Riding the Whirlwind

Strategic Interactive Marketing for the Insurance Industry

Direct telesales are the current battle ground, predominantly for GI products but increasing for simple life and investment products.

4.1 Product & Service Offering

4.1.1 Interviewees were asked for an opinion as to whether products and services (P&S) will become simpler or more comprehensive. Comprehensive refers to providing a wide range of features and options. These are typically picked-and-mixed to match a customer's particular requirements, both initially and on an ongoing basis.

4.1.2 Interviewees linked this P&S issue to distribution and to the marketplace demands:

• there is a definite shift throughout the industry towards direct sales, especially in telesales. This is being driven by the success of the new direct entrants such as Direct Line in the area of general insurance (GI), but more recently also in life insurance (LI) and investments (e.g. Virgin).

Virgin, enters the market with execution only telesales operation.

Field sales forces will decline and Brokers will specialise in the non mass markets.

- Significant Shift -

• this shift is so significant that even insurers who have previously sold exclusively through brokers are now establishing direct selling operations. They recognise that this is a sensitive area - there is a danger of losing a share of the broker market, but without attaining a compensating share of the direct market.
• those with extensive field sales forces seem to accept that their days are numbered, certainly for the mass market. One such large bancassurer felt that there is still a significant market for face-to-face selling but saw this moving to branch outlets. Others, though, saw face-to-face selling primarily the prerogative of brokers who will continue to meet the needs of clients with specialist needs. These needs could be product related (a classic sports car) or service related (shopping around for busy executives with little time).

Use of direct telesales is raising customers' confidence.

Home shopping, entertainment on-demand, and home banking will pave the way for using the new mediums for more complex financial products and services.

There are concerns at selling commodity products in a mass market. These new distribution mediums will make it even more difficult.

• the product has to be easy to promote in the media.
• customer need to reach a sufficient level of understanding if they are to have the confidence to handle the sales process.
• sales calls need to be short in order to maintain high through-put at the telesales centres (due to the high cost of technology, media advertising, and low conversion rates).
• administration needs to be infrequent and efficient.
• investment products need selling on an execution only basis.

4.1.4 Over time customers will become familiar with the concept of buying direct, particularly over the 'phone. Interviewees believe that direct sales will then:

• encompass the more complex life insurance and investment products.
• help to promote the use of other direct sales methods such as the Internet or Web-TV.

- Concerns With Commodity Products -

4.1.5 Many interviewees have concerns at selling commodity products in a mass market:

• it promotes a downward spiral of price cutting.
• media advertising costs rise as competitors strive to gain larger market shares in order to reduce their unit costs.
• telesales only give an edge until most insurance is sold this way.
• Internet sales reduce costs further, but are at risk from so called intelligent agents. Despite their name, these agents will tend to evaluate on price; certainly not on the intangibles like service quality.

Concerns expressed with the market becoming one of commodity.

Brokers have a role for the more complex requirements.

4.1.6 Many interviewees are doubtful whether there is a need within the mass market for the more comprehensive products:

• they have a high cost of development, sales and administration.
• there are long lead times from concept to launch.
• a long sales process can lead to a premature termination.
• a number of basic products can meet the more comprehensive needs. Whilst this might mean duplication of cover (e.g. more than one product with legal advice cover) there is still a significant cost saving to the consumer.

4.1.7 One interviewee said that customers are just not asking for options, but rather the emphasis is on price. This suggests customers see:

• the various products offerings as broadly similar.
• that it is more important to have the basic cover rather than go through a time consuming and perhaps fruitless acquisition process.
• they perhaps lack the knowledge and experience to define more specific needs.

4.1.8 Comprehensive products do have a place, especially with brokers:

• they allow the broker to produce a value-added tailor-made product for those with complex or unusual needs, or for those that crave individuality (and are prepared to pay for it).
• they make price comparison difficult and thus help to avoid reducing sales to a commodity level, largely based on price.

4.1.9 Comprehensive also applies to the service offering. For example,

• ease of selling and switching unit trust shares.
• the provision of support information on ethical investments, company financial performance, or get-rich-quick schemes.
  

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