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Riding the Whirlwind

Strategic Interactive Marketing in Insurance - Executive Summary

This report is written in the form of a Press Release

29 April 1997

Today, Managing Change publishes a major report into the application of the new interactive mediums within the insurance industry. The mediums include kiosks, the telephone, personal data assistants (PDAs), interactive and web TV, e-mail, and others.

The report is the culmination of many months of research involving interviews with marketing manager in major UK insurers and bancassurers, together with reviews of the media, academic papers and books. Circulation is initially restricted to contributors and supporters.

Riding the Whirlwind looks at the visions of Don Peppers and Martha Rogers (1-to-1 Marketing) and Joseph Pine (Mass Customisation). It reports on the changing social and political scene that is leading to new business models, and on the views of the interviewees to these two concepts. In addition to describing the application of these new mediums to realising these visions, the report also provides practical suggestions for their implementation.

Executive Synopsis

Society is changing rapidly, with people having to adopt new patterns of behaviours. Whilst technology is an agent of change, it also provides enabling solutions, and there are business opportunities in helping customers. Customer's use of the new mediums is increasing their expectations from businesses.

For insurers, the current battle ground is direct sales, especially telesales. Consumer confidence in these direct mediums will see them go on to embrace home shopping and entertainment on-demand, and then home banking and other financial services.

Relationship Marketing is still an objective but one that is getting more difficult to achieve. Companies saw 1-to-1 Marketing as an ideal, but thought it too difficult and non profitable. They appear to be locked into the mass market paradigm.

Mass Customisation seeks to provide cost effective 1-to-1 Marketing within mass markets, and these new interactive technologies are an important enabler. Insurers feel it will become more relevant as customers focus on added value.

Despite concerns about embracing the new delivery mediums too quickly, larger companies are making substantial investments in pilots. Favourite mediums are telesales (well underway), followed by kiosks, Interactive TV, and the Internet. Smaller companies are more cautious, believing they can catch-up should consumers enthusiastically accept the new mediums.

One concern of interviewees is their customers' financial skills and knowledge. Many insurers are in the mass market. On a Market Segmentation model they place most of their customers between Financially Unaware / Unsure and Financially Aware / Unsure. They agree the general trend is towards Financially Astute / Sure (where some would prefer to be now!).

The new mediums - Interviewee's and the general market's views:
 

• Companies are using postal mail in sophisticated ways and it will continue to be an important part of the communications mix.
• Fax, Pagers and PDAs have their roles where time is critical. PDAs will become ubiquitous.
• CD-ROMs are useful for delivering volume information, supplemented with more up-to-date information via online access.
• The large financial service providers are the most committed to kiosks although other interviewees thought kiosks have limited applicability.
• The growth and liberalisation of telecommunications is being exploited by companies. They are adopting new business models to serve global and local customers around the clock.
• Many interviewees are enthusiastic about Interactive-TV because the cable and satellite expansion will bring hundreds of new channels and 2-way interaction to a mass audience.
• Web-TV is an easy to set-up and use consumer device that receives TV programmes and allows access to the Internet. In the US it has been enthusiastically received.
• E-mail is a universal and ubiquitous facility that is likely to become widely available through public kiosks, Smartphones, PDAs, etc.. Already there is most concern by interviewees over their companies' poor handling of customer's e-mails.

Distribution - Interviewee's views:

The World Wide Web has caught the imagination of many people. The attractions for businesses include the professional standing of many of the users, and the extremely low transaction costs. Never-the-less, many interviewees were sceptical as to consumer take-up in the mass market. Many also find their own companies' Web offering disappointing.

Those distributing via brokers were sensitive to communicating direct to customers but never-the-less, they thought it important to use and understand these new mediums.

Making the change:

Serious pilots are costing in the order of £0.25m to £0.5m with most seeing their pilots as a learning exercise. Some are "dabbling" in case it becomes big.

Insurance companies are ill placed to handle these new mediums but most see them as complementary to the way they do business, rather than changing fundamentals.

Recommendations and Key Conclusions

• Strategic Interactive Marketing needs to be customer, not technology, driven.
• Vision and frameworks help to avoid fragmentation and wasteful developments in this unpredictable environment.
• Relationship Marketing needs a new step-by-step approach that promotes two-way dialogue, understands real needs, and develops trust. Those with strong brands have an edge.
• Consumers are using the new mediums to support a Pull strategy. Companies must regain the initiative by using new Push techniques to direct consumers.
• All the interactive delivery mediums need including, and they must be used in an integrated way. This requires co-ordination, both within organisations and with distributors and suppliers. Customers should have a choice of which medium to use.
• An Architecture helps to turn vision into reality. At a high level, it is likely to consist of front-end delivery systems, back-end customer databases & legacy systems, and a middle "glue" layer. Other key components of the architecture include:
  • a product metabase.
  • customer and policy databases based on Object Technology.
  • use of Business Objects as the principal components.
  • processes that strike a balance between automation, flexible response, and ROI.
  • communications database to record all customer interactions.
  • use of marketing rules to trigger unique and targeted messages to customers when specific events occur.
  • a middleware to link the systems and to distribute the components.
  • a robust and secure telecommunications infrastructure.
     
• Developing an architecture is a major undertaking but "off the shelf" adaptable insurance frameworks are available.
• An incremental approach to implementation is recommended and it may be necessary to take a long term view. Risk management and active project management are vital.
• Effective use of the new mediums requires an agile and responsive organisation. The management style is likely to be a mixture of self management and task management. Network structures and a learning environment are key organisational features.
• Partnerships and collaborative ventures provide access to the various required skills.

The report's comprehensive Implementation section provides practical ideas for strategic interactive marketing. It includes the SIM framework based on 3 cycles: the Relationship Cycle, the Purchasing Cycle, and the Communications Cycle.

Editors' Notes

The 150 page report is initially restricted to those companies who contributed to the study. In due course the report may be made available on the World Wide Web.

Contributors to the study were:

Insurers and bancassurers:

Abbey National, Friends Provident Life, Nationwide Building Society, Norwich Union, Prudential Corporation, Royal Sun Alliance, Sun Life Assurance, Sun Life of Canada, TSB General Insurance, TSB Life & Pensions, Woolwich Building Society, Zurich Insurance.

Suppliers:

IBM Insurance Europe, Interactive Financial Services (IFS), M&G Reinsurance (now part of Swiss Re), NCR Financial Systems and NCR Knowledge Lab.

Supporting:

South Bank University, TriReme International, Talmage Consultancy Services.

References:

1-to-1 Marketing is accredited to Don Peppers and Martha Rogers. Their two main books are:
 

• The One to One Future, Piakus, London (Pbk), 1994
• Enterprise One to One, Currency, New York, 1997 (UK publication is imminent)
   

Mass Customisation is accredited to B. Joseph Pine II. His main book is:
 

• Mass Customization, Harvard Business School Press, Boston, Mass., 1993.

[Overview] [Concepts and Principles] [Distribution Issues]
[Behaviour Analysis and Behaviour Models]
[Business Rules Approach] [SIM Brochure]

[SIM Overview] [One to One Marketing] [Mass Customisation] [Interactive Mediums] [STEP Analysis]
 [SIM Executive Summary] [SIM Report] [SIM Project] [SIM Framework] [SIM Methodology] [SIM Illustrations] [SIM Links]

[Key Information & Resources] [Guest Contributions] [List of Support Topics] [What's On]

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