DIRECT MARKETING

a unique solution for enhancing the value of life portfolio

Moscow, 18.November 2009 Bogomil MARN 1

Direct Marketing
Content

Moscow, 18.November 2009 Bogomil MARN 2

The distribution dilemma

Distribution dilemma number 1

which is my target market?
what will be market dynamics?
which distribution channels are going to prevail in future?

in many countries we observe an erosion of the market share of

insurance products sold through agents

companies have large investments in their agent force and still receive
the majority of their premium income from agent cultivated business

ability and readiness of top management to act is often too low and
conditioned by given situation

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The distribution dilemma

Distribution dilemma number 2

which products have best market chances?
which products fit best to given distribution channel?
how to combine channels and secure their symbiosis?

create matrix of products and distribution channels

findings of simple analysis of earnings / production cost are key drivers

deal in an early stage with the fear around “bothering MY client”

achieve buy-in of all parties involved and create a win – win situation

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The distribution dilemma

Distribution dilemma number 3

how to achieve right balance and properly allocate the resources?
home-made versus outsourcing to professional direct marketing agencies?
self financed or via reinsurance and what are financial drivers behind?

it is comforting to get affirmed to be on right track and continue

cultivating your agent force for the majority of insurance sales

create ability to generate business which would otherwise not be pursued

assessment of availability and quality of internal and external resources

projection of cash flows, tax issues, balance sheet constrains etc.

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Direct marketing methods suitable for
Life and A&H insurance

• all direct marketing channels seem to be suitable and successful if:

 used systematically and consistently
 key success factors are observed
 symbiosis with other distribution channels is achieved

• most frequently used methods are

 direct mail to existing insurance clients
 direct mail to related Group portfolios like pension fund and banking clients
 telemarketing; inbound/outbound call centre
 e-mail
 SMS
 internet as active and passive direct sales channel

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Cost efficiency and added value
to other distribution channels

• some US studies suggest that direct channels generate new insurance products 8 –
15% cheaper than agent sales force
• in Germany some direct insurers offer specific products up to 50% cheaper than their
traditional rivals (term life, auto TPL also thanks to segmentation)

I prefer to see direct marketing as complementary distribution channel for insurance

markets in CEE region and not as competition to traditional sales channels!
 generate additional business in cost effective manner
 often low premium business < 100 Eur. which cannot be produced in cost effective manner by
intermediaries
 efficient cross-selling of commodity insurance products to other Group portfolios (non-life, health
insurance, pension fund, bank)
 some clients simply prefer to buy direct (10-20% growing)
 generate leads for agents
 improve persistency and client loyalty
 allow agents to concentrate on acquisition of new clients and on sizable sales
 pre- and post sales activities

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Critical success factors

1. targeted client base

 life insurer
 pension provider
 general insurer (non-life portfolio)
 credit card provider
 savings bank
 ..........
 consumer loyalty plans
 utility companies

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Critical success factors

1. targeted client base

2. high esteem and recognition
3. complementary and supported by agents, brokers, bankassurance
4. simplicity (KIS!!! – offer, product, how to reply, how to buy, how to pay,
how to clarify – all this in 5-10 minutes)
5. segmentation (before first campaign and for following campaigns)
6. step by step approach (increase offer and product complexity, higher
price)
7. always targeted and personalised, affordable and simple to buy
8. and many more small direct marketing secrets

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Step by step approach

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Implementation phases of successful
direct marketing strategy

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 Practical example of a mailing campaign

timing in months
Target
1 Population
100,000

3 Initial Product Initial Product

10,000 (10%) 90,000 (90%)

Re-mail #1 Re-mail #1
Increase Offer Increase Offer
9 Initial Product Initial Product
3,000 (30%) 7,000 (70%)
5,400 (6%) 84,600 (94%)

Re-mail #1 Re-mail #1 Re-mail #2 Re-mail #2

Further Product
15 Increase Offer Increase Offer Initial Product Initial Product
600 (20%)
1,260 (18%) 5,740 (82%) 2,538 (3%) 82,062 (97%)

Pool of 18,000 clients who WILL buy direct in future

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Financing and cooperation with reinsurers

1. direct marketing should be complementary distribution channel to

traditional ones
2. it can immediately contribute positive earnings
3. feasibility study must include such cash-flow projections
4. results of mailings and telemarketing on own client basis are well
predictable
5. some professional direct marketing companies run entire projects from A
to Z and even cover some or all marketing expenses
6. they often cooperate with reinsurers who then pay their fees in exchange
for reinsurance
7. reinsurer would typically agree a quota share treaty on business generated
by defined direct marketing campaigns
8. you may prefer not to reinsure on terms which allow reinsurer to cover
some or all marketing expenses and fees of the direct marketing agency
9. than the break even for insurance company may be moved (usually to 3rd -
5th year)

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Questions and answers

thank you for your attention and active contributions!

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