capturing hearts, minds and market share

©2015 IBM Corporation1 12 October 2015

Customers increasingly requiring connected insurers

Capturing hearts, minds and market share

Lee-Han Tjioe

Insurance Industry Leader Europe IBM

London, October 5, 2015

©2015 IBM Corporation 12 October 20152

We surveyed 12,000 consumers in 24 countries on their insurance relationships, value preferences and switching behavior

Source: IBM Institute for Business Value survey data 2014, n=12,210

> 50 years

30-50 years

< 30 years

Male

Female

Very high

High

Average

Low

Very low

Income

Age

Gender

includes

the U.K.

n=539


U.K. Insurance clients are looking for providers who take personal care

Low trust

Source: [1] IBV survey data 2007-2014 “Do you agree with the statement ‘I completely trust the insurance industry’?” [2] IBV survey data 2012, 2013, 2014 „Please state how often you switched your insurance provider in the past two years(3) My needs changed and the previous provider could not meet my new needs

44%Of UK customers do not trust insurers 1

50,5%of UK customers switch insurer at least 1 time in last 2 years 2

High churn

32%of UK customers who switched do this because of lack of personal needs served 3

Lack of personal care

©2015 IBM Corporation4 12 October 2015

Value propositions of P&C Insurers require differentiation on 3 main

disciplines

“Transparent”-

“Provide me with better visibility on my risk coverage, claims situations and ensuring right pricing of my individual risks when I need it via multiple connections”

“Share of Mind”-

“Provide more relevant content and services to me via multiple connections which help me to reduce my personal risks”

“Personal”-

“Understand my behavioural preferences and give me tailored propositions, individual advise and pricing for my specific needs”

1

32

Customer

Behavior

Value

Proposition

Technological

Innovation


Greater granularity in analytics can help fine-tune communication even further – U.K. customers have a different profile

Attitude Cluster Security-

oriented

individualist

Demanding

support-

seeker

Loyal quality-

seeker

Price-

oriented

minimalist

Support-

seeking

skeptic

Informed

optimizer

% of total 16% 16% 18% 16% 19% 15%

% U.K. 24% 6% 10% 30% 8% 22%

Key theme "I know what I

want and

organize

myself"

"I need

personal

advice"

"I trust my

insurer and

remain a loyal

customer"

"I do not like

insurers –

make it cheap

and stay away"

"I need advice

but prefer to

keep my

distance from

insurers"

"I take time to

research to find

the best"

Analytics show how insurers should communicate

Source: IBV survey data 2014. Top n=12,210; U.K. n=539Bottom U.K. n=408. Q: Please select the three channels most important to you when searching for INFORMATION about your insurance coverage.

websiteinsurer

aggregator

telephoneindpt

agents

peers

Security-orientedindividualist

Price-orientedminimalist

Informed optimizer

Customer Behavior


6

It USES ALL DATA by surfacing up to the second structured and unstructured data collected across INSURER and public

It is REAL TIME providing next best action guidance to customers and associates while they are on phone or in web

It is VIRTUAL in that data is aggregated on demand vs. relying on a centralized warehouse

It is also BATCH leveraging massive amounts of structured and unstructured data to produce insight across the business

It LEARNS AND REASONS the next best action by leveraging sense making, cognitive computing, and big data technology

It uses NATURAL LANGUAGE DIALOGUE in customer interactions via web, phone, associate

It is SELF SERVICE by providing analysts and others across the business a rich data discovery platform customer analytics

Customer

Transforming from Intuition to Cognitive Insight and “Watson” like Guidance to ensure the best possible outcome for each customer and each customer

interaction

Leading insurers adapt COGNITIVE CUSTOMER INTERACTION SYSTEMS to transform into customer centric servicing

COGNITIVE

4

Customer

Behavior


Value is more than just price. Perception of value matters

Value Proposition

Customers don‘t see price in absolute terms, but as a matter of

fairness

Price consciousness per se has no immediate effect on loyalty....

Loyalty Index

medium

high

Price consciousness

medium

high

Quality consciousness

3,4

3,6

3,8

4

4,2

4,4

...too high ... fair ... too low

Do you think the premium of your insurance is…

global U.K.

Source IBV survey data 2014, global n=12,210, U.K. n=539

Loyalty Index

... perceived quality does


Insurers brand matters less than expected – for the insurance customer of the future, direct and individual engagement is more important

20% 68% 12%

of sample

low medium high

Brand consciousness

Loyalty Index

medium

high

Only very high brand consciousness increases loyalty1

Brand Enthusiasts

High propensity for individual recognition and two-way engagement.

51%

Millennials

25%

of total disposable

income

The customer of the future tends toward a new view of brand2

Source: [1] IBV survey data 2014, n=12,210, U.K. n=539 [2] „Brand enthusiasm: More than loyalty“. IBV. Nov 2014.[3] „Digital reinvention: Trust, transparency and technology in the insurance world of tomorrow“. IBV Jan 2014

The insurance customer of the future3

� … is less concerned about price alone

� … wants to interact with others when shopping for insurance

� ... is omni-channel

� … is looking for advice

� … is open to new products and ideas

20% 71% 9%

of sample

Value

Proposition


Customers can accept product complexity, as long as they are enabled to understand how it works.

There is little discernible effect of product complexity on loyalty…

... it is transparency about the productthat counts

“We need to “de-mystify” the world of insurance through increased transparency and reduced complexity.”

CEO, All-lines insurer, Singapore

Loyalty Index

medium

high

low medium high

Product knowledge

42%

44%

Percentage of customers who are highly loyal when they feel…

… their insurance is not complex

… their insurance is highly complex

Source IBV survey data 2014, n=12,210

Technological

Innovation


The Internet of Things will be an important playing field for insurers – the millennial customer will expect it

Do you own or can you imagine owning devices that connect to the Internet on

their own? (E.g. refrigerator, washing machine

etc.)1

I would be comfortable with my insurer using the data from these

devices

If my insurer used the data from these devices, this would improve my loyalty

36%

56%

Millennials Gen X Boomers

50%

Source IBV survey data 2014, n=12,210; U.K. n=539 [1] Answer “yes”

21%

19%

15%

44%

41%

35%

36%

40%

50%

Millennials

GenX

Boomers

agree neutral disagree

21%

19%

14%

45%

42%

38%

34%

39%

49%

Millennials

GenX

Boomers

agree neutral disagree

U.K.48%

U.K.43% U.K.

31%

Technological Innovation


INTERCONNECTED INSTRUMENTEDINTELLIGENCE

3 Ecosystems to Co-create

Deliver Customised Insights based on

Deep Customer

Analytics

Orchestrate a broad set

of services around an

integrated set of

customer needs

Offer a real-time

monitoring

proposition on key

risk objects

eCall4All


New business models are needed to address shifting insurance market requirements

Seamless and automated interaction with clients, third party providers and other insurers

From static data to behavioural and environmental dynamic data

Drastically reduce complexity in supporting processes and IT to become more Agile at lower cost

From: To:

Access

Integration

Legacy Admin

Networked

Data rich

Less is More

capturing hearts, minds and market share

Technology