a result

of a poor claims experience, while 40% say theywould be much more likely to do so. This picture issimilar to the Americas, where 19% of consumerssaid they were certain a poor claims experiencewould prompt them to switch and a 40% indicatedthat it would make switching much more likely.

There are some surprising results in individualcountries. For example, in Hong Kong (16%)and South Korea (20%) (where there is a highdegree of dissatisfaction with the claims process),respondents respectively say that they are lesslikely to stay with the insurer as a result of theirclaims experience.

Customers who are satised with the way in whichtheir claim has been handled are very consistentin their views, with around 75% saying that theywould be likely to change insurers as a result of apoor claims experience. Malaysians appear to bethe most forgiving, 32% of customers stated that

a poor claims experience would have no impact ontheir decision to change insurers.

To support this view further, of those customerswho had a poor claims experience, 52% ofrespondents felt they were unlikely to changeinsurers compared to 60% of respondents whodidnt claim and 63% who had a good claimsexperience. It is clear that claims can have apredominantly downside impact on retention.

Satisfaction with claims across Asia-Pacic

29

Non-life insurance


Extremely satised Quite satised Neither satised or dissatised

Somewhat dissatised Dissatised Extremely dissatised


32/40

30

Other than the size of the payment, what could the provider have done to improve the way theyhandled your claim?

63%of consumershad a good claimexperience.

Asia-Pacific*

Australia

China

Hong Kong

Indonesia

Malaysia

Singapore

South Korea

0% 10% 20% 30% 40% 50% 60% 70% 80%


Non-life insurance

Let me off because it was a minor or

rst claim on this policy

Provided better practical support

following the incident

Provided a more personal service

Used better quality companies/

people for the repair or replacement

Provided more or better quality options

for repair or replacement

Dealt with my claim more quickly

Provided a better level of communication

Nothing

Other


33/40

31


Good claims handling increases brandstrengthClaims handling is one of the key interactionsthat customers have with insurers. Getting

the experience right will improve customersatisfaction and assist in the development andpromotion of an insurers brand in the market.

Manage the downside risk and invest

appropriatelyOur data suggests that customers are, for themost part, happy with the claims process andthat claims handling is not an area of positivedifferentiation for insurers. However, while agood experience does not drive loyalty, a poorexperience will encourage switching, so thechallenge for insurers is to set the right levelof investment in the claims process to improve

service. Across Asia-Pacic, many insurers areinvesting heavily in claims technologies andreengineering the claims process. This meansthat the market benchmark for the claimsexperience is being raised. It also highlightsthe fact that many insurers recognize thatreducing the total indemnity cost of claims, andthe associated handling costs, is one potentialavenue for funding the investment needed inother customer-facing aspects of their business.

Focus on quick wins

Our experience also suggests that there area number of relatively low-cost, quick-winsavailable for insurers in the claims process to

improve claims handling times and generatemore frequent, proactive communication.These could include regular text updates onclaims progress or rapid triage of claims so thatcustomers know quickly whether their claim islikely to have a relatively rapid resolution.

Equally, our work in this area shows that manyinsurers in the region need to reassess claimstraining and time spent by the claims team. It isour understanding that too often claims teamsspend substantial amounts of their time onadministration as opposed to either progressingthe claim or liaising with the customer as to

the progress of their claim. This is commonlyexacerbated by an insurers best claimsassessors being bogged down by relativelyminor, non-complex claims. Redesigningclaims processes so claims are allocated to themost appropriate claims handlers can lead tosubstantial cost savings, in both handling andindemnity costs.

Asia-Pacific* Australia China Hong Kong Indonesia Malaysia Singapore South Korea

0%

10%

20%

30%

40%

50%

60%

70%

80%

Percentage of respondents unlikely to switch insurer


Non-life insurance

No claim

Bad claim

Good claim


34/40

Customersdontrespondto cross-selling

Received wisdom is that customers dont enjoy the sales processand resent insurers trying to sell them additional products. Ourresearch found that if insurers understand customers needs andoffer the right propositions in the right way, they can sell moreproducts effectively.

Myth 4


35/40

33

Customers will buy more if its convenient anddelivers valueOur research shows that customers are willing tobuy multiple products from existing providers andacross Asia-Pacic, 46% of respondents expresseda preference to buy different products from asingle supplier as long as it can be done in a

way that is convenient for them and that deliversbetter value.

Across all markets in the region, customers citeconvenience (simplicity) and better service asthe drivers for repeat purchasing. Value or costalso feature in the responses, but the level ofimportance varies materially. For example, almosttwo-thirds of customers in Australia note price as afactor, while less than 20% cited it in South Korea.

It is also clear that improved quality and frequencyof contact, as well as satisfaction with the provider,drive repeat purchases; incentives or rewards

for loyalty can also inuence repeat purchases.In China, Australia and Malaysia a higherpercentage of respondents are interested inmultiple policy discounts.

Regulation can affect cross-sellingIn some countries there are structural factorsthat limit the amount of repeat purchasing thatis possible. In some markets for example, healthinsurance is regulated separately from other non-life products, preventing insurers from includingdiscounts arising from bundling or multi-product

purchases, forcing customers to look at thisproduct in isolation. Similar situations exist forthird-party coverage in motor, particularlywhere this protection is compulsory. Insurersoften attribute the discount or bonus to anothernon-regulated product, but making this actiontransparent to the consumer is a challenge.

Although customers are willing to buy more,they expect insurers to make it easy for themand to share the benet. The process has tobe convenient for example, by providing anopportunity for cross-selling at the time of theoriginal purchase and through the channel of

their choosing. Customers expect the providerto leverage their knowledge and insight to offerrelevant, related products in one quick and easysale rather than in multiple contacts over aprotracted period. Trying to cross-sell after theprimary purchase is less successful since this isperceived to be no more convenient than buyingfrom a new insurer.

Non-life insurance


Companies need to demonstrate the valueand convenience of repeat purchasingFundamentally, Asia-Pacic is a region in whichif providers can sell one product, and service itwell, then they are in a strong position to cross-sell other products. Insurers need to ask howthey can demonstrate that another purchasefrom the same provider is more convenientthan going to a different insurer and offers asimilar value.

Enhance back-ofce functionality to improve

cross-selling

In our experience, insurers are often preventedfrom capturing cross-selling potential by theirdistribution operating model which drives howresponsibilities, targets and decision-makingresponsibilities are allocated between entities,managers and teams. Common issues in thisarea include weak customer relationshipmanagement (CRM) systems, poor incentivestructures and organizational silos created tofoster specialization.

In our experience, insurers tend to forgetthat consumers expectations of convenience

are often established by other retailers, forexample, technology companies, banks, utilitycompanies and telecoms. Indeed, the traditionalview of insurers that consumers want to

understand price as quickly as possible and thencover other administrative details after makingthe purchase decision is almost completelyopposite to what consumers now expect.Our research demonstrates very clearly thatconsumers are happy to spend time respondingto underwriting questions, provided they feelit is adding value, for example, by reducing orpersonalizing the premium, and is not repetitive.Consumers do not expect to have to providepersonal information more than once.

In many instances, however, realigning

core processes to meet these expectationsrepresents a substantial undertaking.

Focus on tailoring products to customersneedsInsurers need to be able to better understandtheir customers personal circumstances, andthen to leverage this effectively in order tocross-sell products that meet current clientneeds. They can only do this if they are betterconnected with the customer, understandwhen their needs change and have developedappropriate incentive plans for customersholding multiple policies. Remunerationstructures may also require revision to promotemore effective cross-selling.

46%of respondentsexpressed apreference to buy

different productsfrom a singlesupplier as long asit is done in a waythat is convenient

for them and thatdelivers better value.


36/40

In Asia-Pacic, 60% of consumers are either notvery, or not at all, likely to change insurers in thenext ve years. This is in sharp contrast to the UKwhere only 40% of consumers report that they areunlikely to change provider in the next ve years.This is an indication that there can be no groundsfor complacency in Asia-Pacic if it follows in the

footstep of European markets.

Those who have not changed providers,overwhelmingly stated four key factors that havekept them loyal: the ease of staying with theircurrent provider, a competitive price, trust inthe insurer and happy with the service theyhave received.

Customers are more likely to renew if they are

asked

It is clear from the research, however, that despitethis predilection not to change providers, insurers

have a long way to go in terms of retention effort.On average across Asia-Pacic, 39% of consumersfelt their insurers made no effort to retain them,and a 29% felt only a little effort had been made.

Signicant variation by market

There are, of course, differences in the experiencesof customers in different countries. In Australia,a staggering 62% of customers said that insurersmade no effort to retain them. This rose to analarming 89% when including those who felt littleor nothing had been done to try and retain them.

In China, another hugely competitive market, onlyaround 30% felt that little or nothing had beendone to retain them. Perhaps changes to regulationin China, which forced a shift from a monopolyprovider, PICC, to a more open market, will meanthat increased competition is leading to a greaterfocus on customer retention.

Rationale for switchingCustomers who had changed product providers inthe past ve years were consistent in saying thatthe driver for change was the availability of better

or cheaper products from competitors. In somecountries, a substantial number of those surveyedsaid they switched because of the way their claimwas handled, supporting earlier commentarythat poor claims management is a major risk forcustomer loyalty.

Insurers cant inuencecustomer retention

Received wisdom is that providers feel they have little ability toretain customers its just not something they can control. Ourresearch found that insurers can protably inuence retentionin many countries in this region.

Myth 5

Top reasons why consumers switch providers

60%of consumers areeither not very, ornot at all, likely tochange insurers in

the next ve years.

Another provider offered

me a better product or

cheaper price

42%

Poor service by my previous

provider

16%

My agent recommended a

new provider

14%

I found a better product

elsewhere

35%

My needs changed and my

previous provider couldnt

meet my new needs

16%

Other

5%

None of the above

2%

I had a poor experience on a

claim I made

10%

I found a cheaper price

elsewhere

44%

34


37/40

35

How much effort did your previous provider make for you to stay with them?


Dont rely on inertia and miss the cross-selling opportunityCustomer inertia favors providers, and it is clearthat there is more to gain in some countries

from improving retention activity since onaverage a third of consumers are likely to switch.

Given that retaining the best customers is thegoal, insurers need to understand the costto serve different customer segments andchannels. Without a rm grasp of costs, it isdifcult to work out whether a customer is worthretaining and, therefore, how much should beinvested in retaining them. Insurers also need tounderstand the switching behavior of customersand how this differs by territory and customersegment. Combining an understanding of cost toserve with propensity to switch will strengthen

any retention strategy.

In some markets and for some insurers, asophisticated approach using a highly trainedspecialist retention salesforce, able to makeappropriate recommendations around coverand pricing combinations, will be the correctstrategy to retain more customers. This requiresnot only dedicated staff, but also agile productswith exible pricing models so that the retention

team can negotiate effectively on price andproduct coverage. Without this level of productexibility, the retention team will only be ableto offer blanket discounts, which rarely create

long-term protability.

In other markets and for other insurers, anexisting high retention rate may require a moredefensive strategy, but it will certainly requiredifferent capabilities in different countries.Having an effective customer retention functionthat segments the customer base, targets thosewho are most valuable and communicates withthem proactively is becoming increasinglyimportant for insurers to boost retentionand protability.

Focus on the bottom line

Improved access to product and priceinformation for consumers, combined withproviders drive to improve customer serviceand brand positioning will be key features ofthe industry landscape for the foreseeablefuture. In our opinion, insurers have signicantopportunities to lift their game on customerretention where only small incremental

performance improvements cascade intomajor bottom-line benets.

Asia-Pacific* China Hong KongAustralia

Indonesia Singapore South KoreaMalaysia

9% 8%

23%

9%

31%

16%

42%

24%

6%

1% 1%

46%27%

62%

1%3%

10%

28%

32% 28%

2%

16%

37%

29%

17%

1% 7%8%

41%

13%

32%

9%

31%

31%

26%

3%

39%

21%

29%

2%


Great deal my provider was proactive A fair amount Just a little

None at all I never heard from them Dont know


38/40

36

36

During August and October 2011, Ernst & Young commissioned a global customer insurance survey.Working with Ipsos, this research focused on better understanding the behaviors and expectations ofcustomers across the globe.

The survey covered 24,000 customersacross 7 regionsand 23 markets.

The survey was designed to be broadly representative of the insurance-buying population in each

country, accessible through online panels. Only people holding at least one insurance policy were eligibleto participate. This methodology has been widely used by Ipsos for insurance, consumer products andservices clients around the world.

It is important to remember that in developing markets, online panels tend to be more representativeof an urban and relatively afuent population than of the population as a whole. However, as this is thegroup that is more likely to buy insurance (and indeed, consumer goods and services in general), it wasfelt that an online approach still produced a sample that is broadly representative of the target marketfor insurance companies. It is also a reasonable assumption that younger people are less likely to own aninsurance policy and therefore formed a smaller proportion of responses to the survey than they do of thepopulation as a whole.

The following steps were taken to reach a cross-section of insurance customers via the

online panels:

Interviews were conducted in each market using online access panels* among members of theadult population.**

The outgoing sample, i.e., the group of people initially invited to respond to the survey, was balanced tobe representative of the national population by age, gender and region.

A screening question was placed at the beginning of the survey to exclude respondents who did nothold at least one product from a set list of insurance products.

Quotas were set on life and pensions and non-life insurance to ensure equal numbers of responsesacross the two main insurance categories (in order to facilitate analysis within each category.)

No further quotas were set. The interviews were left to fall out naturally across the online demographicgroups on the assumption that the responses should broadly reect the prole of the insurance marketin each country.

For the European, American, Asia-Pacic and India regions, the data has been weighted accordingto the size of each individual countrys Gross National Income adjusted for the Purchase Parity Power(GNI PPP). Source: World Bank website, 2010 data.

Analysis of the survey ndings has been conducted jointly by Ipsos and Ernst & Young.

Life and pensions

Age

Gender

Non-life insurance

Age

Gender

18-24

25-34

35-44

45-54

55-64

65+

13%

17%

21%

24%

13%

12%

18-24

25-34

35-44

45-54

55-64

65+

13%

18%

22%

23%

11%13%

Male

51%Female49%

Male

49%Female51%

* South Africa conducted ofine and India mixed online/ofine.** In some markets this is 18-65 years old, extended to 65+ where feasible. Excludes regions in some developing markets where this is not appropriate.

Global methodology


39/40

Asia-PacicPaul Clark

Asia-Pacic Insurance Leader, Asean Financial ServicesErnst & Young Advisory Pte. Ltd.Email: [email protected] Tel: +61 2 8295 6967

Asia-PacicGraham HandyInsurance Practice Leader, Asean Financial Services

Ernst & Young Advisory Pte. Ltd.Email: [email protected] Tel: +65 8383 4123

Asia-PacicFabian NgInsurance Customer Advisory Leader, Asean Financial ServicesErnst & Young Advisory Pte. Ltd.Email: [email protected] Tel: +65 9030 0223

Find out how we can help at www.ey.com/insurance, orcontact a member of our team.

Ernst & Young is a global leader in professional services andhas signicant experience providing a broad range of servicesto the insurance industry. Our reputation is built on assemblingmultidisciplinary insurance teams from around the world to delivera range of services, including: performance improvement; nancial

management and control; change management; regulatoryreporting; risk management; information technology; productdesign; tax; transactions; actuarial; corporate advisory; and auditservices. This means you get a clear perspective of your marketand the options available to you. Its how Ernst & Young makesa difference.

How Ernst & Young can help
mailto:[email protected]:[email protected]:[email protected]://www.ey.com/insurancehttp://www.ey.com/insurancemailto:[email protected]:[email protected]:[email protected]://www.ey.com/insurance


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Assurance | Tax | Transactions | Advisory

About Ernst & Young

Ernst & Young is a global leader in assurance, tax,

transaction and advisory services. Worldwide, our

152,000 people are united by our shared values and

an unwavering commitment to quality. We make a

difference by helping our people, our clients and ourwider communities achieve their potential.

Ernst & Young refers to the global organization of

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of which is a separate legal entity. Ernst & Young

Global Limited, a UK company limited by guarantee,

does not provide services to clients.

For more information, please visit www.ey.com.

About Ernst & Youngs

Global Insurance Center

From globalization to technological innovation,

businesses around the world are exploring new

and different ways of achieving their potential.By investing in dedicated Global Industry Centers

around the world, Ernst & Young can give you

a global perspective on your assurance, tax,

transaction and advisory needs, whatever your

industry. The Centers serve as a hub for sharing

industry-focused knowledge, enabling our global

network of professionals to give you highly

responsive advice that helps you compete more

effectively in your industry.

Its how Ernst & Young makes a difference.

www.ey.com/insurance

2012 EYGM Limited.All Rights Reserved.

EYG No. EG0078g

In line with Ernst & Youngs commitment to minimize

its impact on the environment, this document has been

printed on paper with a high recycled content.

This publication contains information in summary form and is

therefore intended for general guidance only. It is not intended to

be a substitute for detailed research or the exercise of professional

judgment. Neither EYGM Limited nor any other member of the global

Ernst & Young organization can accept any responsibility for loss

occasioned to any person acting or refraining from action as a result

of any material in this publication. On any specific matter, reference

should be made to the appropriate advisor.

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