Product Design 101: Developing Products That Cater to Client’s Needs Calvin Foo CFP Asia Regional...

Product Design 101: Developing Products That Cater to Client’s Needs

Calvin Foo CFP

Asia Regional Head

Financial Advisory & High-Net-Worth Development

2

Agenda

Product Strategy

Different Stakeholders’ Roles & Points of View

Client Segmentation

Client Life Cycle

Case Studies

Singapore – ASEAN Wealth Management Hub

Bancassurance – Multiple products for multi-channel distribution

The FMCG Approach – to simplified product marketing

Micro-insurance – one countries success

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Objective

Discuss the strategy behind

designing products for the client

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Developing Products That Cater to Client’s Needs

First issue most clients don’t know what they need

Second issue some insurance companies are weak at marketing

Third issue some insurance companies have reverse strategies

Fourth issue some insurance companies don’t tend to align the interests of clients,

distributors and the finance/actuarial operations…..each may have their own personal agendas

Fifth issue regulation is not embraced

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Agenda

Product Strategy


Client Segmentation

Client Life Cycle

Case Studies





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Strategy

Starts and finishes with the customer

Is aligned to product (differentiated where possible)

Distribution and the who’s, the where’s, the how’s and the when’s, is how you execute the strategy

The definition of marketing: "the management process that seeks to maximize returns to shareholders by developing relationships with valued customers and creating a competitive advantage.“

Product→Solution

Promotion→Information

Price→Value

Place→Access

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Constructive criticism helps marketers adapt offerings to meet changing customer needs.

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Product PositioningInfluencing Factors for Product Design

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Marketing / After-sales

Service Facilities

Regulation (Tax System, ILAS)

Clients’ Needs / Target

Group (Clients)

Competition(Insurers and Fund

Houses)

Profitability Fee Income

(Up-front and trail)Persistency

Product

Positioning

Existing Product Range

Technology(POS, Underwriting,

MI, Web-site)

Sales Competence of

Distributor

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Product Strategyfrom Cradle to Grave…….

Starts with the Client Ends with the Client

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“ WHEN Otto von Bismarck introduced the first pension for workers over 70 in 1889, the life expectancy of a Prussian was 45.

In 1908, when Lloyd George bullied through a payment of five shillings a week for poor men who had reached 70, Britons, especially poor ones, were lucky to survive much past 50.

By 1935, when America set up its Social Security system, the official pension age was 65 - three years beyond the lifespan of the typical American.

State-sponsored retirement was designed to be a brief sunset to life, for a few hardy souls.”

- “The End of Retirement”, The Economist, Jun 25th 2009

Life expectancy when state pensions were first introduced…matching needs to expectation!!

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“ A universal problem we had to resolve was retirement benefits or pensions when a worker became too old to work. In Europe and America, the government provided these pensions, paid by taxpayers. We decided that every worker should accumulate his own savings in the CPF for old age”

- Minister Mentor Lee Kuan Yew, in his memoir “From Third World to First”

Singapore philosophy…

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Product StrategyActuary’s Role

Deals with the financial impact of risk & uncertainty

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Product StrategyDistributor’s Role

Sells, solicits & negotiates for compensation

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Product StrategyClient’s Role

Achieve financial security & independence for self & dependents

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Product StrategyDifferent Stakeholder’s Point of View

Actuary • Risks, Pricing, Experience, Profit

Distributor • Features & Benefits, Market

Competitiveness

Client • Funds for Major Illness Protection, Peace

of Mind

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Product StrategyDifferent Stakeholder’s Point of View

Actuary •Risks, Pricing, Experience, Sustainability of Future Bonuses

Distributor • Features & Benefits, Market Competitiveness

Client •Funds for retirement, Peace of Mind

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Understanding the customers’ product and service preferences drives the creation of offers and needs-based approaches that are relevant and seamlessly integrated

• Retirement planning

• Emergency planning

• Disaster planning• Best of breed

product• Charges

transparency• Fair choices• Trust and integrity• Demystified

guidance

Long term products require an ongoing relationship with the distributor and insurer and may require specialised servicing.

• Lifestyle needs• Security• Life-stage needs• Long-term

relationship• Household

budgeting• Financial planning• Asset management• Tailored products• Financing

• Convenience• Non-financial help• Complete

delegation for managing assets and liabilities

• One-stop shop• Anytime, anywhere• Prompt service

• Flexible options• Non-financial needs• Innovation• Financial planning• Prestige &

exclusivity• Performance• Value for money

• Account aggregation

• Entrepreneur management

• Long term relationship

• Simple administration

• Integrated services• E-payments• Product

aggregators• Automated

optimisers

Secure my future & reduce my risks

Give mepeace of mind

Save time for me

Help me enjoymy life

Simplify my life

The Customer Franchise

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Agenda

Product Strategy


Client Segmentation

Client Life Cycle

Case Studies





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Client Segmentation Client Life Stages

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Agenda

Product Strategy


Client Segmentation

Client Life Cycle

Case Studies





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Singapore Population: Growing, ageing, increasing longevity and wealth

Chart 1: Resident Population Chart 2: Population Age Pyramid

Source: Department of Statistics, Singapore

Chart 3: Life Expectancy

Chart 4: Per Capita GDP (US$)

0

10000

20000

30000

40000

1970 1980 1990 2000 2008

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Global HNW wealth will grow at an annual rate of 6%

By 2010, Asia’s HNW assets expected to reach US$10.6 trillion, close to the European wealth market

•Singapore has the highest rate of growth of HNWIs of 21%!•There are 67,000 of HNWIs in Singapore with US$323b in total assets!•This is 2.5% of the adult population!•This also means 5 out of every 200 adults in Singapore are millionaires, with very real Estate Planning needs !!

World Wealth Report 2007 by Capgemini and Merrill Lynch

High Net Worth Market

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Source: Asia-Pacific Wealth Report 2007 by Capgemini and Merrill Lynch

Japan, 43.70%

Australia, 6.00%

Hong Kong, 5.50%

India, 4.20%

South Korea, 3.20%

Taiwan, 2.60%

Indonesia, 0.80%

Other, 9.60%

China, 20.60%

Singapore, 3.80%

Asia-Pacific HNWI Wealth Distribution, by Market,2006

Comprised of 9 countries namely Kazakhstan, Malaysia, Myanmar,New Zealand, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam

HNWI Wealth,2006(US$ Billions)

• Others US$810• Indonesia US$70• Taiwan US$220• South Korea US$270• Singapore US$320• India US$350• Hong Kong US$460• Australia US$510• China US$1730• Japan US$3680

Total HNWI Wealth in Asia-Pacific Region = US$8.42 Trillion

Asia-Pacific HNWI’s financial wealthforecasted to reach US$12.7 trillionby 2011

High Net Worth Market

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Singapore will be among the world leaders when it comes to increasing the number of mass affluent people.

The number of mass affluent residents (individuals with > USD60,000 in liquid assets) in Singapore will grow from 410,000 last year to more than 600,000 by 2011 (close to 20% of resident adult population)!

Additionally, Singapore is likely to benefit from greater inflows of wealth from regional (e.g. Indonesia, Malaysia & Thailand) and global market (e.g. Middle-East), as investors look to diversify portfolios in safe havens such as Singapore.

* Wealth Management in Singapore 2007 by Datamonitor

Hence, the number of mass affluent non-residents adults in Singapore will also grow!

Wealth

Mass Market

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UHNW

HNW

Affluent

Emerging

Mass

> USD20mio

< USD100k

USD1mio to < USD20mio

USD500k to < USD1mio

USD100k to < USD500k

Client Segmentation Assets Under Management

Based on AUMSources: Credit Suisse Global Wealth Databook 2011, Cap Gemini & Merrill Lynch World Wealth Report

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Client Segmentation Life Stages Needs & Products

Life Stage Primary Need Life Insurance Product

Young & Single Asset Creation Wealth Creation plans

Young & Just Married

Asset Creation & Protection Wealth CreationMortgage Protection

Married with Kids Children’s EducationAsset Creation

Asset Protection

Education InsuranceMortgage Protection

Wealth Creation

Middle Aged with Grown Up Kids

Retirement PlanningAsset Protection

Retirement SolutionsMortgage Protection

Across All Life Stages

Health Health Insurance

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Agenda

Product Strategy


Client Segmentation

Client Life Cycle

Case Studies





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Corporate (SME)

RMs/ISs

Employee BenefitsKey-men Insurance

HNWRMs/ISs

Universal LifeWM Products

Product Positioning Alignment by Client Segmentation

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Multi-Channel Distribution ModelMulti-Channel Distribution Model

Retail Br Managers

/RMs

Investment Linked & WM

Products

Retail RMs/ISs

Need-based Products

Telemarketing

Low premium, high

perceived value

products

Manulife’s product and distribution expertise positions us to support RHB in realizing its full financial services potential

Privileged

High Net WorthAchievers

Youth

Strivers

Mature

Life Stage / Value Segment

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Product Range of Retail Banks

Co

mp

lexity

Equities

Funds

Bonds

SavingsAccounts

Credit Cards

Current Accounts

Business

Financing

Mortgage

Consumer

Loan

Investment Loan

Foreign Exchange

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Insurance Offers a Third Dimension: Protection

Co

mp

lexity

Equities

Funds

BondsCredit Cards

Current Accounts

Business

Financing

Mortgage

Consumer

Loan

Investment Loan

SavingsAccounts

Securit

y

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Co

mp

lexity

Equities

Funds

Bonds

Unit Linked

Assurance

Term

Assurance

ULA + Riders

EA + Riders

Investment Protection

SavingsAccounts

Endowment

Assurance

Guaranteed Products

with LA

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Co

mp

lexity

Business

Financing

Mortgage

Consumer

Loan

Home Ins.

Travelers Ins

Group Life Ass.

Pensions

Mortgage

Assurance

Investment Protection

Motor Ins.

Term Ass.

Credit Life

Loan Protection

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Product PositioningCase Study - Bancassurance ChannelProduct / SBU Credit Cards Mortgage / Motor

LoanUnsecured Loans

Deposits

CA/SA/TD

High Net Worth Income

SME

Credit Life (Shield)

Fix SI or variable type

POS

TM/DM

POS

TM/DM

POS

TM/DM

MRTA / MLTA

Reducing or Level

POS

TM/DM

PA and HIP

Segment specific with or without ROP

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

Critical Illness

Covering 1-5 Specific illnesses

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

Term Life

With or without ROP

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

TM/DM

In Branch (offered)

RM/PB

Insurance specialist

Endowment

Par or Non Par

TM/DM

In Branch (offered)

TM/DM

In Branch

Insurance Specialist

RM/PB


Whole of Life In Branch


RM/PB


Annuities In Branch


RM/PB


Universal Life RM/PB


RPUL / SPUL

Link to MAM or 3rd party funds with top up options

In Branch


RM/PB


Business Insurance

Directors and Key Man policies


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Direct and Telemarketing Model

Basic Marketing Style Follows Up On Value Proposition: Value-for-money, Simplicity and Convenience

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Agenda

Product Strategy


Client Segmentation

Client Life Cycle

Case Studies





• 20,000 units in 650 stores

• Permanently displayed

FMCG Approach in Stores

Instant Products For Sale in Stores

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Agenda

Product Strategy


Client Segmentation

Client Life Cycle

Case Studies





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Manulife Vietnam Life Insurance (MVL) began its operations in September 1999 as the first foreign life insurance company in Vietnam since the country opened its insurance market to foreign companies

MVL operates in 12 cities through a network of 7,000 agents, serving 300,000 urban middle class customer

We also partner with selected banks to distribute life insurance in major urban cities

In 2007, Manulife established Manulife Vietnam Fund Management Company (MVFM) to enter the wealth management business. MVFM managed third party institutional asset and is one of the three companies in Vietnam offering local retail

mutual fund.

Manulife Vietnam

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Established in 1930

A political mass-based national organization aiming to promote the welfare of Vietnamese women in all aspects: economic, political, health and education

VWU has 13 million women members nation wide, through an extensive administration network at national, provincial and district level

Since 2003 the VWU acts as the main partner of the Vietnam Bank for Social Policies for disbursing their loans to low income families

VWU manages about 40 microfinance and credit programs

Vietnam is considered one of the most successful countries in reducing poverty, the percentage of the population living under the poverty line has reduced from 58% in 1993 to 14.87% at the end of 2007 and VWU plays an important role in Vietnam’s poverty reduction efforts

Vietnam Women’s Union (VWU)

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The rural market in Vietnam is a large market with approximately fifteen million households and around sixty million people. This market largely remains under-served due to the remoteness of the locations and the lack of accessibility to financial services

In 2008/2009 the Vietnam Ministry of Finance (MoF) started to look into rural area insurance needs and encouraged commercial insurance companies to develop commercially viable micro-insurance for the mass rural market

Manulife went through an extensive distribution partner selection process with the following criteria:

NGO & non-profit organisation focusing on low income families

Nationwide network with administration capability – Vietnam Post Office & Banks

Experience with micro-finance or micro-insurance projects

Identified VWU as an ideal partner for the micro-insurance project and signed an MOU in early 2009. Project officially launched in Sept 2009.

Micro-Insurance Project Background

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Partnership – Manulife & Vietnam Women Union’sSigning of MOU

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Product & Benefit Coverage

Premium: VND300,000 (US$17, THB510) annual premium

7 year Term Coverage

Death Benefit: VND 10 million (US$560, THB16,800)

Accidental Death: Additional VND 10 million (US$560, THB16,800)

Accidental Dismemberment: VND4 million (THB6,720) to VND6 million (THB10,080) depending on the type of dismemberment

Hospital Benefit: VND180k (US$10 THB300) first policy year VND360k (US$20 THB200) 2nd – 7th policy year onwards

No claim bonus: 100% refund of premium if no claim during benefit period

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Engagement Process

Presentations of micro-insurance via pre-scheduled seminars at the commune level organized by VWU commune and district leaders

Over 1,000 seminars held during 12 months period

About 50 to 200 attendees per seminar, sign up rate over 70% and signed up 60,000 micro-insurance customers so far

Product introduction and fulfillment conducted by Manulife employees

Simplified business process at the end of the seminar

Pre-scheduled sales seminar to avoid anti-selection

The seminars also serve as an introduction to the concept of insurance and protecting family welfare to the rural mass

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A Typical Engagement Seminar

There was not enough seats so VWU members had to stand or sit on the ladder on the right hand side of the house.

The meeting house was too small so some sat outside along the corridor

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Customer Visits

On the way to a customer's house…

At a customer's house..

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We are really bringing hope to a family that is so much in need of money.

Claim Cheque Delivery

Source: Saturday's Globe and Mail, published on Friday, Feb. 19, 2010

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Vietnam Post Pilot Project

Lessons learnt The wealthy rural market offers real potential and there is a continual need to explore

options to penetrate this market segment.

Must build strong relationships with Postal workers and Post Office management at different levels

Micro-insurance advisors must have positive attitudes and must be suitable for the work to be undertaken.

The range of micro-insurance products offered should be comprehensive and offer many choices.

Mode of payment must be flexible or at least allow various modes of payment. Restriction to annual mode only is a distinct disadvantage.

All the engagement processes must be simple, especially premium collection and policyholder services.

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“The human being needs a challenge, and my advice to every person in Singapore and elsewhere, keep yourself interested, have a challenge. If you're not interested in the world and the world is not interested in you, the biggest punishment a man can receive is total isolation, black...complete withdrawal of all stimuli, that's real torture.

So when I read that our people believe in retiring at 62, I said to them: "You really want to die quickly?" If you want to see sunrise tomorrow or sunset, you must have a reason, you must have the stimuli to keep going."

Minister Mentor Lee Kuan Yew at age 85 shared his own experiences of active ageing at the Silver Industry Conference and Exhibition, 12 Jan 2008

ABOUT MANULIFE

5757

Manulife FinancialStrong & Diversified Businesses

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InvestmentsUnited States, Canada, United Kingdom, Japan, Australia, Hong Kong, Southeast Asia

Asia Hong Kong, Philippines, Singapore, Indonesia, Vietnam, Malaysia, Thailand, Taiwan, China, Cambodia

• Individual Life Insurance• Group Life & Health Insurance• Pension Products• Mutual Funds

Canada • Individual Insurance • Individual Wealth Management• Group Benefits• Group Pensions

United States • Insurance• Long Term Care• Annuities• Group Pensions• Mutual Funds

Reinsurance• United States• Canada• Europe• Asia

Japan • Individual Insurance• Variable Annuities

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5858

Manulife FinancialCompetitive Strength

Excellent brand recognition and reputation

Strong claims paying ability / financial strength ratings

Strong capital position - C$28.9 billion @ June 30, 2011

Significant scale

Product diversity

Strong, multi-channel distribution

Superior asset quality

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5959

Manulife Financial Strong Multi-Channel Distribution

AdvisorsFinancial Planners

Independent Agents

Brokers

DealersWire-houses

Banks

In-house Agents

• Deep & growing relationships across multiple channels worldwide

• Over 110 Bank partnerships across Insurance and Mutual Funds distribution in Asia

• Meet varying needs of our international base of customers, regardless of their chosen distribution channel.

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Product Design 101: Developing Products That Cater to Client’s Needs Calvin Foo CFP Asia Regional...

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