• In 2012 43% were made through direct distribution channels, and the remainder of sales were accounted for by the intermediated channel.

Direct Distribution Channel - Summary

Salaried or self-employed sales reps

• Sales often dovetail on Product X schemes. Some providers utilise their Product Y customer list or work with other suppliers to find potential customers.

• Sale reps are often invited by brokers to attend sales meetings with potential corporate clients – mutual beneficial.

52% of direct sales

Telephone

• Inbound / outbound telephone is the second largest direct distribution channel.

• Company X demonstrated a renewed focus on both direct and indirect channels recently by expanding their sales team to include three telephone account managers and two intermediary support executives. Company Y also expanded its telephone team.

20% of direct sales

Online

• Typically online sales increased by 1%-2% per annum in the past but no increase seen in 2012. However, the internet remains a key source of info provision.

• Online channels include: provider/broker websites, mobile apps, private broker exchanges, price comparison sites, third parties.

18% of direct sales

Mail

• Direct mail still constitutes a primary advertising and sales channel for providers.

• Almost two thirds of total advertising spend for Product X providers went towards direct mail advertising, and 5% of direct sales (corporate and individual) were completed through direct mail .

5% of direct sales

Over the Counter

• Over the counter sales are primarily made through affinity partners with discounted rates often offered to members

• This includes: professional associations, trade associations, lifestyle organisations, trade unions, sport organisations, banks and building societies, retailers, educational institutions, charities, media.

3% of direct sales

Other

• Includes sales where the distribution channel cannot be categorised by the provider surveyed.

2% of direct sales

57% 43%

Intermediated Direct

% Breakdown of Direct Corporate and Individual Sales

1

2

The Role of Brokers

• Brokers play an essential role in introducing potential clients to the idea of Product X as an alternative to Product Y, and managing expectations.

• There are also opportunities to broaden the intermediary distribution channel to include non-specialist intermediaries.

Recent Trends• Intermediary market is very consolidated and very

powerful (few small or one man operations left). There are 15 national players who cover the whole of the country and have a wide remit (investments, pensions and Product Y).

• Intermediary sales for both individual and corporate Product Xs increased by 12% over the last 10 years.

• Future intermediation activity is certain to grow hand in hand with employer demand for Product X.

Commission rates• Standard - 11% of the annual premium in year one and

8% recurring in the medium term• Tied arrangements - 15% of annual premiums.• High value Product Xs – unknown % but there is a higher

commission level.• Employee benefit consultants are more open to a fee

based form of remuneration

Intermediary Distribution Channel - Summary

Recommendations for Broker Engagement

• During the X conference 2014, providers stated that Product X has not yet been successful due to marketing and distribution failures.

Therefore:• Investment in broker communication and training is needed i.e. roadshows to

highlight the sales opportunities and strong marketing material.• Convince brokers that commission rates are adequate to cover the cost of lead

generation and that there are opportunities for upselling and cross-selling.• Avoid complexity and ensure that brokers and clients understand that Product

X includes exclusions • Online portal for intermediaries should be developed to allow flexible quoting

and / or management of policies (cover level, employee eligibility, claims).

43%57%

Corporate Product X Sales

DirectIntermediaried

Product X Product Y Product 30%

20%

40%

60%

80%

100%

70%

94%

65%

% of managers that recognise and can clearly explain product (n=X)

Intermediated1. Developing strong broker relationships is crucial – must engage

early to ensure adoption.2. Intermediaries expect the provider to be present in the market

and deliver on-site communication campaigns for client businesses.

3. A new entrant should pay the standard market commission rate 11% as other providers would just match higher rate.

4. Profit sharing as a form remuneration could create vested interest among brokers to sell product.

5. Intermediaries will do all the client management and account management. They in return expect really good service from the provider e.g. claims turnaround.

Direct1. Need a product that will sell itself based on differentiation and

addressing a market need.2. Opportunities may exist to sell Product X online if the product

design is simple to understand.3. Two main potential target segments

i. Companies who have Product Y but can no longer afford it i.e. downgrading to Product X cover.

ii. Companies who do not have Product Y. This option is better as the economy is improving and there may not be a long term opportunity in downgrading of Product Y subscribers.

4. There are some very big affinity schemes in the market but they tend to remain with the same provider. These members would appear as individuals in the market stats.

Suggested Timeline for Distribution Strategy

Distribution Strategy –Recommendations

3

Launch product around August, September, or October.

Engage direct with potential corporate clients around June and July.

Step 6

Capture renewals - no particular

renewal cycle for product but

approx. X% of corporate business

renew in the market around Jan

and April.

Conduct direct research with UK corporates and intermediaries prior to launch.

Step 5

Once clients have been acquired, we would be required to organise a 2-3 day campaign to

encourage uptake among clients.

Hire a broker support team in the UK to build a working relationship with intermediaries.

Step 4

Launch product around August, September, or

October.

Website and social media campaign

should go live close to launch date.

Step 3

Engage directly with potential

corporate clients around June and

July.

Step 2

Conduct direct research with

corporates and intermediaries prior to launch.

Step 1

Hire a broker support team in

the new market to build a working

relationship with intermediaries.

Recommendations for Distribution Strategy