Sami Guellouz Dubaï 06-04-2005 1

Best practices : from e-insurance to e-takaful1st e-takaful seminar

Dubaï 06-04-2005 2

OverviewE-business definitionE-business strategy road mapE-insurance overviewE-takaful

Dubaï 06-04-2005 3

E-business

m-commerce

Electronic commerce

E-Business

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E-businessUse of of electronic means to conduct an organization’s business internally and/or externallyInternal e-business

Better info sharing, knowledge dissemination management reporting

External e-business Formulation of a sales promotion, Collaboration with partners

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E-commerceFocus on facilitating transactions and selling of products and services online,By internet or any other telecom network,Encompasses all trading steps :

Online (marketing, ordering, distribution), e-payment

Buy-side activities (suppliers) Selle-side activities (customers)

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m-commerceSubset of e-commerceSimilar online activitiesUnderlying technology is more specific

Limited to mobile telecom networks Accessed through wireless hand-held

devices (mobile phones, hand-held computers, personal digital assistants)

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OverviewE-business definitionE-business strategy road mapE-insurance overviewE-takaful

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E-business strategy roadmap

Vision formulationBusiness objectives definitionCustomer value creationMarket segmentation and targeting Organizational set upE-business model formulation

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Pre-requisitesManagers need to be «catalysts of change » Combine positive traits of both the « visionary »

and the « efficient performer » High levels of both creativity and analytical

ability Know that ideas by themselves are not enough

to build a profitable business Able to find new ideas by analysing state-of-the

art cies within their industry and across other industries

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Vision formulationTwofold goals : Focus attention and effort of top

management and employees around a common task

Encourage creativity and innovation by expanding your thinking beyond the existing boundaries of the cy and its environment

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Business objectives definition

Objectives have to be measurableAllow progress tracking Ex : % of savings amount due e-business strategy implementation

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Business objectives definition

Objectives have to be measurableAllow progress tracking Ex : % of savings amount due e-business strategy implementation

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Customer value creationLow price Become cost leader within the industryDifferentiation advantage : Superior brand name, high service

quality, broad product selection, Leverage information available to

create benefits for your customers (by data mining techniques for instance)

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Market segmentation Closely linked to value creationTwo steps : Select criteria for dividing you market

into segments age, income for instance Consumer (personal lines), corporate

(commercial lines) Decide which segment to target

Segment’s needs driven products and services

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Organizational set upWhat scale? Analysis of expected cost structure of e-

business activities Analysis of each activity of the value chain Analysis of its underlying cost drivers

What scope? Products scope Leverage the internet to establish partnerships

with complementorsHow integrated?

Which e-business activities to perform in-house and which ones to outsource?

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Organizational set upHow to align physical-world strategy with e-strategy? Stragtegic decisions

Branding, pricing, IT and channel conflictWhat structure? Integrated into the existing organization

Leverage brand to attract customers to online channel

Multi-channel offering becomes possible, cross promotions, shared IT

Set up inside a separate entity

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Business modelCost structure? Consider individual parts of te value chain

Production, IT, marketing, sales an after sales service How can we use internet to lower costs across the

value chain?Revenue structure? Transaction fees, advertising revenues,

subscription fees (in B2C e-commerce) Assess sustainability of business model

Intensity of competition, substitutes, etc. Leveraging data mining techniques to analyse

customer information

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OverviewE-business definitionE-business strategy road mapE-insurance overviewE-takaful

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Business models for e-insurance

Insurance cy’s websites homepages of individual insurers

Products portals Comprehensive standard websites for insurance

Aggregators Internet insurance brokers

Online risk markets Large risks placed with trading partners

Point of sale portals product marketing through various theme-based

pages

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E-insurance difficultiesComplexity of some productsClaims settlement difficult to standardiseInternet suited for products where the contact with the cy is more frequentInternet viewed as insecure medium for high amountsRegulation (licences)

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Internet-product suitability

Low HighProduct complexity

Lo wTr

ansa

ctio

n vo

lum

eH

ig h * Large commercial risks

* Health insurance

* Commercial motor

* Household

* Motor

* Term life

More advice/ Less

suitable

* Index linked life products

* Annuity products

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E-insurance advantagesImportant market share gain potential

Standardised personal lines insuranceLimited suitability for sale via internet

Most life and pension products, health insurance, commercial insurance

Enormous potential for improvements in quality and service levels

Better tailored products Shorter reponse times Greater flexibility in cover structure Better risk management support

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E-business increases efficiency

Sales, administration, claims settlement, claims payment expenses

decrease for both personal and commercial lines

Personal lines cost cut potential > Commercial lines cost cut potential

High level of advisory services and tailor made products

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Market entry barriers lowered

New entrants can avoid long and expensive setting up of traditional sales network“Lateral” from other sectors benefit from easier access

Financial services, internet cies, banks, online brokers, internet service providers

Internet presence and brand name to add insurance to their product range

More efficiency Established insurers face growing competitive pressure

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Towards more integrated e-business models

E-business makes it possible to disseminate information quickly and in large volumesTraditional value chain is deconstructed and certain links are outsourced to specialist providers

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Internet impact on value chain

Product development & rating Standardisation, data availability and analysis, new risks

Marketing New marketing opportunities, deintermediation,

reintermediationAdministration

Standardisation, automationAsset management

Better informationClaims management

Automation, proximity to the customer, additional services

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Potential providersProduct development & rating

Actuarial firmsMarketing

Trading cies, financial services providers, virtual brokers and markets

Administration Policy administrators, IT companies

Asset management Asset managers, funds, banks

Claims management Professional claims managers, call centres, Repair

companies

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Role of traditional brokers is shifting

Standard products Considerable competition

Products that need more advice and for which prices and benefits are not easy to compare

Using e-business, more finance management and risk consulting services

Ex : complex pension products, commercial lines

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Customers benefitsGreater transparency, lower prices and improved servicesE-business opens up new ways of reducing costsHardening competition ensures that these benefits are passed on to the customerInternet offers a number of possibilities of increasing the value creation for customers by means of increased transparency and improved services

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E-insurance conclusionFrom purely info and communication medium to important distribution channelFocus from selling products to consumers (B2C) to selling to commercial clients (B2B).Internet does not only impact the distribution but the entire business process Challenge of continuously optimizing the business processes

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OverviewE-business definitionE-business strategy road mapE-insurance overviewE-takaful

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Insurance not permissibleUncertainty (Gharar)Gambling (Maisir)Interest (Riba)

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E-takafulPrevent al-gharar, uncertainty and ambiguity in the transactionProvide to the consumers with comparative informations between products availableLead to more informed decision by consumersScope of the cover, benefits and exclusionsRate of tabarru’ for takaful vs saving

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E-takafulYoung industry Can leverage on the conventional insurance e-

experience Comprehensive e-business strategies should be

built (eventhough takaful is a high level brand)Takafulconcept & internet suitability E-business enhances the transparency

(involved by the takaful concept) E-business favor the participant’s

empowerment (involved in the takaful concept)

Sami Guellouz Dubaï 06-04-2005 35

Thank youSources

Swiss Re, Sigma n° 5/2000Strategies for e-business, Prentice

Hall, Financial Times