product design 101: developing products that cater to client’s needs calvin foo cfp asia regional...
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Product Design 101: Developing Products That Cater to Client’s Needs
Calvin Foo CFP
Asia Regional Head
Financial Advisory & High-Net-Worth Development
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Agenda
Product Strategy
Different Stakeholders’ Roles & Points of View
Client Segmentation
Client Life Cycle
Case Studies
Singapore – ASEAN Wealth Management Hub
Bancassurance – Multiple products for multi-channel distribution
The FMCG Approach – to simplified product marketing
Micro-insurance – one countries success
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Developing Products That Cater to Client’s Needs
First issue most clients don’t know what they need
Second issue some insurance companies are weak at marketing
Third issue some insurance companies have reverse strategies
Fourth issue some insurance companies don’t tend to align the interests of clients,
distributors and the finance/actuarial operations…..each may have their own personal agendas
Fifth issue regulation is not embraced
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Agenda
Product Strategy
Different Stakeholders’ Roles & Points of View
Client Segmentation
Client Life Cycle
Case Studies
Singapore – ASEAN Wealth Management Hub
Bancassurance – Multiple products for multi-channel distribution
The FMCG Approach – to simplified product marketing
Micro-insurance – one countries success
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Strategy
Starts and finishes with the customer
Is aligned to product (differentiated where possible)
Distribution and the who’s, the where’s, the how’s and the when’s, is how you execute the strategy
The definition of marketing: "the management process that seeks to maximize returns to shareholders by developing relationships with valued customers and creating a competitive advantage.“
Product→Solution
Promotion→Information
Price→Value
Place→Access
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Product PositioningInfluencing Factors for Product Design
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Marketing / After-sales
Service Facilities
Regulation (Tax System, ILAS)
Clients’ Needs / Target
Group (Clients)
Competition(Insurers and Fund
Houses)
Profitability Fee Income
(Up-front and trail)Persistency
Product
Positioning
Existing Product Range
Technology(POS, Underwriting,
MI, Web-site)
Sales Competence of
Distributor
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“ WHEN Otto von Bismarck introduced the first pension for workers over 70 in 1889, the life expectancy of a Prussian was 45.
In 1908, when Lloyd George bullied through a payment of five shillings a week for poor men who had reached 70, Britons, especially poor ones, were lucky to survive much past 50.
By 1935, when America set up its Social Security system, the official pension age was 65 - three years beyond the lifespan of the typical American.
State-sponsored retirement was designed to be a brief sunset to life, for a few hardy souls.”
- “The End of Retirement”, The Economist, Jun 25th 2009
Life expectancy when state pensions were first introduced…matching needs to expectation!!
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“ A universal problem we had to resolve was retirement benefits or pensions when a worker became too old to work. In Europe and America, the government provided these pensions, paid by taxpayers. We decided that every worker should accumulate his own savings in the CPF for old age”
- Minister Mentor Lee Kuan Yew, in his memoir “From Third World to First”
Singapore philosophy…
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Product StrategyDifferent Stakeholder’s Point of View
Actuary • Risks, Pricing, Experience, Profit
Distributor • Features & Benefits, Market
Competitiveness
Client • Funds for Major Illness Protection, Peace
of Mind
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Product StrategyDifferent Stakeholder’s Point of View
Actuary •Risks, Pricing, Experience, Sustainability of Future Bonuses
Distributor • Features & Benefits, Market Competitiveness
Client •Funds for retirement, Peace of Mind
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Understanding the customers’ product and service preferences drives the creation of offers and needs-based approaches that are relevant and seamlessly integrated
• Retirement planning
• Emergency planning
• Disaster planning• Best of breed
product• Charges
transparency• Fair choices• Trust and integrity• Demystified
guidance
Long term products require an ongoing relationship with the distributor and insurer and may require specialised servicing.
• Lifestyle needs• Security• Life-stage needs• Long-term
relationship• Household
budgeting• Financial planning• Asset management• Tailored products• Financing
• Convenience• Non-financial help• Complete
delegation for managing assets and liabilities
• One-stop shop• Anytime, anywhere• Prompt service
• Flexible options• Non-financial needs• Innovation• Financial planning• Prestige &
exclusivity• Performance• Value for money
• Account aggregation
• Entrepreneur management
• Long term relationship
• Simple administration
• Integrated services• E-payments• Product
aggregators• Automated
optimisers
Secure my future & reduce my risks
Give mepeace of mind
Save time for me
Help me enjoymy life
Simplify my life
The Customer Franchise
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Agenda
Product Strategy
Different Stakeholders’ Roles & Points of View
Client Segmentation
Client Life Cycle
Case Studies
Singapore – ASEAN Wealth Management Hub
Bancassurance – Multiple products for multi-channel distribution
The FMCG Approach – to simplified product marketing
Micro-insurance – one countries success
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Agenda
Product Strategy
Different Stakeholders’ Roles & Points of View
Client Segmentation
Client Life Cycle
Case Studies
Singapore – ASEAN Wealth Management Hub
Bancassurance – Multiple products for multi-channel distribution
The FMCG Approach – to simplified product marketing
Micro-insurance – one countries success
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Singapore Population: Growing, ageing, increasing longevity and wealth
Chart 1: Resident Population Chart 2: Population Age Pyramid
Source: Department of Statistics, Singapore
Chart 3: Life Expectancy
Chart 4: Per Capita GDP (US$)
0
10000
20000
30000
40000
1970 1980 1990 2000 2008
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Global HNW wealth will grow at an annual rate of 6%
By 2010, Asia’s HNW assets expected to reach US$10.6 trillion, close to the European wealth market
•Singapore has the highest rate of growth of HNWIs of 21%!•There are 67,000 of HNWIs in Singapore with US$323b in total assets!•This is 2.5% of the adult population!•This also means 5 out of every 200 adults in Singapore are millionaires, with very real Estate Planning needs !!
World Wealth Report 2007 by Capgemini and Merrill Lynch
High Net Worth Market
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Source: Asia-Pacific Wealth Report 2007 by Capgemini and Merrill Lynch
Japan, 43.70%
Australia, 6.00%
Hong Kong, 5.50%
India, 4.20%
South Korea, 3.20%
Taiwan, 2.60%
Indonesia, 0.80%
Other, 9.60%
China, 20.60%
Singapore, 3.80%
Asia-Pacific HNWI Wealth Distribution, by Market,2006
Comprised of 9 countries namely Kazakhstan, Malaysia, Myanmar,New Zealand, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam
HNWI Wealth,2006(US$ Billions)
• Others US$810• Indonesia US$70• Taiwan US$220• South Korea US$270• Singapore US$320• India US$350• Hong Kong US$460• Australia US$510• China US$1730• Japan US$3680
Total HNWI Wealth in Asia-Pacific Region = US$8.42 Trillion
Asia-Pacific HNWI’s financial wealthforecasted to reach US$12.7 trillionby 2011
High Net Worth Market
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Singapore will be among the world leaders when it comes to increasing the number of mass affluent people.
The number of mass affluent residents (individuals with > USD60,000 in liquid assets) in Singapore will grow from 410,000 last year to more than 600,000 by 2011 (close to 20% of resident adult population)!
Additionally, Singapore is likely to benefit from greater inflows of wealth from regional (e.g. Indonesia, Malaysia & Thailand) and global market (e.g. Middle-East), as investors look to diversify portfolios in safe havens such as Singapore.
* Wealth Management in Singapore 2007 by Datamonitor
Hence, the number of mass affluent non-residents adults in Singapore will also grow!
Wealth
Mass Market
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UHNW
HNW
Affluent
Emerging
Mass
> USD20mio
< USD100k
USD1mio to < USD20mio
USD500k to < USD1mio
USD100k to < USD500k
Client Segmentation Assets Under Management
Based on AUMSources: Credit Suisse Global Wealth Databook 2011, Cap Gemini & Merrill Lynch World Wealth Report
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Client Segmentation Life Stages Needs & Products
Life Stage Primary Need Life Insurance Product
Young & Single Asset Creation Wealth Creation plans
Young & Just Married
Asset Creation & Protection Wealth CreationMortgage Protection
Married with Kids Children’s EducationAsset Creation
Asset Protection
Education InsuranceMortgage Protection
Wealth Creation
Middle Aged with Grown Up Kids
Retirement PlanningAsset Protection
Retirement SolutionsMortgage Protection
Across All Life Stages
Health Health Insurance
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Agenda
Product Strategy
Different Stakeholders’ Roles & Points of View
Client Segmentation
Client Life Cycle
Case Studies
Singapore – ASEAN Wealth Management Hub
Bancassurance – Multiple products for multi-channel distribution
The FMCG Approach – to simplified product marketing
Micro-insurance – one countries success
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Corporate (SME)
RMs/ISs
Employee BenefitsKey-men Insurance
HNWRMs/ISs
Universal LifeWM Products
Product Positioning Alignment by Client Segmentation
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Multi-Channel Distribution ModelMulti-Channel Distribution Model
Retail Br Managers
/RMs
Investment Linked & WM
Products
Retail RMs/ISs
Need-based Products
Telemarketing
Low premium, high
perceived value
products
Manulife’s product and distribution expertise positions us to support RHB in realizing its full financial services potential
Privileged
High Net WorthAchievers
Youth
Strivers
Mature
Life Stage / Value Segment
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Product Range of Retail Banks
Co
mp
lexity
Equities
Funds
Bonds
SavingsAccounts
Credit Cards
Current Accounts
Business
Financing
Mortgage
Consumer
Loan
Investment Loan
Foreign Exchange
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Insurance Offers a Third Dimension: Protection
Co
mp
lexity
Equities
Funds
BondsCredit Cards
Current Accounts
Business
Financing
Mortgage
Consumer
Loan
Investment Loan
SavingsAccounts
Securit
y
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Insurance Offers a Third Dimension: Protection
Co
mp
lexity
Equities
Funds
Bonds
Unit Linked
Assurance
Term
Assurance
ULA + Riders
EA + Riders
Investment Protection
SavingsAccounts
Endowment
Assurance
Guaranteed Products
with LA
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Insurance Offers a Third Dimension: Protection
Co
mp
lexity
Business
Financing
Mortgage
Consumer
Loan
Home Ins.
Travelers Ins
Group Life Ass.
Pensions
Mortgage
Assurance
Investment Protection
Motor Ins.
Term Ass.
Credit Life
Loan Protection
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Product PositioningCase Study - Bancassurance ChannelProduct / SBU Credit Cards Mortgage / Motor
LoanUnsecured Loans
Deposits
CA/SA/TD
High Net Worth Income
SME
Credit Life (Shield)
Fix SI or variable type
POS
TM/DM
POS
TM/DM
POS
TM/DM
MRTA / MLTA
Reducing or Level
POS
TM/DM
PA and HIP
Segment specific with or without ROP
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
Critical Illness
Covering 1-5 Specific illnesses
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
Term Life
With or without ROP
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
TM/DM
In Branch (offered)
RM/PB
Insurance specialist
Endowment
Par or Non Par
TM/DM
In Branch (offered)
TM/DM
In Branch
Insurance Specialist
RM/PB
Insurance specialist
Whole of Life In Branch
Insurance Specialist
RM/PB
Insurance specialist
Annuities In Branch
Insurance Specialist
RM/PB
Insurance specialist
Universal Life RM/PB
Insurance specialist
RPUL / SPUL
Link to MAM or 3rd party funds with top up options
In Branch
Insurance specialist
RM/PB
Insurance specialist
Business Insurance
Directors and Key Man policies
Insurance Specialist
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Agenda
Product Strategy
Different Stakeholders’ Roles & Points of View
Client Segmentation
Client Life Cycle
Case Studies
Singapore – ASEAN Wealth Management Hub
Bancassurance – Multiple products for multi-channel distribution
The FMCG Approach – to simplified product marketing
Micro-insurance – one countries success
43
Agenda
Product Strategy
Different Stakeholders’ Roles & Points of View
Client Segmentation
Client Life Cycle
Case Studies
Singapore – ASEAN Wealth Management Hub
Bancassurance – Multiple products for multi-channel distribution
The FMCG Approach – to simplified product marketing
Micro-insurance – one countries success
44
Manulife Vietnam Life Insurance (MVL) began its operations in September 1999 as the first foreign life insurance company in Vietnam since the country opened its insurance market to foreign companies
MVL operates in 12 cities through a network of 7,000 agents, serving 300,000 urban middle class customer
We also partner with selected banks to distribute life insurance in major urban cities
In 2007, Manulife established Manulife Vietnam Fund Management Company (MVFM) to enter the wealth management business. MVFM managed third party institutional asset and is one of the three companies in Vietnam offering local retail
mutual fund.
Manulife Vietnam
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Established in 1930
A political mass-based national organization aiming to promote the welfare of Vietnamese women in all aspects: economic, political, health and education
VWU has 13 million women members nation wide, through an extensive administration network at national, provincial and district level
Since 2003 the VWU acts as the main partner of the Vietnam Bank for Social Policies for disbursing their loans to low income families
VWU manages about 40 microfinance and credit programs
Vietnam is considered one of the most successful countries in reducing poverty, the percentage of the population living under the poverty line has reduced from 58% in 1993 to 14.87% at the end of 2007 and VWU plays an important role in Vietnam’s poverty reduction efforts
Vietnam Women’s Union (VWU)
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The rural market in Vietnam is a large market with approximately fifteen million households and around sixty million people. This market largely remains under-served due to the remoteness of the locations and the lack of accessibility to financial services
In 2008/2009 the Vietnam Ministry of Finance (MoF) started to look into rural area insurance needs and encouraged commercial insurance companies to develop commercially viable micro-insurance for the mass rural market
Manulife went through an extensive distribution partner selection process with the following criteria:
NGO & non-profit organisation focusing on low income families
Nationwide network with administration capability – Vietnam Post Office & Banks
Experience with micro-finance or micro-insurance projects
Identified VWU as an ideal partner for the micro-insurance project and signed an MOU in early 2009. Project officially launched in Sept 2009.
Micro-Insurance Project Background
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Product & Benefit Coverage
Premium: VND300,000 (US$17, THB510) annual premium
7 year Term Coverage
Death Benefit: VND 10 million (US$560, THB16,800)
Accidental Death: Additional VND 10 million (US$560, THB16,800)
Accidental Dismemberment: VND4 million (THB6,720) to VND6 million (THB10,080) depending on the type of dismemberment
Hospital Benefit: VND180k (US$10 THB300) first policy year VND360k (US$20 THB200) 2nd – 7th policy year onwards
No claim bonus: 100% refund of premium if no claim during benefit period
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Engagement Process
Presentations of micro-insurance via pre-scheduled seminars at the commune level organized by VWU commune and district leaders
Over 1,000 seminars held during 12 months period
About 50 to 200 attendees per seminar, sign up rate over 70% and signed up 60,000 micro-insurance customers so far
Product introduction and fulfillment conducted by Manulife employees
Simplified business process at the end of the seminar
Pre-scheduled sales seminar to avoid anti-selection
The seminars also serve as an introduction to the concept of insurance and protecting family welfare to the rural mass
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A Typical Engagement Seminar
There was not enough seats so VWU members had to stand or sit on the ladder on the right hand side of the house.
The meeting house was too small so some sat outside along the corridor
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We are really bringing hope to a family that is so much in need of money.
Claim Cheque Delivery
Source: Saturday's Globe and Mail, published on Friday, Feb. 19, 2010
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Vietnam Post Pilot Project
Lessons learnt The wealthy rural market offers real potential and there is a continual need to explore
options to penetrate this market segment.
Must build strong relationships with Postal workers and Post Office management at different levels
Micro-insurance advisors must have positive attitudes and must be suitable for the work to be undertaken.
The range of micro-insurance products offered should be comprehensive and offer many choices.
Mode of payment must be flexible or at least allow various modes of payment. Restriction to annual mode only is a distinct disadvantage.
All the engagement processes must be simple, especially premium collection and policyholder services.
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“The human being needs a challenge, and my advice to every person in Singapore and elsewhere, keep yourself interested, have a challenge. If you're not interested in the world and the world is not interested in you, the biggest punishment a man can receive is total isolation, black...complete withdrawal of all stimuli, that's real torture.
So when I read that our people believe in retiring at 62, I said to them: "You really want to die quickly?" If you want to see sunrise tomorrow or sunset, you must have a reason, you must have the stimuli to keep going."
Minister Mentor Lee Kuan Yew at age 85 shared his own experiences of active ageing at the Silver Industry Conference and Exhibition, 12 Jan 2008
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Manulife FinancialStrong & Diversified Businesses
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InvestmentsUnited States, Canada, United Kingdom, Japan, Australia, Hong Kong, Southeast Asia
Asia Hong Kong, Philippines, Singapore, Indonesia, Vietnam, Malaysia, Thailand, Taiwan, China, Cambodia
• Individual Life Insurance• Group Life & Health Insurance• Pension Products• Mutual Funds
Canada • Individual Insurance • Individual Wealth Management• Group Benefits• Group Pensions
United States • Insurance• Long Term Care• Annuities• Group Pensions• Mutual Funds
Reinsurance• United States• Canada• Europe• Asia
Japan • Individual Insurance• Variable Annuities
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5858
Manulife FinancialCompetitive Strength
Excellent brand recognition and reputation
Strong claims paying ability / financial strength ratings
Strong capital position - C$28.9 billion @ June 30, 2011
Significant scale
Product diversity
Strong, multi-channel distribution
Superior asset quality
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5959
Manulife Financial Strong Multi-Channel Distribution
AdvisorsFinancial Planners
Independent Agents
Brokers
DealersWire-houses
Banks
In-house Agents
• Deep & growing relationships across multiple channels worldwide
• Over 110 Bank partnerships across Insurance and Mutual Funds distribution in Asia
• Meet varying needs of our international base of customers, regardless of their chosen distribution channel.
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