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A Path to Insurance Distribution Leadership:

New Channels and New Data for Innovative Outcomes September 2015

© 2015 Majesco Page : 1 of 11

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Contents

Executive Summary ............................................................................................................... 3

The Changing Landscape of Insurance .................................................................................... 3

Limitless Possibilities: Analytics to Empower Insurance Distribution ....................................... 5

Boundless Opportunity .......................................................................................................... 6

Distribution Efficiency and Effectiveness ................................................................................ 7

Investing in Data Analytics: Taking the First Step .................................................................... 7

The Path to Distribution Leadership is Unfolding .................................................................... 9

References .......................................................................................................................... 10


Executive Summary

If there is one business topic that dominates boardroom discussions in insurance companies today, it is growth. If

there is one technology topic, it is analytics. No longer confined to CEO and CFO tablets, and no longer limited to

simple operational reporting and dashboard reports, analytics has emerged as a strategic tool to transform the

insurance business across its entire life cycle, including distribution management. Unfortunately, as industry

research by KPMG indicates, while insurance company executives acknowledge its importance and business value,

many are yet to define strategies and begin the evolution of organization-wide adoption.i

This whitepaper examines a strategic area of analytics opportunity and impact — distribution management — based

on the perspectives of industry leaders from a Majesco Roundtable on ‘Leveraging Digital Technology to Reinvent

Distribution Models’. The roundtable discussion provided insights into how to leverage analytics to deliver business

value and reshape distribution models to support market growth strategies.

Distribution management is a unique cogwheel of the enterprise, positioned to influence transformational changes

that impact the entire organization. The use of analytics when approached strategically and deployed operationally,

can deliver real business benefits including organization-wide efficiency, profitability, agility, and time-to-market,

while strengthening both customer and distribution experience and relationships.

The Changing Landscape of Insurance

The insurance industry continues to be poised for growth with many countries indicating an optimistic economic

outlook. IMF’s World Economic Outlook - April 2015 forecasts the global economic growth to be 3.5 percent and 3.8

percent in 2015 and 2016, respectively, with recovery potentially visible across Europe, USA and Canada and a steady

growth in the Asia Pacific region.ii

The insurance sector, however, is expected to witness increased competition in both Life & Annuity and Property &

Casualty segments. Many new companies are emerging in the space, both within and outside the industry. Some of

these companies are backed by large investment firms and are becoming active through acquisitions — posing

competition to established players. Additional competition has arisen from subsidiaries or new brands launched by

established insurers, hoping to position their organizations to compete in new markets, existing markets or in new

business segments to enable growth strategies.

However, rising competition coupled with low interest rates in developed markets continue to trim insurance profit

margins. According to Conning’s 2015 report on ‘Global Insurance Distribution & Services Sector Mergers &

Acquisition’, US insurance M&As grew by 48 percent in aggregate announced transaction values and 12 percent in

announced transaction volume in 2014 over 2013, indicating the effects of competition felt by the US insurers.iii

Already in 2015, M&A is rapidly unfolding with Ace purchasing its rival Chubb in a $28.3 billion deal, creating the

second largest P&C insurer in the US. This is one of the many mergers where consolidated data may result in a host

of coveted analytics, with the power to redefine the quality of underwriting and customer interaction. Adding to the

2015 momentum, the US-based health insurer Anthem agreed to purchase its rival Cigna in a $48.3 billion

transaction. The deal is expected to close in 2016. This deal, combined with Aetna’s $37 billion purchase of Humana,

leaves fewer large health insurance companies in the US market.


Each of these changes is reshaping and intensifying the competitive landscape for insurance. To respond to

competitive pressures, insurance companies need to expand and strengthen their distribution channels. Insurance

distribution is the cogwheel that drives growth. It is a crucial link between insurers and customers and can play a

critical role in helping companies remain relevant, competitive, and stable in the choppy waters of change and

disruption.

Over the last 10 to 15 years, insurance distribution has been undergoing a powerful revolution, often starting in one

geographic region and spreading quickly to others. Empowered by the Internet and digital technology which

together provide greater access to information — retailers are creating new, engaging customer experiences, such

as those provided by Amazon, Apple and Google. As a result, today’s insurance customers are increasingly more

demanding, wanting an Amazon or Apple-like experience. This experience runs dramatically counter to traditional

agency distribution methods.

While the traditional agency distribution model continues to play a dominant role in many markets, increasingly,

consumers (especially Gen X and Gen Y) are demanding new methods to connect with insurers in a direct-to-

consumer model. Across different regions, alternative channels like bancassurance, customer portals for self-service,

aggregator sites, and new channels like Google are emerging as strong alternative channels, intensifying the need

for traditional distribution to ‘modernize and transform’.

A modern distribution channel should be attracting and engaging millenials, who are increasingly affluent with

potential insurance needs.iv Born from 1981 to 2000, millenials who hold at $100,000 in assets are further classified

as affluent millenials. There are as many as 15.5 million of affluent millenials in the USA who spend $2 trillion

annually. These customers expect quick service, such as digitally powered pre-filled approaches to documentation,

among various other personalized and attentive servicing models.

These developments and others will have far-reaching impact on how insurers engage with their customers and

potential customers, conduct business, and most importantly remain relevant and competitive in this rapidly shifting

marketplace. The strategic use of analytics can play a major role in how insurers respond to these shifts, leveraging

an array of distribution channels to create an omni-channel experience for their customers over the next few years.v


Limitless Possibilities: Analytics to Empower Insurance Distribution

Distribution channels are critical to insurance companies’ growth (new customers) and retention (existing

customers). From small improvements in channel efficiency and effectiveness, to large improvements through

optimization and innovation, the changes can deliver significant cumulative benefits to the organization. Benefits

range from increased operational efficiency to improved customer reach, customer satisfaction and retention, new

customer acquisition, sales growth and new market segment growth opportunities.

In a recent Ernst & Young report, ‘Improved distribution and product development’ is at the top of the top 10

opportunities for global insurance organizations. “Effective collation and analysis of data,” the report states, “can

enable insurers to perceive and target demand for new products, control the customer experience and manage

costs.”vi

According to Sudhin Roy Chowdhury, Ex- Member (Life), Insurance Regulatory and Development Authority of India,

analytics can play a significant role in making the insurance distribution process more efficient. Mapping the market

footprint and expertise of every insurance agent and improving channel training will lead to higher sales productivity

and profitability for both insurance companies and distribution channels. “If we use analytics in the area of

intermediaries,” Chowdhury says, “it will help the industry a great deal,”vii

“I don’t buy my car insurance policy online; I still have my agent. He is so handy!

Like a Web aggregator, he does all the needed procedures.”

— Sudhin Roy Chowdhury,

Ex- Member (Life), Insurance Regulatory and Development Authority of India

Consumer Engagement Stages There are multiple stages of consumer interaction with insurance companies. The quality and frequency of

communication with customers varies based on these stages. There are three broad stages that influence this

communication.

Ownership stage: Consumers have few interactions with insurers (outside of bills) and when they do, it is a relatively neutral to non -

positive emotional experience. Studies say that 65-75% of consumers do not know what an annuity means, but 52% of

industry material contains annuities. There is need for better consumer education through improved communications.

Renewal/Shopping stage:

Consumers find insurance confusing and mysterious and they prefer not to deal with it. This leads to a state of inertia

for many consumers, in which they tolerate annoyances like confusing paperwork and poor service simply because it’s

too much of a hassle to go through the shopping/buying process.

Shopping/Purchase stage:

Consumers expect a seamless omni-channel experience that allows anonymous shopping and comparing offers. When

they get deeper into the purchase process they expect all information they’ve provided to be sent to or available in any

other channel they use.


Boundless Opportunity

The increasingly competitive environment in the insurance industry has made it imperative for companies to

innovate in the products and services they offer as well as how they are offered via different distribution channels.

Increasingly, analytics are used to design new products based on the unique requirements of a niche customer

segment, including the preferred distribution channel. Linking customer expectations with products and channels is

the foundation of engaging with customers based on their needs and preferences, creating not just great customer

experiences, but unique customer experiences.

Furthermore, analytics can help insurance distribution in multiple ways. Analytics can help optimize distribution by

accurately forecasting commission and incentive payouts that enhance operations and improve working capital

management. As a CIO of one the biggest general insurance companies in Indiaviii puts it: “When we talk about

distribution, everyone is concerned about the cost of distribution and the percentages paid in commissions. In such

situations analytics can be of immense help if you want to analyze a particular channel and assess how potent that

channel is within a particular segment, a particular geography or a particular product.”viii

Furthermore, analytics can map specific agents in an area geographically and by lead and customer base, to track

their performance. As a result, insurers can uncover gaps and needs within various demographic groups and guide

its agents to target sales efforts by matching appropriate customer segments to products that fit. Using this

approach, they can quickly identify ’low hanging fruit’ in a given market (geography, market, line of business or

customer-segment), and educate their distribution partners to leverage and tap those opportunities.

For example, if small business owners in a particular commercial district are discovered to be susceptible to a fire

hazard, distribution partners within that geography can proactively market the right property insurance products to

the most relevant and likely prospects. Similarly, if a particular urban area is prone to a particular disease, such as


Malaria, agents can be prompted to promote health insurance products with extended coverage for the disease in

that area. If a particular zone within a community is known for significantly higher risk of vehicle accidents, high-risk

products or additional coverage can be marketed extensively and exclusively in that region.

Distribution Efficiency and Effectiveness

According to Murali G, Business Director, Star Union Dai-ichi Life Insurance, analytics can also help detect distribution inefficiencies and thereby improve productivity by addressing them. Insurance distribution, he says, can be viewed in relation to three aspects — product, channel and customer. Knowing whether the right channels are selling the right products to the right customers is the key to ensuring that an insurer achieves optimal efficiency and effectiveness in its distribution operations. “If a channel is repeatedly mis-selling, why is it mis-selling? Is it a training issue? Does the agent not know the product? Is the product too complex?”ix

Relating his experience, Vivekanand Tripathi, Head of IT at Aegon Religare Life Insurance says that his company uses

Tableau’sx business intelligence tool to monitor channel sales performance in four to five product categories. “People

can actually see which channel is selling to which age group. As a result, we are adding more products this year,” he

says.

Providing the enterprise application perspective, Rajendra Walawalkar, Product Manager – Majesco Distribution

Management says, “Data analytics can be of use in the distribution platform; in setting-up the channel, managing

the channel and adapting the channel through configuration. Each channel comes with its own complexities.

Business rules are different. On-boarding processes are different.”xi A comprehensive distribution management

solution can manage all this and more, including regulatory compliance, enabling insurers to adapt to changing

market conditions, varied competition and shifting customer expectations.

Investing in Data Analytics: Taking the First Step

The strategic and operational use of data analytics begins by mapping out a data strategy with well-defined

objectives, goals, expected results, budgets and timeline. This enables the organization to clearly identify the

resources needed, including funding, people and technology. Like any other business solution implementation,

analytics software requires integration with core insurance solutions, modifying some existing business processes

and reorganizing movement of data throughout the enterprise. Here are a few aspects to consider before employing

analytics in your distribution operations.

78% of executives interviewed, cited big data analytics as the

disruptive force that will have the biggest impact on the insurance

industry. Source: Capgemini World Insurance Report 2015


Data Strategy

Strategies and their specific approaches for analytics may differ from organization to organization. However, to build

a foundation and organizational momentum, insurers should identify the greatest opportunity areas that support

the business strategy. For instance, SBI General Insurance uses analytics to assess customer preferences, with the

specific purpose to enhance retention, recognizing that it costs less than acquiring new clients.

Gayatri Prabhu, Channel Head - Digital at SBI General Insurance says, “We do a lot of data mining with our customer

base because it is far more profitable to retain a customer than to acquire a new one.” The company employs various

evaluation and modeling techniques to learn which customers have a high probability of renewing products or

buying new ones. “We use different attributes to understand target segment, location or how a niche segment would

be skewed towards a particular product,” Prabhu explains.xii

Customer retention can save insurers billions of dollars in premium and profit loss. Research conducted by LexisNexis

shows that more than 30 percent of insured households in the US evaluated their auto insurance options at least

once in 2014, with an eye toward switching carriers. Analytics can help stem these losses by identifying and acquiring

customers whose risk appetite matches that of the organization. It can also help understand a customer’s unique

needs and service them in an automated manner, says the report.xiii

Data Governance

As insurers extend their geographic reach, expand distribution channels, introduce new products and grow their

customer base, ensuring data consistency and quality becomes a challenge. Lack of standardization in data

definitions and models, coupled with multiple source systems, and massive amounts of unstructured data (growing

exponentially from documents, pictures, E-mails, spreadsheets, social media, telematics data, and Internet of things)

are complicating data management governance practices. Defining and implementing a comprehensive data

governance framework is critical for an organization to maximize ROI in terms of desired outcomes and business

value.

Data Capture

Leveraging internal and external data is critical for insurers to gain deeper insights. For internal data, capturing it

across the insurance value process, across systems and at every customer touch point is vital to gaining an informed

view of the customer. External data is increasingly crucial as an addition to this internal data, including social media,

telematics and more to uncover and understand patterns or predict trends. Unfortunately, many insurers face

challenges by their current inability to retrieve and analyze data, particularly for customers and channels.

Mayur Vasa, Head - IT Applications at Liberty Videocon General Insurance says that most insurance providers in India

lack adequate customer data. Citing auto insurance as an example, he points out that data is captured about the

vehicle, as it is the basis for rating and underwriting. “In case of motor insurance we capture the data about the

vehicle, but not about the driver! However, since most customer data like date of birth are not required, they are

not captured, leaving gaps in data that could be valuable for future products and engagement.”xiv

Kayzad Hiramanek, COO, Avantha ERGO Life Insurance, explains the necessary elements using the three Vs: Veracity,

Velocity and Variety. “There are three things that are important to consider. The first one is the veracity of data. The

second is the velocity at which data is changing—how often is the customer transacting with me using various

platforms? Lastly—the variety of platforms that a customer uses for transaction. Am I really capturing all that

data?”xv


The Path to Distribution Leadership is Unfolding

Data analytics is more than just an enabler when it comes to insurance distribution. It is weaving itself into every

aspect of the business from sales to marketing to customer engagement, and transforming them for the better. The

insurance sector is the midst of dramatic change and analytics can help insurers develop a roadmap leveraging

analytics to navigate this change successfully.

The pace of change, the explosion of data, the demand for enhanced customer experiences via the channel of choice,

and ready access to the data are challenging insurers to make the transformational changes that analytics can

deliver. In today’s new world, change is not optional – it is mandatory to compete.

With clear business strategies, C-level commitment, the right foundational distribution management solution that

enables expanding channels, and the strategic use of analytics to align customers with distribution, insurance

companies now have a platform to transform and reinvent their distribution models to compete in today’s omni-

channel world. Beginning a transformation journey for distribution management is a critical step toward bringing

the “Amazon-like” experience to customers.


References

i Transforming Insurance: Securing Competitive Advantage, KPMG, 2014

https://www.kpmg.com/BE/en/IssuesAndInsights/ArticlesPublications/Documents/transforming-insurance.pdf

ii “Uneven Growth: Short- and Long-Term Factors”, IMF’s World Economic Outlook, April 2015

iii Warner, Michael, “Global Insurance Distribution & Services Sector Mergers & Acquisition: Vying for Domination in

2014”, Conning Inc., March 10, 2015

iv “Affluent Millennials: Winning the generation that is transforming the financial world”, LinkedIn Corporation

v Omni-channel is a multichannel approach to sales that seeks to provide the customer with a seamless shopping

experience whether shopping online from a desktop or mobile device, by telephone or in a bricks and mortar store.

vi “Insurance Business Pulse 2013–2015”, Ernst & Young

vii Chowdhury, Sudhin Roy, Roundtable Discussion on ‘Leveraging Digital Technology to Reinvent Distribution

Models’ organized by Majesco, June 5, 2015.

viii CIO of general insurance company, Roundtable

ix Murali G, Roundtable

x Tableau is a business intelligence and analytics software

xi Tripathi, Vivekanand, Roundtable

xii Prabhu, Gayatri, Roundtable

xiii “Proactive Customer Retention: A Driver of Long-Term Profitability for Personal Auto Carriers”, LexisNexis, April

22, 2015

xiv Vasa, Mayur, Roundtable

xv Hiramanek, Kayzad, Roundtable

https://www.kpmg.com/BE/en/IssuesAndInsights/ArticlesPublications/Documents/transforming-insurance.pdf


About the Authors:

Denise Garth is Senior Vice President Strategic Marketing responsible for leading marketing, industry relations and

innovation in support of Majesco’s client centric strategy, working closely with Majesco customers, partners and

the industry.

She is a recognized industry leader with both P&C and L&A insurance experience as a CIO and business executive

with deep international ties in Asia and Europe through her ACORD leadership role. Denise is an acknowledged

strategic thinker, innovation leader, international speaker, and author of thought leadership and articles regarding

the key issues and opportunities facing the industry today to prepare for the future.

Shalaka Wagholikar is Deputy Manager, Marketing and is responsible for driving Majesco’s marketing initiatives in

the APAC region as well as supports the Global Marketing team in execution of marketing plans. She has extensive

experience in areas such as thought leaderships, C-level events, region specific campaigns, marketing

communication, analyst relations and corporate branding.

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