Www.celent.com Craig Weber Senior Analyst [email protected] Wow Your Channel Partners:...

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Craig Weber

Senior Analyst

[email protected]

Wow Your Channel Partners:Differentiation Via Distribution Technology

E-Z Data Client Partner ConferenceSan Diego, CA

© 2007, Celent, LLC. 2

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About Celent

• Independent IT Strategy Research for Financial Services Firms– Banking

– Securities & Investments

– Insurance

• Syndicated Research– Overviews/Market Trends/Surveys

– Case Studies

– Vendor Comparisons

• Ongoing Advisory Services

• Custom Research & Strategy Consulting


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Agenda

• Evolving Distribution Strategies• Lessons from Model Carriers• Perfecting Producer Tools• Discussion

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Evolving Distribution Strategies


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Key IT and Business Pressures

Proliferationof

Distribution Channels

Requirementfor Increased

Flexibility

But no longer at all costs

But not at the expense of

forward progress

But not without a coordinating

vision

Need forCost

Containment

DISTRIBUTIONSTRATEGIES


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Does Distribution Still Drive The Agenda?

Top Business Issues for 2007

0% 20% 40% 60% 80% 100%

Data Mastery

Compliance

Competition

Internal Operations

Cost Control

Company Issues

Growth

Profitability

Market Demands

Mid L/H

Large L/H

Mid P/C

Large P/C

Source: Insurance CIO/CTO Pressures, Priorities, Projects, and Plans for 2007: Survey Results


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Does Distribution Still Drive The Agenda? cont.

Source: Insurance CIO/CTO Pressures, Priorities, Projects, and Plans for 2007: Survey Results

Top IT Initiatives for 2007

0% 20% 40% 60% 80% 100%

Billing

Compliance

SOA

VOIP

BPM

Pricing

Security

Claims

Other

Company Issues

Infrastructure

Data Mastery

Distribution/E-Business

Policy Admin/Core Systems

Mid L/H

Large L/H

Mid P/C

Large P/C


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“As we seek to create more profitable channel relationships and add new channels to the mix, what

strategies are likely to be most successful?”


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Carrier Choice Drivers

16%

21%

62%

65%

69%

34%

49%

32%

27%

26%

50%

31%

6%

8%

4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Highest Commission

Lowest Price

Best New Business Support

Best Customer Service

Best Product

Absolute Must-Have Near Must-Have Nice to Have But Not Essential

Source: Independent Producer Survey: Technology, Services, & Other Drivers of Carrier Choice

© 2007, Celent, LLC. 10

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Carrier Choice Drivers

Carrier support for AMS

Commission cycle time

The way claims are handled

Policy delivery speed

Web-based tools provided by carrier

Commission rates

Client services provided

Marketing and sales support

Underwriting speed

New business & underwriting support

5%

9%

15%

16%

16%

27%

29%

35%

38%

43%

5% 15% 25% 35% 45%% of respondents voting for item

Source: Independent Producer Survey: Technology, Services, & Other Drivers of Carrier Choice

© 2007, Celent, LLC. 11

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Innovating & Differentiating

• We pay the best commissions.• We’re extremely price competitive.

• We provide your clients with great service.

• We provide you with great service.– Easy to do business with

– Responsive to new business needs

– Strong marketing & sales support

• We’ve got the right products for your customers.

Relatively easy to do. But can it be sustained?

Ripe for innovation. But requires new technology and solid execution.

Focus of most innovation. But may not be the quickest path to sustainable differentiation.

© 2007, Celent, LLC. 12

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Innovation Strategies For Distribution

Move Move The WorkThe Work

Rethink Rethink DeliveryDelivery

Automate Automate Work & Work &

WorkflowWorkflow

Conquer Conquer Your Your DataData

Improve Improve IT IT

EfficiencyEfficiency

TechnologyTechnology

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Lessons from Model Carriers

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The “Model Carrier”

• “What would it look like for an insurance carrier to do everything right with technology?”

• “Model Carrier Components” are examples of a theoretical model carrier’s insurance IT systems and practices.– “Everyone does something well.”– Generally represent the way things should be done.

• Recognition of a carrier’s effective use of technology, not a certification that the carrier is absolutely the single best in its class (although some may be).

© 2007, Celent, LLC. 15

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Important Fine Print

• Invitation and self-nomination forms were sent to over 100 insurers and 50 vendors • Nomination forms were reviewed by Celent insurance senior analysts and cases

that demonstrated effective use of technology were selected. • Insurers were interviewed to review their cases and provide additional information if

necessary to create a compelling case.• Celent senior analysts drafted cases, which were approved by the insurers for

accuracy and confidentiality.There were no fees charged to insurers or vendors for nomination or recognition.

• Some of the nominating vendors, and many of the selected insurers, are or have been clients to Celent’s retained advisory service (Celent serves a few dozen insurers across the globe in this capacity).

• Celent was not directly involved in the creation or deployment of any of the initiatives that have been recognized.

• No preference was given to clients in the selection process.

• Purpose is to recognize effective insurance IT.

• Some profiled companies are or have been Celent clients, some are not. All are doing good stuff.

• Nominations being accepted for 2008!

© 2007, Celent, LLC. 16

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Select Model Carrier Categories

Marketing

Distribution/Agent Portal

Distribution/Other Elements

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• Advertising and Search Engine Optimization. • Prospect Website Quoting. • Reusable data from quick quote to full quote. • Real-time integration with requirements vendors and

automated underwriting.• Seamless hand-off to agent with closed-loop follow-

up from distribution management.• Product Recommendation Engine/Interactive

Coverage Selection.• Real-Time Customer Service.

Marketing

© 2007, Celent, LLC. 18

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AIG VALIC: Closed Loop Lead Management

ISSUES

• Leads coming in from the Web, the call center, and marketing campaigns.

• Had no automated way in which to capture, distribute, and track them.

• Needed to measure response times and conversion rates.

MODEL CARRIER COMPONENT

• Implemented lead-tracking solution with business rules component and automated workflow.

• 6 month payback.• Lead closing rates: 24% for

annuity leads to 46% for leads on 403b sales.

• Automatically re-routes leads that aren't acted upon.


WorkflowWorkflow

Conquer Conquer The DataThe Data

© 2007, Celent, LLC. 19

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• Electronic quoting and application submission.• Straight-through processing to underwriting and policy issue. • New business process transparency.• Commissions information. • Integration with agency management systems. • Comprehensive policyholder information. • Secure messaging environment. • Download materials (forms, customized proposals and letters,

etc.).• Leads distribution and cross-sell opportunities.

Distribution/Agent Portal

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Ohio National: e-Apps

ISSUES

• Inconsistent new business processes.

• New technology environment.


• Online quoting, app, and new business status to agents and distribution partners for term life, “TermXpress.”

• Developed as a proof-of-concept application.

• Built rapidly using Linux-Apache-MySQL-PHP.

• Windows environment in production.

• Expanded distribution network, and proved validity of e-business internally.


WorkflowWorkflow



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The Principal Financial Group: Print-on-Demand Proposals.

ISSUES

• Retirement and Investment Services (RIS) division with high volume of proposal production.

• 18 versions of pitch book for different retirement products and plan types.


• Deployed web-based tool for distributors to create pitch books online.

• Real-time access to customer-specific information and other data from legacy mainframe systems.

• Reduced the total document preparation time from several hours to 20 minutes.

• 75% reduction in total cost.

Move Move The WorkThe Work



© 2007, Celent, LLC. 22

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AAA Missouri: E-Apps and STP

ISSUES

• Deployed a stand-alone e-app, but realized it was not capitalizing on efficiencies.

• Expanding homeowner’s and auto distribution by becoming more attractive channel partner


• Upgraded policy administration environment to allow for real-time data evaluation, decisioning.

• Integrated agent portal and e-app

• Reduced cycle time in this line from 10 days to 2 days.

• Reduced errors, increased agent satisfaction, integral part of expansion.


WorkflowWorkflow



© 2007, Celent, LLC. 23

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Mutual Benefit Group: Web Services for Online Quoting

ISSUES

• Leveraging legacy (AS/400) systems without replacing.

• Improving quote turnaround time for auto line.


• Developed using vendor-provided solution in .NET.

• Real time web service calls to requirements vendors.

• Comparative raters access quoting service through real time ACORD XML calls.

• Reduced turn-around time from six days to < one.

• Improved agent satisfaction

• Improved hit ratio to 20%+.

• Reusing web services reduced development time on subsequent projects by 40% and reduced user testing time by 60%.


WorkflowWorkflow



© 2007, Celent, LLC. 24

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• Commissions and relationship management• Data mastery for distribution managers• Wireless• e-Learning• Automated licensing and contracting

Distribution/Other Elements

© 2007, Celent, LLC. 25

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The Hartford: Data Mastery for Distribution Mgmt.

ISSUES

• Cementing producer/distribution relationships.

• Improving rep efficiency.

• Standardizing sales processes.


• Dashboard for sales reps to manage producer relationships.

• Comprehensive view of producer activities, sales history reduces prep before sales calls, makes calls more productive.

• Built using standard business intelligence tool that graphically presents information from a consolidated database, which is populated from The Hartford's core systems nightly. Sales reps access the reports via portal.

• Early results indicate that reps spend now more time visiting distributors.

Conquer Conquer The DataThe Data

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Perfecting Producer Tools

© 2007, Celent, LLC. 27

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Key Questions About Producer Tools

• How do producers perform key tasks today?• Which specific systems have the strongest impact on

producer behavior vis-à-vis carrier choice?• What are the key design principles that matter most

to producers?

© 2007, Celent, LLC. 28

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Approach

• Online survey of independent life insurance producers

• Respondents offered BlackBerry (free with subscription) for participating

• Total of 215 respondents took majority of survey• Review and cleaning of data suggests excellent level

of participation, thoughtfulness

© 2007, Celent, LLC. 29

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By Producer Role & Agency Type

Respondents are largely independent producers working for independent agencies.

Independent agent/producer

67%

Captive agent/producer8%

General agent,agency principal

25%

CSR0% Affiliated GA

7%

Independent GA/Independent

Agency75%

Other5%

Captive5%

MGA8%

© 2007, Celent, LLC. 30

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By Age & Experience

Respondents were mixed in terms of age, but generally very experienced.

36 to 45

20%

25 or under

1%

56 to 65

35%

26 to 35

6%66 or over

10%

46 to 55

28%

7 to 9 years11%

1 to 3 years10%

4 to 6 years14%

Less than a year2%

10 years or more63%

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Findings

Source: Celent Producer Tools Survey, July 2006

© 2007, Celent, LLC. 32

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Tools Used

Respondents use a variety of tools. Not surprisingly for this segment, agency management systems are the least-used tool.

47% 24% 8% 21%

53% 31% 7% 9%

27% 26% 17% 29%

40% 26% 15% 19%

48% 33% 13% 6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Agency Web Site

Proprietary Carrier WebSites

Agency ManagementSystem

Contact ManagementSoftware

Point of Sale Tools(lllustration or Needs

Analysis)

Use Often Use Sometimes Use Rarely Don't Have

© 2007, Celent, LLC. 33

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% of all respondents who voted (multiples allowed)

Check commissions pending or paid

Check licensing and appointment status

Check new business pending

Obtain current versions ofmarketing materials

Telephone the carrier Fax the carrierEmail the carrier Download info to agy. mgt. sys.Use proprietary carrier software Use single-carrier web siteUse multi-carrier web site

19%

21%

16%

11%

5%

5%

5%

5%

25%

26%

23%

23%

24%

19%

22%

19%

20%

16%

15%

26%

24%

31%

33%

24%

25%

32%

34%21%

For checking status, virtually all channels are preference of some producers. But multi-carrier sites have very slight edge for new

business status and ordering marketing materials.

Tool Preference

Q: How do you prefer to perform the following tasks?

© 2007, Celent, LLC. 34

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Telephone the carrier Fax the carrierEmail the carrier Download info to agy. mgt. sys.Use proprietary carrier software Use single-carrier web

siteUse multi-carrier web site

Generate illustrations/quotes

Communicate with underwriters

Perform basic policy changes

Submit/manage claims

% of all respondents who voted (multiples allowed)

9%

43%

25%

28%

4%

7%

12%

18%

20%

50%

41%

41%

15%

8%

13%

12%

29%

8%

13%

28%

14%

24%

23%

30%

15%

24%

21%13%

Tool Preference

For routine service, email is the clear choice.

Q: How do you prefer to perform the following tasks?

© 2007, Celent, LLC. 35

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Business “Shopping”

New business is shopped across several carriers in most cases, which suggests that there is value in “informal” underwriting and

quoting tools.

Q: For new business, how often do you need to “shop” cases between carriers for the best price or underwriting results?

43%

49%

32%

44%

13%11%

2%

6%

0%

10%

20%

30%

40%

50%

60%

Always Sometimes Never Not applicable

Life Annuity

© 2007, Celent, LLC. 36

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Relative Impact of Producer Tool Attributes

Strong drivers include email and being Web-enabled. Weak drivers include wireless and single-carrier vs. multi-carrier

considerations.

3.77

2.95

2.46

2.16

2.11

1.94

1.68

1.64

1.64

1.76

1.82

2.92

2.57

1.5 2 2.5 3 3.5 4

Available over my handheld device (PDA Blackberry etc.)

Is non-proprietary (i.e. it works for multiple carriers) even if thetradeoff is that the system has limited functionality

Supports fax as a means of getting or sending info

Has rich functionality even if the tradeoff is that the system isproprietary i.e. it only works for one carrier

Supports phone-based automation (e.g. touchtone or voiceresponse) so I can call when I need something

Includes “wizard” interfaces that walk me through unfamiliar procedures

Provides robust reporting capability

Supports live phone interactions as a means of getting or sending info

Prevents me from having to rekey data

Sends me regular status by email or phone

Web-based so I can access it from any Web browser

Provides me 24/7 access

Supports email as a means of getting or sending info

Q: How important are these attributes of producer tools in terms of building new systems that will make your life easier? Rate them from 1 to 7 where 1 means Major Importance and 7 means Minor Importance.

© 2007, Celent, LLC. 37

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Ranking Impact of Common Tools

27%

29%

42%

50%

50%

55%

46%

53%

56%

55%

66%

72%

75%

82%

57%

55%

45%

40%

43%

33%

47%

39%

36%

38%

29%

26%

22%

16%

16%

16%

13%

10%

7%

11%

7%

8%

8%

6%

5%

3%

3%

2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Commission projection

Projection vs. actual commission calculation

Own portfolio management

Tools for upsell/cross sell based on analytics & customer life-cycle

Customer Self Service

Customer financial need analysis tools

Referral management systems

Contact management tools

360 degree view of existing customers

Tool for “What if” analysis

Online real-time policy endorsement claims, new bus., and complaint status

Proactive alerts (premium due, policy lapse, fund value / prices

Online automated quote generation

Sales illustration software

High Impact Modest Impact Low Impact

Note: Original results polarized.

Responses of 1 or 2 = High Impact

Responses of 3, 4, or 5 = Modest Impact

Responses of 6 or 7 = Low Impact

Q: Rate these tools in terms of their potential impact on your decision to do business with a particular carrier, where 1 means Major Potential Impact and 7 mean Minor Potential Impact.

© 2007, Celent, LLC. 38

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Implications for Tool Choice

• Support multiple methods where you can.• Differentiate by providing rich functionality,

particularly where you can integrate online and email capabilities.

• Think through your support for telephone, fax, email:– Can you provide it cost effectively?– Should you provide it selectively?– Can you redirect the demand with really good online

functionality?– Are you marketing your online services effectively? Is it

obvious why producers should use them?

© 2007, Celent, LLC. 39

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The Human Touch?

Producers almost universally want a live telephone option when they have a question about new business.

Q: How important is it to be able to talk on the phone to someone in underwriting when you have a question about cases that are not yet submitted or are in process?

Extremely Important

87%

Somewhat Important

12%

Not At All Important

1%

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Summary

© 2007, Celent, LLC. 41

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Macro Level

• Defend your ship, or prepare to be boarded.• Devise and execute long- and short-term

differentiation strategies.• Focus on services and process, rather than product,

price, and compensation.• Create execution discipline.

© 2007, Celent, LLC. 42

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Micro Level

• Improve access to information.• Match tools to daily work patterns.• Improve producer efficiency, and make sure they

know it.• Provide choices so channels can tap the tools

they need.

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Discussion

For a copy of this presentation, contact:

Craig WeberCelent, LLC

[email protected]

Www.celent.com Craig Weber Senior Analyst [email protected] Wow Your Channel Partners:...

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