Cross sell: The growing need to diversify

James Hickey and Penny Butler © Deloitte Actuaries & Consultants Limited

• “A new normal” • Cross sell offerings • Case study: Mortgage Brokers • Bank models • Pushing boundaries

Agenda

• e.g. Life Risk evolution

Traditional to new channels • Others product offerings:

• Group Life • General Insurance • Wealth Management • Estate Planning

IFA / Life Agent Financial Planners Bank Branch Alliances Direct Mortgage Brokers, Aggregators etc … ?

Why will banks focus on cross sell? System Size • Total market over $1.2tr at Dec 2011 • Monthly settlements c.$20b per month

System % Growth Rates • Growth rates slowing (now 5% p.a.) • New normal for medium term

What’s changed: Mortgage system growth fallen from 15-20% to <5% p.a.

• “A new normal” • Cross sell offerings • Case study: Mortgage Brokers • Bank models • Pushing boundaries

Agenda

Cross sell offerings Offering Potential Features Relative Margin

Wealth • Full advice offering

• Scaled advice offering

• Online/ low cost super fund

Life Risk • Loan protect

• Simple direct life risk

• Fully underwritten life risk

• Funeral Insurance

General Insurance • House and Contents packaged with loan

• Bundled other products

• “A new normal” • Cross sell offerings • Case study: Mortgage Brokers • Bank models • Pushing boundaries

Agenda

Case study: Mortgage brokers

Industry Issues: • Consolidation

• Commission reductions by lenders

• Slowing finance market

• Increased compliance

• NCCP is still being integrated in to broker processes

• Fee for service remuneration models are being considered, although in relative infancy.

AFG Mortgage Choice

Aussie Home loans

VOW financial

Smartline

Plan Choice Aggregation

FAST Connective FirstFolio

Market Insights: Broker landscape Will ‘fee for service’ occur for brokers? What cross sell areas are most likely to be successful for

mortgage brokers?

• A mortgage is likely the largest debt of a customer’s life, and they probably have little

understanding of the risk that they are actually taking on • Australians are grossly underinsured in life risk; mortgage debt levels are at an all time high • Under NCCP, brokers are spending more hours in front of clients and are increasingly well

placed to understand their needs • A variety of life risk products and models are available • Commissions- whilst smaller than those received for the loan- are perceived as fair for the

additional work required to cross- sell life risk insurance.

Speaking broadly, a broker with a conversion rate of 30% for life risk products might earn the same amount as writing additional 1-2 loans per month.

Life risk should be an easy cross sell..

.. But no one has it completely right

Non - referral

Referral

No advice

General advice

Full Advice

Poin

t of s

ale

“Tic

k an

d Fl

ick”

A number of different models exist in the broker market

Broker Requirements to cross sell

Motivation

Support

Trust

CONFIDENCE

• “A new normal” • Cross sell offerings • Case study: Mortgage Brokers • Bank models • Pushing boundaries

Agenda

• Those with bancassurance experience are making solid progress • Others are struggling - are they product providers or distributors? • How are traditional channels (IFAs, branches, direct) aligning with newer

channels (alliances, online, social media etc) at pre/at/post point of sale

A clear distribution strategy is key

Bank Models: Cross sell cross road

Empowering the branch Branch Requirement Lessons learnt

Education for staff • Required for product features and needs based conversation • Technical ability accounts for only 10% of sale • Role plays and conversation scripting are vital

Customer centric position • Customer needs first, product opportunity second

Support from head office • Initial and ongoing support required, including real time support • Campaigns to increase general customer awareness • Install cross sell targets, and monitor performance

Appropriate products • Products and processes should be relatively quick, simple and easy to explain, and integrated into BAU

Timeliness • Insurance should be brought up early in the loan conversation • Conversion rates decline dramatically with time after loan has

been approved

• “A new normal” • Cross sell offerings • Case study: Mortgage Brokers • Bank models • Pushing boundaries

Agenda

• Segmentation (life cycle vs behavioural) • Merging products • Bundling products • Existing and new customers

Pushing boundaries

The road may not be easy, but the rewards are there for banks that can get

this model right

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