5 darren thomson

Product Design 101: Developing Products That Cater to Client’s Needs

Darren Thomson Regional Head Strategic Channel Development Asia

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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Objective

Discuss the strategy behind designing products for the client

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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.“

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Product→Solution Promotion→Information Price→Value Place→Access

Constructive criticism helps marketers adapt offerings to meet changing customer needs.

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Product Positioning Influencing Factors for Product Design

Existing Product Range

Sales Competence of Distributor

Profitability Fee Income

Product

(Up-front and trail)

Persistency

Competition (Insurers and Fund Houses)

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Technology (POS, Underwriting, MI, Web-site)

Positioning

Marketing / Aftersales Service Facilities

Clients’ Needs / Target Group

(Tax System, ILAS)

(Clients)

Regulation

Product Strategy from Cradle to Grave…….

Starts with the Client

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Ends with the Client

Life expectancy when state pensions were first introduced…matching needs to expectation!! “ 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 10

Singapore philosophy…

“ 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”

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Product Strategy Actuary’s Role

Deals with the financial impact of risk & uncertainty

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Product Strategy Distributor’s Role

Sells, solicits & negotiates for compensation

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Product Strategy Client’s Role

Achieve financial security & independence for self & dependents

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Product Strategy Different Stakeholder’s Point of View Actuary •

Risks, Pricing, Experience, Profit

Distributor •

Features & Benefits, Market Competitiveness

Client •

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Funds for Major Illness Protection, Peace of Mind

Product Strategy Different 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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The Customer Franchise Understanding the customers’ product and service preferences drives the creation of offers and needs-based approaches that are relevant and seamlessly integrated

Secure my future & reduce my risks

• Lifestyle needs • Security • Life-stage needs • Long-term relationship

• Household

budgeting • Financial planning • Asset management • Tailored products • Financing

Give me peace of mind

• Retirement planning • Emergency planning • Disaster planning • Best of breed product • Charges transparency • Fair choices • Trust and integrity • Demystified guidance

Save time for me

• Convenience • Non-financial help • Complete delegation for managing assets and liabilities • One-stop shop • Anytime, anywhere • Prompt service

Help me enjoy my life

• Flexible options • Non-financial needs

• Innovation • Financial planning • Prestige & exclusivity • Performance • Value for money

Simplify my life

• Account aggregation • Entrepreneur management • Long term relationship • Simple administration • Integrated services • E-payments • Product aggregators • Automated optimisers

Long term products require an ongoing relationship with the distributor and insurer and may require specialised servicing.

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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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Client Segmentation Client Life Stages

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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

Chart 3: Life Expectancy

Chart 4: Per Capita GDP (US$) 40000 30000 20000 10000 0 1970

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Source: Department of Statistics, Singapore

1980

1990

2000

2008

High Net Worth Market

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

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High Net Worth Market Asia-Pacific HNWI Wealth Distribution, by Market,2006 Australia, 6.00%

HNWI Wealth,2006 (US$ Billions)

China, 20.60% Hong Kong, 5.50%

India, 4.20%

Singapore, 3.80%

South Korea, 3.20%

Taiwan, 2.60% Indonesia, 0.80%

Other, 9.60% Comprised of 9 countries namely Kazakhstan, Malaysia, Myanmar, New Zealand, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam

Japan, 43.70%

Source: Asia-Pacific Wealth Report 2007 by Capgemini and Merrill Lynch

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• Others • Indonesia • Taiwan • South Korea • Singapore • India • Hong Kong • Australia • China • Japan

US$810 US$70 US$220 US$270 US$320 US$350 US$460 US$510 US$1730 US$3680

Total HNWI Wealth in Asia-Pacific Region = US$8.42 Trillion Asia-Pacific HNWI’s financial wealth forecasted to reach US$12.7 trillion by 2011

Mass Market 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)!

Wealth

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.

Hence, the number of mass affluent non-residents adults in Singapore will also grow!

* Wealth Management in Singapore 2007 by Datamonitor 24

Client Segmentation Assets Under Management

UHNW HNW

> USD20mio USD1mio to < USD20mio

Affluent

USD500k to < USD1mio

Emerging

USD100k to < USD500k

Mass

< USD100k

Based on AUM Sources: Credit Suisse Global Wealth Databook 2011, Cap Gemini & Merrill Lynch World Wealth Report

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Client Segmentation Life Stages Needs & Products

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Life Stage

Primary Need

Life Insurance Product

Young & Single

Asset Creation

Wealth Creation plans

Young & Just Married

Asset Creation & Protection

Wealth Creation Mortgage Protection

Married with Kids

Childrenâ&#x20AC;&#x2122;s Education Asset Creation Asset Protection

Education Insurance Mortgage Protection Wealth Creation

Middle Aged with Grown Up Kids

Retirement Planning Asset Protection

Retirement Solutions Mortgage Protection

Across All Life Stages

Health

Health Insurance

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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Product Positioning Alignment by Client Segmentation Multi-Channel Distribution Model Corporate (SME) RMs/ISs

HNW RMs/ISs

Retail Br Managers /RMs

Retail RMs/ISs

Telemarketing

Employee Benefits Key-men Insurance

Universal Life WM Products

Investment Linked & WM Products

Need-based Products

Low premium, high perceived value products

Privileged

Youth Strivers Achievers

High Net Worth

Life Stage / Value Segment

Mature

Manulifeâ&#x20AC;&#x2122;s product and distribution expertise positions us to support RHB in realizing its full financial services potential

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Product Range of Retail Banks

Equities Complexity

Funds

Investment

Business Financing

Credit Cards Mortgage

Bonds Savings Accounts

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Foreign Exchange

Current Accounts

Consumer Loan Loan

Insurance Offers a Third Dimension: Protection

Complexity

Equities Funds Bonds Savings Accounts Investment

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ir ty u c e S

Business Financing

Mortgage

Credit Cards Current Accounts

Consumer Loan Loan

Insurance Offers a Third Dimension: Protection Guaranteed Products with LA Complexity

Equities Funds Bonds

Unit Linked Assurance

ULA + Riders

Endowment Assurance EA + Riders

Savings Accounts Investment 32

Term Assurance Protection

Insurance Offers a Third Dimension: Protection

Term Ass. Complexity

Business Financing

Home Ins. Motor Ins.

Mortgage

Group Life Ass. Pensions Mortgage Assurance

Credit Life Consumer Loan Investment 33

Loan Protection Travelers Ins Protection

Product Positioning Case Study - Bancassurance Channel Product / SBU Credit Life (Shield) Fix SI or variable type

Credit Cards POS TM/DM

Mortgage / Motor Loan

Unsecured Loans

POS TM/DM

POS TM/DM

Deposits CA/SA/TD

High Net Worth Income

POS TM/DM

MRTA / MLTA Reducing or Level

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

TM/DM In Branch (offered)

RM/PB Insurance

TM/DM In Branch Insurance Specialist

RM/PB Insurance

Whole of Life

In Branch Insurance Specialist

RM/PB Insurance

Annuities

In Branch Insurance Specialist

RM/PB Insurance

PA and HIP Segment specific with or without ROP Critical Illness Covering 1-5 Specific illnesses Term Life With or without ROP Endowment Par or Non Par

SME

TM/DM In Branch (offered)

specialist

specialist

specialist

specialist

RM/PB Insurance

Universal Life

specialist

RPUL / SPUL Link to MAM or 3rd party funds with top up options Business Insurance Directors and Key Man policies 34

In Branch Insurance specialist

RM/PB Insurance specialist

Insurance Specialist

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Direct and Telemarketing Model

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Basic Marketing Style Follows Up On Value Proposition: Value-for-money, Simplicity and Convenience

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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FMCG Approach in Stores

â&#x20AC;˘ 20,000 units in 650 stores â&#x20AC;˘ Permanently displayed

Instant Products For Sale in Stores

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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Manulife Vietnam 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.

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Vietnam Womenâ&#x20AC;&#x2122;s Union (VWU) 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 Vietnamâ&#x20AC;&#x2122;s poverty reduction efforts 45

Micro-Insurance Project Background 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.

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Partnership – Manulife & Vietnam Women Union’s Signing of MOU

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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 â&#x20AC;&#x201C; 7th policy year onwards

No claim bonus: 100% refund of premium if no claim during benefit

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period

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

The meeting house was too small so some sat outside along the corridor

There was not enough seats so VWU members had to stand or sit on the ladder on the right hand side of the house.

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Customer Visits

At a customer's house..

On the way to a customer's houseâ&#x20AC;Ś

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Claim Cheque Delivery We are really bringing hope to a family that is so much in need of money.

Source: Saturday's Globe and Mail, published on Friday, Feb. 19, 2010 52

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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â&#x20AC;&#x153;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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ABOUT MANULIFE

Manulife Financial Strong & Diversified Businesses Asia

Canada • Individual Insurance • Individual Wealth Management • Group Benefits • Group Pensions

United States • Insurance • Long Term Care • Annuities • Group Pensions • Mutual Funds

Hong Kong, Philippines, Singapore, Indonesia, Vietnam, Malaysia, Thailand, Taiwan, China, Cambodia • Individual Life Insurance • Group Life & Health Insurance • Pension Products • Mutual Funds

Reinsurance • United States • Canada • Europe • Asia

Investments United States, Canada, United Kingdom, Japan, Australia, Hong Kong, Southeast Asia 57 57

Japan • Individual Insurance • Variable Annuities

Manulife Financial Competitive Strength

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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

Manulife Financial Strong Multi-Channel Distribution

Advisors

In-house Agents

Financial Planners

Independent Agents

Brokers

Banks

Wire-houses

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• Deep & growing relationships across multiple channels worldwide

Dealers

• 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.