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Asia-Pacific

Voice of the customerTime for insurers to rethink their relationships Global Consumer Insurance Survey 2012

Contents

Executive summary 2

01 Life and pensions (including investments) 5Our survey explores the following myths:1. Customers have low confidence in the life and pensions industry2. Life insurance is sold, not bought3. Personal interaction is essential4. It’s hard to cross-sell to existing customers5. Providers can’t influence persistency

02 Non-life insurance 21 Our survey explores the following myths:1. The future is online2. It’s only about price3. Good claims experience builds loyalty4. Customers don’t respond to cross-selling5. Insurers can’t influence customer retention

Global methodology 36

Contacts 37

1

Faced with the unprecedented challenges of troubled financial markets, changing regulatory oversight and economic uncertainty, there is a risk that some insurers may not be listening and responding to the most important voice of all — that of their customers. For any insurer hoping to navigate through this difficult time, understanding how customer behaviors and attitudes are changing is critical. Previous assumptions and received wisdom about customers may no longer be reliable, and those insurers who are able to respond best to what customers want now are most likely to succeed.

In light of this, Ernst & Young conducted a groundbreaking survey of insurance customers. Working with the research firm Ipsos, we set out to test the received wisdom by interviewing 9,000 consumers of life and non-life personal insurance products in Australia, China, Hong Kong (special administrative region of China), Indonesia, Malaysia, Singapore, and South Korea between August and October 2011, as part of a global survey covering 23 markets in seven regions around the world.1

Global Consumer Insurance Survey 2012 — Asia-Pacific

1 For 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

2

The Asia-Pacific region is one of enormous growth and opportunity for insurers. It is also one of significant diversity. In developing countries, agency sales forces dominate and play a vital social role in making products accessible to low earners. The development of insurance markets in western-developed countries, 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-Pacific, the race is on between insurers to secure new customers by selling them their first insurance product. In the more developed Asia-Pacific markets, the battleground is shifting to focus on securing a greater share of the market and increasing retention by deepening the customer relationship and cross-selling.

Australia, perhaps the most mature market in the region, presents an unique dynamic with compulsory retirement savings. The Australian challenge is to overcome customer misconceptions of their insurance protection as part of their superannuation plan, create products that complement and fill gaps that exist in this cover.

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

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

Asia-Pacific life and pensions key findings

• The good news is that customer confidence in the insurance industry has been less affected by the financial crisis and recession than other financial markets. However, there is no room for complacency because a significant minority of customers still are not certain that they have the right products to meet their needs.

• Customers are demanding simpler and easier-to-understand products.

• Among the rapidly growing number with internet access, there is a very significant increase in customers who are conducting their own research and who expect clear and transparent information from insurers.

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

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

Alongside these opportunities there is an underlying threat that an increasingly well-researched and aware 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 leading practices with well-trained agents.

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

Executive summary

In emerging markets, a focus on customer lifetime value starts with selling new customers their first insurance 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 first time rather than chasing customer volume 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 profitable business from loyal customers makes them worthy of debate.

Asia-Pacific non-life insurance key findings

For non-life insurers, the region presents a variety of challenges, including: competing with strong domestic players with well-known brands and entrenched distribution channels; operating regionally across markets that exhibiting many common traits and have important local nuances and accessing consumers who are more familiar with bancassurance and agency distribution than their counterparts around the globe.

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

• Consumers in Asia-Pacific highlight that, for them, insurers need to have an integrated multichannel distribution platform. Increasingly, this platform will include a fully transactional online presence but not one that operates in isolation of other channels.

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

• Somewhat surprisingly, yet consistent with other parts of the globe, consumers expect great claims service, 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 switch insurers lightly.

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

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

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

Graham HandyInsurance Practice Leader, Asean Financial Services Ernst & 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 for multiple products

• Increased and improved customer contact• Increased cross-selling, loyalty and overall profitability

Customers

New (first product)

Incremental (additional contributions, riders)

Loyal(multiple product, large share of wallet)

Customer and Agent maturity model

Agents

New (sell to family)

Referral (sell beyond family)

Successful and retained(cross sell and up sell to existing customers to build wider networkor attract new customers)

http://www.ey.com/insurance

We set out to explore customers’ attitudes and behaviors today, to separate myth from reality and provide some hard evidence of what customers want now.

01Life and pensions (including investments)While there is some truth in the received wisdom around how life and pensions products are bought and sold, the reality is more complex. Understanding customers’ current attitudes and behaviors will help insurers determine what they can do better or differently to attract consumers, deepen and retain relationships and unlock greater customer lifetime value.

Our survey explores the following myths:1. Customers have low confidence in the life and pensions industry2. Life insurance is sold, not bought3. Personal interaction is essential4. It’s hard to cross-sell to existing customers5. Providers can’t influence persistency

Myth 1

Customers have low confidence in the life and pensions industryReceived wisdom is that the financial crisis has created mistrust of financial services, and a perception that all financial services companies are untrustworthy. Our research indicates that this is not the case in the insurance sector.

7

Asia-Pacific customers are generally satisfied and confidentOur research shows that customers in the Asia- Pacific region have a positive view of the insurance industry, suggesting that it may have been less affected by the financial crisis than banks, in terms of undermining customer trust.

With regard to their overall opinion of the sector, respondents generally view the insurance industry positively. Thirty-six percent of customers have a favorable view, while only 19% have an unfavorable view.

However, while insurance remains a trusted industry, 42% of customers agreed that, compared with other consumer-facing businesses, it lags behind in service quality, while only 18% disagreed with this. When asked how the industry compares with others on rewarding loyalty, 49% agreed the industry lags behind others, while only 15% disagreed.

Seventy-seven percent of the customers surveyed felt that they had bought appropriate products for their needs. However, this is no cause for celebration as 21% of the respondents indicated they were not confident that the product they bought was the right one for their needs. Reasons for this lack of confidence included:• 39% said that they did not have enough information

about how well their policies were performing • 37% said they did not fully understand the terms

when they first bought the policy • 26% said that their needs had changed since first

buying the policy

There is room for improvement in meeting customers’ needsThe fact that 21% of customers are not confident that the product meets their needs clearly shows

that insurers need to be doing more to meet their customers’ requirements. Similarly, the mean satisfaction score for customer service is 6.8 out of 10 across the region, which clearly shows some scope for improvement. This level of dissatisfaction may be the result of two underlying factors.

The sales process When customers don’t fully understand the terms of the product at the point of purchase, this is a reflection of the sales process and the techniques employed. Bancassurance, for example, is a popular distribution channel across the region and the sale process within this channel is often completed quickly, with little or no subsequent follow-up from the insurer (although this problem is tempered by the relative simplicity of typical bancassurance products).

The service processThere are two factors to consider here. Firstly, the training and competency of the agency force and secondly the growing orphan policy issue (where the agent who sold the policy is no longer with the insurer). Follow-up service is becoming a key issue to make sure customers understand not only how their products are performing, but that their needs are being met. While insurers are making inroads into dealing with this problem by assigning orphan policies to new agents, there is often little incentive for the new agent/adviser to contact or build a relationship with the customer.

In the mature Australian market, regulatory changes brought about by the Future of Financial Advice (FOFA) hope to address the sales and service issues with the financial advice industry moving down the path of full-service financial advisory, including changes to remuneration structures that will encourage appropriate and adequate servicing of clients.

Life and pensions

77%

of customers are confident their products 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

8

How confident 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 are not confident that the products they purchased meets their needs.


Very/fairly Not very/not at all

9

Implications for insurers

These findings are positive for the industry, but are not grounds for complacency. Customers judge insurers against other consumer industries: they expect comparable standards of service and rewards for loyalty, like those they already receive from non-financial services companies. Insurers need to continually evolve customer propositions to meet changing needs and expectations, particularly for improved information and transparency. Closing the gap between sales and service Irrespective of market, providers need to be sure they have product communications that are simple and transparent about the benefits that they will deliver. They should provide regular, simple reporting for investment products and insurance products and be certain that the terms of the products are easily understood at the research phase so customers can feel confident that what they are buying meets their needs. Insurers need to close the gap between their sales and service process; for instance, follow-up welcome calls might be made on the completion of each sale regardless of the channel used.

For many insurers in Asia, the focus needs to be on agency retention; insurers need to ensure that the right types of agents are recruited and that they are adequately trained. Products need to be simplified so that the agent understands what they are selling and how products between insurers differ. Insurers should try to make sure

that agents stay with the business for longer and that if and when they leave, that the focus is on retaining the policy initially and then retaining the customer. These principles, while not new, also apply to more mature markets like Australia, particularly as the IFA market grapples with the new remuneration rules. The risk in these markets, in particular Australia, is that discontinuance rates may continue to to increase on the back of a more regular servicing business model.

A successful adoption strategy is key to orphan problemThe gap in understanding is most prevalent when the customer is “orphaned” — and a succession plan or “adoption” by another agent or 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 provider’s potential future sales (seeIt’s hard to cross-sell to existing customers onpage 16), but also to ensure an ongoing regularassessment of customers’ changing needsand assurance of the suitability of their overallinsurance portfolio. For those markets where the agency channel dominates, it is clear that the 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 confident 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 hasn’t performed as well as other insurance products

23%None of the above

6%

My needs have changed

26%Don’t know

3%

I think I received poor advice

16%

I do not have enough information about how well my product is performing

39%

Myth 2

Life insurance is sold, not boughtReceived wisdom is that because of a lack of customer knowledge and confidence, life insurance products are “sold” to consumers — the purchasing decision is not customer-driven. Our research indicates that many customers intend to be much more involved in the purchase decisions in the future.

11

Customers expect to do a lot more research in futureAcross the Asia-Pacific region, customers are becoming more actively involved in the process of buying life insurance and pensions; deciding on their needs, researching possible solutions and making informed decisions as to the best providers. It should be noted, however, that the survey was conducted online and that as a result, our respondents are obviously skewed toward those customers with internet access.

Historically, 59% of customers did little or no research before purchasing, but our research shows a marked shift in customers’ intentions to conduct more research in future with the regional total increasing to 73% intending to do a fair amount or great deal of research in future. These figures are very similar to the findings in Europe, where 73% of consumers currently do no or 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” of the process by customers themselves. Customers expect agents and intermediaries to do the necessary research, but if this trend continues, then perhaps we can expect a greater degree of challenge from an increasingly educated customer base. This is likely to be matched by a greater demand 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 family are the most important source of information for buyers by a considerable margin, while in South Korea and Australia the insurance agent or intermediary is seen as key. However, it is evident that there is a migration towards online sources, particularly amongst the young or more affluent. This trend was particularly apparent in South Korea (67%) and Australia (56%), where respondents are already conducting online research. While it could be argued that as an online survey our survey population may have a predisposition to conducting online research, our experiences suggests this trend is real.

The difficulty in mature markets such as Australia is that it is often difficult to find out the details of most products online. Advisers will continue to have a role as they often have product information available to them on specialist comparator services not available to the public.

There is a high level of consistency across the region in the most important factors informing the purchasing decision. Product features, financial stability of the insurer and product performance are the region’s top three factors in the purchasing decision. This implies that even where a recommendation is given, customers perceive themselves as accepting that recommendation based on financial stability, product features, and performance, 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 little or no research before purchasing, but our research shows a marked shift (of at least 30 percentage points in every market) in customers’ intentions to conduct more research in the future.


Previous Future

12

Life and pensions

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

Direct contact with bank or insurance company people (call center, branch)

38%Bank or insurance company websites

38%

Advice from intermediary or agent

51%

Information from an employer

11%

Online comparison website

47%

Family or friends — word of mouth

52%

Online blogs/communities

19%

Financial press/media

26%

Advertising/direct mail from product provider (bank or insurance company)

24%

Other online sources

23%Don’t know

2%

Other

3%

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

Their reputation for customer service

Financial stability of the insurance provider

Performance of the productProduct features

I am already a customer of the insurance provider/the insurance agent

The brand of insurance provider

It is recommended by my insurance agent/intermediary

Recommendation from family/friends

Don’t knowIt is recommended by my bank

None of the aboveI have discussed the decision with an insurance specialist

26%39%48%55%

13%18%21%23%

1%2%6%13%

13

Life and pensions


Provision of simple and transparent online information is vital Customers understand the value of research and expect in the future to do more research before purchasing. When undertaking this research they will look at a variety of information sources, including online, which we consider will become the new version of “family and friends.”

With an audience of increasingly well-informed buyers, providers need to focus on giving customers access to more knowledge and detail about their product range. This information needs to be transparent and consistent across various information sources; it needs to be simple, customer-centric and easy to access.

Customers will undertake research to double- check and validate the product that has been recommended to them and, given the current lack of online product comparison sites, will most likely do this through insurers’ websites. As a result, insurers need to understand who is visiting their sites and what they are doing once they get there. This highlights the need to design their websites to be focused less on brand, and more on customer advocacy. The site should be search friendly, explain products in a simple manner and provide customers with the ability to compare alternative products.

Intermediaries will continue to play a key roleAgents and intermediaries will continue to play the key role in providing customers with information about products that meet their needs. This is partly because of the complexity

of risk insurance products and partly because agents and intermediaries are recognized as product specialists who understand how products work and what products properly align with different circumstances. However, in our view, the tied agency network, as it traditionally operates across Asia, will come under pressure. Customers are becoming more sophisticated and have indicated a preference for multi-tied agents or independent intermediaries. This presents a threat to the traditional agency, a journey that developed markets have already navigated. Customers will demand the best product to meet their needs and not the most available product. Insurers, need to look at ways they can offer alternative products through the agency network.

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

trigger events that are occurring in their customers’ lives

• Being aware about what is being said about the company on social media sites and responding accordingly

• Building a brand• Connecting better with their customers

Insurers should also give more consideration to further simplifying product literature, making terms and conditions transparent and ensuring options, costs and benefits are understandable. This will help customers with their agent, to make informed purchasing decisions based on what is best for their needs.

52%

of customers consult friends and family when researching a new policy.

14

Personal interaction remains important for most customersGiven the prevalence of agency and intermediary distribution channels across the Asia-Pacific region, it is not surprising that personal interaction is still very important. Customers see personal interaction as essential, with 89% of respondents across the region saying that it is essential, very or fairly important.

The 8% of respondents who didn’t think personal interaction was important were predominantly from the developed markets of Australia and South Korea. When asked, these customers felt comfortable that they had sufficient knowledge around the products that they want to buy without needing assistance, which we see as evidence of a self-directed customer segment. This is supported by the fact that in Australia superannuation is typically purchased through the workplace with little or no interaction from agents/advisers, and the market place unbundles products, which makes them easier to understand.

The reasons why the majority of customers regard personal interaction as important vary across the region, but three factors are consistently cited as among the most important. Customers feel:• They need expert assistance to make important

financial decisions• Products are too complicated and technical• They don’t know what products are best for

their needs

Customers want more personal contactOur research shows that insurers could make greater efforts to contact customers to determine their needs. Across the region 44% of respondents disagree or are unsure if the level of personal contact with their provider is meeting their needs. The main reason for this dissatisfaction — cited by 44% of respondents across the region — is that customers feel product providers are more focused on selling products than on meeting their needs. Among the different methods of contacting customers, survey respondents show a marked preference for phone contact.

The level of preference customers show for phone contact surprised us, but we believe that this is consistent with the general desire for more personal contact. Across the Asia-Pacific region, phone and online communication consistently score as highly as face-to-face contact. These results provide useful data points for insurers to consider, given that affordability is clearly a primary concern for any provider.

Respondents indicated that clarity and transparency would help to improve service quality. The top three service areas where customers would like to see improvements are:• Ensuring the communication process is clear and

transparent• Improving the claims process• Providing the name of a contact for the customer

to deal with

89% of respondents across Asia-Pacific say personal interaction is important or essential.

Personal interaction is essentialReceived wisdom is that personal interaction is essential to educate customers about their financial needs and explain which products to buy. Our research indicates that this largely remains the case, but some 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%

Don’t know

1%

Products are too complicated or technical

49%

I don’t know what products are best for my needs

43%I don’t know the insurance companies

10%

I don’t know how to measure the products’ performance

28%

31%

I feel I need expert assistance to make important financial decisions

60%

15

Life and pensions


Interacting proactively around key customer life events is vitalCustomers are telling us that they regard personal interaction as important, that they are happy to talk with product providers and their agents and intermediaries, but they don’t want a conversation that is sales focused. Customers want the focus of the discussion to be on their needs, they want more time spent reviewing their needs and they also value expert assistance in helping them make important financial decisions.

There are some straightforward, but potentially costly, initiatives that insurers can undertake to shift their focus from product profitability to customer profitability. Insurers need to interact with customers at the right time, which means recognizing the life events that will make customers open to advice and tailoring their service strategy and product offering accordingly. Insurers will increasingly be expected to make timely approaches, across every channel, that are tailored to customers’ changing needs, triggered by events such as marriage, house purchase, job moves or starting a family.

Providers need to work in partnership with distribution channelsAgents and intermediaries will continue to be an integral part of the personal interaction and insurers need to make sure that they are equipped with the appropriate knowledge to identify solutions for their customers. Insurers also need to integrate personal interaction with the sales channel and ensure that servicing and sales are in sync. Insurers need to follow up sales, regardless of the channel that the customer purchased through. For example, within 30 days of a sale, insurers should consider making a welcome call to gather feedback about the sales process. By doing this, insurers will connect better with their customers, create greater customer advocacy and identify dissatisfied customers earlier in the process.

A sample of initiatives that could be undertaken includes:• 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%

16

Customers are prepared to buy multiple products from the same provider In emerging markets, sales are often focused on attracting new customers, who may be buying an insurance product for the first time. In contrast, in developed markets, with higher penetration rates, growth comes mainly through the ability to cross-sell to existing customers. But regardless of whether they are operating in a developed or emerging market, insurers want to improve their ability to cross-sell to existing customers.

Our research shows that cross-selling activity in Asia-Pacific is at a significant level, and much higher than for any other region. Thirty-seven percent of consumers surveyed in the region have bought more than one product from a provider, compared with 19% in Europe and just 16% in the Americas. However, the regional statistics conceal some interesting variations by country. In China, more than half of respondents have bought more than one product from the same provider, reflecting the dominance of a small number of large insurers, and significance of the tied agency network. Australia scored lowest at 13% — reflecting the comparatively lower levels

of face-to-face interaction, unbundled product structure, broader choice of distribution channels and the fact that many insurers are not able to market to their advisers’ customer base as part of their adviser agreements.

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

Interestingly, advice from agents is rated more highly in the region’s developed markets than in its emerging markets. This may reflect market dynamics within emerging markets, where agents are focused on initial sales to new customers, while in developed markets advisers and agents, both independent or multi-tied, are often incentivized for volume sales through insurance providers. In Australia, however, recent regulatory changes are set to altered these types of agent incentivization schemes.

It’s hard to cross-sell to existing customersReceived wisdom is that customers are reluctant to buy more products from the same provider. Our research shows that while current cross-selling levels are low, customers are willing to 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 additional products from the insurance company?

37% of customers have bought more than one product from the same provider.


Percentage purchasing

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 willing to consider repeat purchases from their existing providers when they trust the provider and when it is easy to buy. Discounts and incentives — in other words, rewards for loyalty — may also help, particularly in the region’s emerging markets. Insurers have to build a trustworthy brand and make sure their agents are acting as their advocates.

If you are not servicing your current customers, then all potential cross-selling opportunities are lost. Therefore, the first point of action should be to correctly serve your existing customers.

Using existing knowledge of the customer, inputs from social media (status change, birth of children, new jobs etc.) and demographic indicators, insurers should be able to build a solid profile of their customer base and develop a targeted contact plan. This should be a plan for distributing the latest product, and insurersshould look at moving the focus from product profitability to customer profitability.

To do this requires significant investment in both the technologies to obtain and retain this customer data, and in the reward and remuneration structure — particularly for the agent/intermediary channel.

Insurers need to integrate the agency distribution channelIt is not as hard to cross-sell as received wisdom would suggest, particularly in markets where tied agency distribution continues to be a significant sales channel. Questions those insurers in markets dominated by tied agency channels 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 customers who are likely to become loyal customers?• Am I selling customers secondary products or coverage extensions? And am I receiving additional premium contributions or nothing at all?• If nothing, does this reflect a lack of need or ineffective customer contact?• What is making it hard for my distributors to engage with my product offering and what can I do to make it easier?• How do I reward a service contact as opposed to sales contact?

In mature markets, the cross-sell opportunity would appear to revolve around having a deep understanding of clients’ needs and having regular enough contact to capture opportunities as 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?

Providers can’t influence persistencyReceived wisdom is that providers feel they have little ability to make a material difference to persistency. Our research shows that insurers can improve customer retention by better meeting customers’ changing needs.

Myth 5

19

Changing customer needs drives switching behaviorIn growing markets, particularly those with largely intermediated sales, insurers have tended to have limited contact with end customers and have focused on growth rather than retention. Despite retention not being the main focus, surprisingly, our survey found that only 10% of respondents have changed policy providers in the past five years. This is significantly lower than we would have expected and suggests that customers are more reluctant to switch providers than other data points would indicate. To a certain extent, this reflects apathy within the customer base, where it is easier to stay with the current provider rather than change.

For those who have changed product providers, there are two dominant factors behind the decision, the first of which is recommendation by the agent. In Australia, this is the main reason for change, reflecting market dynamics where multi-tied agents and IFAs tend to develop deeper, longer-term relationships with their customers, compared with less developed markets where attracting new customers is the primary goal.

The second factor causing customers to switch providers is a change in their needs that the previous provider was unable to meet.

Customers’ perceptions are that insurers put little effort into retentionIn the agency-driven markets, where there is so much exposure to defecting agents encouraging their clients to consider other options, it is even more important that the provider is perceived to be making an effort to retain customers and policies, or to defend profitability in the event of exit (surrender charges). However, when we asked customers how they perceived insurers’ retention efforts, they delivered a clear message that the industry does a poor job in most markets.

Not enough customers feel their previous providers made enough effort to keep them, despite the fact that greater effort by insurers is likely to improve retention. Besides being offered a better deal, customers say that more frequent contact, more transparency and a belief that future service will improve would have caused them to reconsider a 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 across Asia-Pacific said their providers had tried to persuade them to stay.


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

Fair amount Great deal


Invest in customer retentionIn the Asia-Pacific region, it is untrue that no effort is made to retain customers. But it is clear from our survey results that insurers’ retention efforts are neither consistent nor sufficient. Customer inertia has favored providers in the past, but switching behavior appears set to increase in the future. The survey shows there is a real opportunity for insurers to influence persistency, and that they should consider an effective customer retention function essential.

Focus on keeping the customer, not the policyThere is a difference between trying to keep the policy and trying to keep the customer, but many of the existing systemic processes today are focused on keeping the policy. New ideas are often rejected because of their impact on product profitability.

Keeping the customer involves a greater engagement by the provider — particularly when a departing agent is involved. For example, more than a quarter of the South Koreans changed providers because their agent recommended them to do so. Our survey indicates that customers would welcome more depth and more frequency of contact with the provider, and do not see this as conflicting with the role their

agent plays. If this contact is established during the early stages of the policy, the retention conversation has a better chance of feeling credible and valued.

Efforts at retention need to be made well before the customer lapses, not at the point they are considering leaving. An effective retention program requires significant investment in understanding your customer base and the trigger points for switching providers. Our experience shows that most insurers already have the necessary data to focus their retention efforts on those most vulnerable and valuable. This makes the business case for investment more palatable. However, few use it this way.

The focus of customer retention programs should be on the majority of the customer base, through regularized customer contact points and loyalty programs. In markets dominated by tied agency networks, retention efforts should also focus on trying to retain agents in an effort to reduce the impact that orphan policies are having on customer profitability. In more mature markets, insurers should focus on the lapse reasons for those customers where a change is not adviser driven.

20

There are some notable exceptions within the region, with some countries making particular efforts to retain customers. In Malaysia, 52% of respondents think they make some effort. In China, 72% of customers said that their providers had tried to persuade them to stay. It is possible that the branch model, in which consumers are required to go to the insurer’s office to surrender their policy, drives the effort put into renewal in China, as customers are therefore physically present and the insurer has an opportunity to try to retain them. Australia is at the other end of the spectrum, with 63% of customers saying that insurers make no effort to retain their business. There remains alarge pool of people who have never contacted, and an even larger pool that are only contacted once a year at the most.

Switching is set to increaseThe survey indicates that switching behavior may increase in the future as customers become more demanding that products and services meet their needs and expectations.

We also asked those customers who haven’t switched providers why they have stayed with their current insurer. Overwhelmingly, the responses across the region cited the same four key factors: that it’s easier to stay; the customer sees no reason to change; they are happy with the level of service they are receiving; and are happy with the way the product is performing.

Life and pensions

10% of respondents have changed policy providers in the past five years.

02Non-life insuranceWhile there is some truth in the myths around how non-life insurance products are bought and sold, the reality is more complex. Understanding the nuances helps insurers understand what they can do better or differently to attract consumers, deepen and retain relationships and unlock greater customer lifetime value.

Our survey explores the following myths:1. The future is online2. It’s only about price3. Good claims experience builds loyalty4. Customers don’t respond to cross-selling5. Insurers can’t influence customer retention

22

Myth 1

The future is onlineReceived wisdom is that the use of internet resources is growing rapidly and in the future, online will be the dominant channel for research and transactions. Our research indicates that online is an important part of the future, but only as one component of an integrated channel management strategy.

23

Comparison sites becoming more popularThe importance of online channels for research and their expected continued growth is clear across our survey. Thirty-nine percent of respondents across Asia-Pacific are using online comparison sites, blogs or other online sources to research their purchases. Interestingly, the engagement of these channels is much higher in Asia-Pacific than in Europe (32%) or the Americas (23%). This most likely reflects the different demographic profile in Asia-Pacific and a higher level of technological familiarity. However, it is interesting that, despite the high rates of internet adoption in most parts of the region, the internet remains only one of a range of sources to which buyers go to seek information and recommendation. As the chart below shows,

one factor rated highly by customers across all the countries surveyed in Asia was word-of-mouth recommendation from family and friends. This confirmation from a trusted third party is a very strong driver in many countries, but particularly in China, Indonesia and Hong Kong, where it was the most prevalent form of research before purchasing.

In Australia, online comparison sites are the most utilized research tool, reflecting the emergence in recent years of comparison sites, primarily for health insurance. However, for motor insurance — where online comparison tools are not as common due to the high concentration of the market and traditional bias toward direct channels — customers tend to do their research direct with the insurance companies.

Non-life insurance

Top three channels used for research by consumers in Asia-Pacific 39% of respondents across Asia-Pacific are using online comparison sites, blogs or other online sources to research their purchases.

Australia China Hong Kong Indonesia Malaysia Singapore

0%

30%

40%

50%

60%

10%

20%

South Korea

Family or friends Online comparison

website Advice from

intermediary or agent Direct contact with

bank or insurance company people

Bank or insurance company websites

Information from an employer

24

Channels used for purchasing by consumers in Asia-Pacific

Non-life insurance

Online sales lag behind other channelsComparing the channels used for actual purchases to those used for research across the region,customers more frequently choose to go direct to insurance companies or through agents and banks. In fact, in Hong Kong, China, Indonesia and Malaysia, banks are among the preferred channels, reflecting the established strength and importance of bancassurance in these markets. Online sales significantly lag behind internet use for research purposes, with only 14% of consumers in Asia-Pacific reporting they have bought through an internet site so far, against 49% that have considered it. This level of internet purchasing is comparable with Europe (also 14%) but exceeds the Americas, where only 7% of consumers have used the internet to make a purchase.

This relatively low level of online purchasing activity is unsurprising since many insurers do not include full transactional capabilities on their websites. For example, in China, many large insurers have found motor insurance e-business to be difficult due to technical problems linking to government databases.

Equally, even in the mature markets such as Australia and South Korea, insurers have been relatively slow to adopt full transactional capabilities online, although this is changing as internet-only insurers become established.

Another factor that may be slowing the speed of growth of online engagement is the relative strength of the agent as a buying channel in Asia-Pacific. This has led to a strong preference for personal interaction across all countries in the region during many phases of the product life cycle, particularly when extending cover, making a claim, or dealing with other customer service issues.

However, as insurers become better at creating online sales processes that give customers confidence that they can purchase a reliable product quickly, there can be little doubt that more customers will migrate to this channel across the region. Our expectation is that, near term, a combination of convenience and increased familiarity with transacting over the internet will drive growth in online sales.

14% of consumers in Asia-Pacific report they have bought through an internet site.

Asia-Pacific* Australia China Hong Kong Indonesia Malaysia Singapore South Korea0%

10%

20%

30%

40%

50%

60%

70%

80%


Insurance company Insurance agent/intermediary Bank Third-party online site Asset provider Non-financial provider

25


Insurers need to maintain a multichannel distribution strategyThe survey findings indicate that customers use a range of channels to research and purchase their products, so in Asia-Pacific insurers need to maintain a multichannel distribution strategy.

We would expect the online channel to become an increasingly important part of the distribution suite, and anticipate that the rate of change in this area will be much faster than it has been in other markets.

Insurers need to build direct relationshipsInsurers also need to focus on their customers’ interactions with family and friends, and provide opportunities for customers to connect around their brand. This may provide an interesting opportunity to exploit social media and internet- based relationships as many consumers in the region may see these as extensions of their traditional social networks.

As a result, we believe that leading companies should look to social media and mobile technology to enable customers and their peer groups to share information and opinions on insurance products and providers. Insurers might also look at how banks have started interacting with their customers using mobile technology. The banks have some of the most visited mobile sites and, while insurers may believe that they don’t have the same opportunities as banks to interact regularly with clients, there are plenty of different ways in which to engage with their customers throughout the policy period.

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

customers with local area safety updates when they are parking their car

• Providing details of accident-prone areas when traveling

• Offering hail and storm warnings to drivers or 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 effectively for insurers will not be without significant challenges. Companies will need to consider how they will integrate online and offline channels seamlessly to meet changing customer needs over the product life cycle. Ensuring accurate and easy-to-use recordkeeping across three or four different communication methods is a technology challenge for many organizations. Certainly, when consumers decide they want personal interaction, whether face-to-face, by telephone or web chat, they want a prompt response. Consumers do not want to squander their time on an insurer’s own process inefficiencies or internal requirements.

For sizable incumbent insurers, building a first-class online proposition could be slowed by working with legacy systems and a powerful agency network. However, insurers cannot take the time to approach this process iteratively or in small steps — they will need to make bold moves to integrate information and communication across channels and to deliver the simple and easy online execution their customers expect. Such action is particularly important given the strength that bancassurance has in the region, in significant contrast to others that we surveyed. Many banks in this region are well ahead with plans to fully integrate their online and offline offerings across the full product suite. Should they succeed in this strategy, we believe that it may place insurers at a disadvantage in terms of meeting customer expectations.

Non-life insurance

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 value Price is an important component of value, but it is not the only one. This is particularly true when looking at Asia-Pacific, where the tariff structure operating in various markets (for example health insurance in Australia or motor insurance in Malaysia, China and South Korea) means that differentiation on issues other than price plays an important role across the region.

A number of drivers affect buying behavior While our research shows that price is one of the most important components for buyers in Asia- Pacific, with 55% of regional respondents citing it as a factor in their considerations, 54% also said that buying from a well-known or trustworthy brand is important. Customer service (39%) and financial stability (42%) were also mentioned by respondents as a the key criteria. The chart below shows that these four criteria are consistently

mentioned by customers, irrespective of the channel 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 to the next. For example, in Malaysia and China (both tariffed markets) around half of respondents said that price was a factor they took into consideration, and that other considerations — such as brand, financial strength and reputation — were similarly important. This picture is in sharp contrast to Australia, where tariffs lifted and, as a result, 62% of respondents cited price — significantly more than any other consideration.

Brand plays an important role One of the standout features of the survey is the large number of respondents within the Asia- Pacific region who rated brand as a key buying

It’s only about price

Received wisdom is that non-life insurance products are commoditized, and price, therefore, is the only criterion on which they are purchased. Our research indicates that price is an important component of value, but that customers also place substantial value on other factors such as brand and service.

Myth 2

Top factors driving purchasing behavior in Asia-Pacific

54% of consumers said that buying from a well-known or trustworthy brand is important.


Price Brand Service Financial stability

51%

32%

17%

69%

20%

11%

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


Price is important, but so are service and brandUndoubtedly, price is an important factor when considering an insurance purchase in Asia- Pacific. However, across many of the countries we surveyed in this region, good customer service and a strong trustworthy brand are also key considerations. So, while the data suggests that insurers do not necessarily have to be the cheapest, it also suggests that to charge premium prices, insurers need to have clarity on their brand proposition and consistency in the execution of their customer service, irrespective of the channel through which the product is bought.

This offers some potential challenges to new entrants without a strong local name or track record that want to create a compelling local offer that is not entirely based on price.

Exploit local opportunitiesAlthough tariffed markets typically do not highlight price as a point of differentiation for obvious reasons, this does not mean there are no opportunities to differentiate on price in these markets. In Malaysia for example, takaful

operators are increasing their share of motor premium by offering discounts under the tariff regime that traditional insurers cannot. This suggests that underlying customer behavior is more consistent across the region than the headline data might suggest and that deregulation across a number of markets in Asia-Pacific will undoubtedly generate some interesting opportunities and challenges for insurers in the next three to five years.

Service is important in winning and retaining businessOver time, we would expect to see the removal of tariffs in many of the region’s markets; however, in the near term — while they remain in place — customer service will continue to play an important role in winning new business and retaining existing customers. Insurers need to be sure they have clarity around their service proposition and focus on those areas of investment that are going to provide the most significant returns, for example, understanding customer needs, clear communication throughout the claims process and introducing simple and easy to understand products.

27

consideration. It was also interesting that there was very little difference between customer responses in mature economies, such as Australia and South Korea, and emerging economies, such as Malaysiaor China, in the importance they attached to brand. This strong affiliation to the concept of brand is also reflected in the fact that 69% of respondents from emerging economies and 51% from developed economies said that they would be prepared to pay an additional premium for a product from a strong or financially stable brand.

This highlights an often overlooked factor in pricing. In our view, insurers frequently over-simplify the pricing equation and miss an opportunity to charge a premium based on their market position and brand proposition — particularly on renewal. Clearly, the price point cannot be so high that it causes consumers to question the value, but insurers could exploit the information that 55% of consumers say that they are prepared to pay a premium for a brand they know and trust.

Non-life insurance

* Aggregated unweighted data

Emerging markets*

Yes No Don’t knowDeveloped markets*

Yes No Don’t know

Good claims experience builds loyalty Received wisdom is that if providers offer a good claims experience, customers will be delighted and this will drive loyalty and help build brand value. Our research shows that while a good claims experience doesn’t necessarily build loyalty, a bad claims experience substantially increases the risk of non-renewal.

Myth 3

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 the Asia-Pacific region varies widely. In South Korea and Hong Kong, around 33% of respondents are not satisfied with their claims experience, but in Australia and Malaysia, the proportion drops to 10%. Speed of claims processing is the top performance measure for consumersIn terms of areas for improvement, speed of claims processing tops the list in most countries and is seen to be substantially more important than other factors by consumers in Malaysia, Indonesia, South Korea and Hong Kong. In Australia (where the majority of customers who responded to the survey had household insurance claims) 24% think claims could have been dealt with faster, but 27% cite a better level of communication and an overwhelming 47% say “nothing” could be improved. This information indicates that the levels of satisfaction around the claims experience in this country are quite high.

Poor claims experience encourages switchingPeople expect a great claims experience, and delivering an efficient and quick response will validate a policyholder’s view that they have chosen the right insurer. However, a poor experience will make a customer change insurer: 16% of regional respondents say that they are certain that they would look elsewhere as a result

of a poor claims experience, while 40% say they would be much more likely to do so. This picture is similar to the Americas, where 19% of consumers said they were “certain” a poor claims experience would prompt them to switch and a 40% indicated that it would make switching much more likely.

There are some surprising results in individual countries. For example, in Hong Kong (16%)and South Korea (20%) (where there is a high degree of dissatisfaction with the claims process), respondents respectively say that they are less likely to stay with the insurer as a result of their claims’ experience.

Customers who are satisfied with the way in which their claim has been handled are very consistent in their views, with around 75% saying that they would be likely to change insurers as a result of a poor claims experience. Malaysians appear to be the most forgiving, 32% of customers stated that a poor claims experience would have no impact on their decision to change insurers.

To support this view further, of those customers who had a poor claims experience, 52% of respondents felt they were unlikely to change insurers compared to 60% of respondents who didn’t claim and 63% who had a good claims experience. It is clear that claims can have a predominantly downside impact on retention.

Satisfaction with claims across Asia-Pacific

29

Non-life insurance


Extremely satisfied Quite satisfied Neither satisfied or dissatisfied Somewhat dissatisfied Dissatisfied Extremely dissatisfied

30

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

63% of consumers had a good claim experience.

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 first 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

31


Good claims handling increases brand strengthClaims handling is one of the key interactions that customers have with insurers. Getting the experience right will improve customer satisfaction and assist in the development and promotion of an insurer’s brand in the market.

Manage the downside risk and invest appropriatelyOur data suggests that customers are, for the most part, happy with the claims process and that claims handling is not an area of positive differentiation for insurers. However, while a good experience does not drive loyalty, a poor experience will encourage switching, so the challenge for insurers is to set the right level of investment in the claims process to improve service. Across Asia-Pacific, many insurers are investing heavily in claims technologies and reengineering the claims process. This means that the market benchmark for the claims experience is being raised. It also highlights the fact that many insurers recognize that reducing the total indemnity cost of claims, and the associated handling costs, is one potential avenue for funding the investment needed in other customer-facing aspects of their business.

Focus on quick winsOur experience also suggests that there are a number of relatively low-cost, quick-wins available for insurers in the claims process to improve claims handling times and generate more frequent, proactive communication. These could include regular text updates on claims progress or rapid triage of claims so that customers know quickly whether their claim is likely to have a relatively rapid resolution.

Equally, our work in this area shows that many insurers in the region need to reassess claims training and time spent by the claims team. It is our understanding that too often claims teams spend substantial amounts of their time on administration as opposed to either progressing the claim or liaising with the customer as to the progress of their claim. This is commonly exacerbated by an insurers’ best claims assessors being bogged down by relatively minor, non-complex claims. Redesigning claims processes so claims are allocated to the most appropriate claims handlers can lead to substantial cost savings, in both handling and indemnity 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

Customers don’t respond to cross-sellingReceived wisdom is that customers don’t enjoy the sales process and resent insurers trying to sell them additional products. Our research found that if insurers understand customers’ needs and offer the right propositions in the right way, they can sell more products effectively.

Myth 4

33

Customers will buy more if it’s convenient and delivers valueOur research shows that customers are willing to buy multiple products from existing providers and across Asia-Pacific, 46% of respondents expressed a preference to buy different products from a single supplier — as long as it can be done in a way that is convenient for them and that delivers better value.

Across all markets in the region, customers cite convenience (simplicity) and better service as the drivers for repeat purchasing. Value or cost also feature in the responses, but the level of importance varies materially. For example, almost two-thirds of customers in Australia note price as a factor, while less than 20% cited it in South Korea.

It is also clear that improved quality and frequency of contact, as well as satisfaction with the provider, drive repeat purchases; incentives or rewards for loyalty can also influence repeat purchases. In China, Australia and Malaysia a higher percentage of respondents are interested in multiple policy discounts.

Regulation can affect cross-sellingIn some countries there are structural factors that limit the amount of repeat purchasing that is possible. In some markets for example, health insurance is regulated separately from other non-life products, preventing insurers from including discounts arising from bundling or multi-product purchases, forcing customers to look at this product in isolation. Similar situations exist for third-party coverage in motor, particularly where this protection is compulsory. Insurers often attribute the discount or bonus to another non-regulated product, but making this action transparent to the consumer is a challenge.

Although customers are willing to buy more, they expect insurers to make it easy for them and to share the benefit. The process has to be convenient — for example, by providing an opportunity for cross-selling at the time of the original purchase and through the channel of their choosing. Customers expect the provider to leverage their knowledge and insight to offer relevant, related products in one quick and easy sale rather than in multiple contacts over a protracted period. Trying to cross-sell after the primary purchase is less successful since this is perceived to be no more convenient than buying from a new insurer.

Non-life insurance


Companies need to demonstrate the value and convenience of repeat purchasingFundamentally, Asia-Pacific is a region in which if providers can sell one product, and service it well, then they are in a strong position to cross-sell other products. Insurers need to ask how they can demonstrate that another purchase from the same provider is more convenient than going to a different insurer and offers a similar value.

Enhance back-office functionality to improve cross-sellingIn our experience, insurers are often prevented from capturing cross-selling potential by their distribution operating model — which drives how responsibilities, targets and decision-making responsibilities are allocated between entities, managers and teams. Common issues in this area include weak customer relationshipmanagement (CRM) systems, poor incentive structures and organizational silos created to foster specialization.

In our experience, insurers tend to forget that consumers’ expectations of convenience are often established by other retailers, for example, technology companies, banks, utility companies and telecoms. Indeed, the traditional view of insurers that consumers want to

understand price as quickly as possible and then cover other administrative details after making the purchase decision is almost completely opposite to what consumers now expect. Our research demonstrates very clearly that consumers are happy to spend time responding to underwriting questions, provided they feel it is adding value, for example, by reducing or personalizing the premium, and is not repetitive. Consumers do not expect to have to provide personal information more than once. In many instances, however, realigning core processes to meet these expectations represents a substantial undertaking.

Focus on tailoring products to customers’ needsInsurers need to be able to better understand their customers’ personal circumstances, and then to leverage this effectively in order to cross-sell products that meet current client needs. They can only do this if they are better connected with the customer, understand when their needs change and have developed appropriate incentive plans for customers holding multiple policies. Remuneration structures may also require revision to promote more effective cross-selling.

46% of respondents expressed a preference to buy different products from a single supplier — as long as it is done in a way that is convenient for them and that delivers better value.

In Asia-Pacific, 60% of consumers are either not very, or not at all, likely to change insurers in the next five years. This is in sharp contrast to the UK where only 40% of consumers report that they are unlikely to change provider in the next five years. This is an indication that there can be no groundsfor complacency in Asia-Pacific if it follows in thefootstep of European markets. Those who have not changed providers, overwhelmingly stated four key factors that have kept them loyal: the ease of staying with their current provider, a competitive price, trust in the insurer and happy with the service they have received.

Customers are more likely to renew if they are askedIt is clear from the research, however, that despite this predilection not to change providers, insurers have a long way to go in terms of retention effort. On average across Asia-Pacific, 39% of consumers felt their insurers made no effort to retain them, and a 29% felt only a little effort had been made.

Significant variation by marketThere are, of course, differences in the experiences of customers in different countries. In Australia, a staggering 62% of customers said that insurers made “no effort” to retain them. This rose to an alarming 89% when including those who felt “little or nothing” had been done to try and retain them.

In China, another hugely competitive market, only around 30% felt that little or nothing had been done to retain them. Perhaps changes to regulation in China, which forced a shift from a monopoly provider, PICC, to a more open market, will mean that increased competition is leading to a greater focus on customer retention.

Rationale for switching Customers who had changed product providers in the past five years were consistent in saying that the driver for change was the availability of better or cheaper products from competitors. In some countries, a substantial number of those surveyed said they switched because of the way their claim was handled, supporting earlier commentary that poor claims management is a major risk for customer loyalty.

Insurers can’t influencecustomer retentionReceived wisdom is that providers feel they have little ability to retain customers — it’s just not something they can control. Our research found that insurers can profitably influence retention in many countries in this region.

Myth 5

Top reasons why consumers switch providers

60% of consumers are either not very, or not at all, likely to change insurers in the next five 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 couldn’t 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

35

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


Don’t rely on inertia and miss the cross-selling opportunity Customer inertia favors providers, and it is clear that there is more to gain in some countries from improving retention activity since on average a third of consumers are likely to switch.

Given that retaining the best customers is the goal, insurers need to understand the cost to serve different customer segments and channels. Without a firm grasp of costs, it is difficult to work out whether a customer is worth retaining and, therefore, how much should be invested in retaining them. Insurers also need to understand the switching behavior of customers and how this differs by territory and customer segment. Combining an understanding of cost to serve with propensity to switch will strengthen any retention strategy.

In some markets and for some insurers, a sophisticated approach using a highly trained specialist retention salesforce, able to make appropriate recommendations around cover and pricing combinations, will be the correct strategy to retain more customers. This requires not only dedicated staff, but also agile products with flexible pricing models so that the retention

team can negotiate effectively on price and product coverage. Without this level of product flexibility, the retention team will only be able to offer blanket discounts, which rarely create long-term profitability.

In other markets and for other insurers, an existing high retention rate may require a more defensive strategy, but it will certainly require different capabilities in different countries. Having an effective customer retention function that segments the customer base, targets those who are most valuable and communicates with them proactively is becoming increasingly important for insurers to boost retention and profitability.

Focus on the bottom lineImproved access to product and price information for consumers, combined with providers’ drive to improve customer service and brand positioning will be key features of the industry landscape for the foreseeable future. In our opinion, insurers have significant opportunities to lift their game on customer retention where only small incremental performance improvements cascade into major bottom-line benefits.

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 Don’t know

3636

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 of customers across the globe.

The survey covered 24,000 customers across 7 regions and 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 eligible to participate. This methodology has been widely used by Ipsos for insurance, consumer products and services clients around the world.

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

adult population.**

• The outgoing sample, i.e., the group of people initially invited to respond to the survey, was balanced to be 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 not hold 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 responses across 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 demographic groups on the assumption that the responses should broadly reflect the profile of the insurance market in each country.

• For the European, American, Asia-Pacific and India regions, the data has been weighted according to the size of each individual country’s Gross National Income adjusted for the Purchase Parity Power (GNI PPP). Source: World Bank website, 2010 data.

• Analysis of the survey findings 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%Female

49%

Male

49%Female

51%* South Africa conducted offline and India mixed online/offline. ** 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

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

Asia-Pacific Graham Handy Insurance Practice Leader, Asean Financial Services Ernst & Young Advisory Pte. Ltd. Email: [email protected] Tel: +65 8383 4123

Asia-Pacific Fabian Ng Insurance Customer Advisory Leader, Asean Financial Services Ernst & Young Advisory Pte. Ltd. Email: [email protected] Tel: +65 9030 0223

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

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