Managing and Leveraging Existing and Emerging Channels DIRECT Pojistovna Case Study

DIRECT Pojistovna Strategic Concept Addresses the New Customer Needs

Insurance Strategy and Channel Distribution Excellence Forum 17 th & 18 th of September 2009, Vienna

After Lunch Digest

Viral campaign „Car thieves“

Viral campaign „Car thieves“

Objective:

• buzz around DIRECT brand (positive connotations in public; people to send its friends/relatives the link; reach min. 40.000 viewers on YouTube.com; minimum costs) • learn how sales performance of viral campaign works (reach 2times higher daily visits on our website at the peak of the campaign, track conversion rates)

Form:

5 videos placed on YouTube.com (not branded, after 1 month branded).

Message:

„It is easy to theft your car. Much easier is to arrange an insurance for your car with DIRECT.“

Results:

• Costs only 2.000 EUR • Cca 2,5 million viewers !!! saw videos on YouTube.com

• • Daily visits on our website 9times higher than usual daily average (9.000) Main TV channel (TV Prima), main dailies, main radios and key internet domains broadcasted at least some information about theft prevention commented by Czech Police representatives and providers of antitheft tools.

Awards for „Car thieves“

The unconventional informational campaign of DIRECT Pojistovna gained the acknowledgement of not only Czech internet users, but also of the jury members of a series of prestigious competitions both domestically and abroad.

Red Apple 2008 (Russia)

– 3x Grand Prix, 4x gold

Louskáček 2008 (Czech Republic)

– 1x Grand Prix, 1x gold, 2x silver

Golden Drum 2008 (Slovenia)

– 3x silver

Méribel (France)

– 1x Grand Prix, 1x gold

Agenda

After lunch digest Who we are Internet Pricing Product Innovation CRM & Segmentation Innovative communication

Who we are?

DIRECT Pojistovna is owned by one of the oldest and biggest British insurance group - RSA Insurance Group Plc.

Global Operations in 29 countries and a network in over 130 20 million customers worldwide The UK’s largest commercial lines insurer The UK’s third largest personal lines insurer MoreTh>n – the UK’s third largest direct insurer Sun 1710 Royal 1845

Who we are?

DIRECT Pojistovna operates on the Czech market Population: 10 467 542 Car registered: 7 091 963 Personal cars&vans: 5 102 812 Households: 4 450 000

Who we are?

DIRECT Pojistovna was founded in May 2007 i.e. 2.5 year of activity on the market Currently we offer motor vehicle home and civil liability The only purely online insurance company on the Czech market. Direct non-physical distribution channels only: Call center Internet

2007 2008 2009 2010

Key Milestones in Product Launches

DIRECT reason for a change.

Don’t thing of nonessentials, you have better think of more advantageous insurance contract.

Leader on the direct insurance market: To gain 250.000 satisfied clients by 2013, achieve great financial results and excellent reputation in insurance sector.

Bright Ideas Brilliant Service Getting The Job Done Doing The Right Thing Positive People Promise Vision Values Dynamic and innovative insurance company, which simply, fast and reliably offers a budget wise products and services of non-life insurance for responsible clients.

Mision

Key KPIs Development - Index

DIRECT Pojistovna Strategic Concept Addresses the New Customer Needs

Customers are changing as fast as the technology – insurers must align their market strategies: channel, pricing and product to meet the unique needs of targeted customer segments

Relative strength of each network in 3 year

•Relative ability of each network to deliver against the top selection criteria (price, product, brand) •Internet scores so high in terms of price and product that it can overcome concerns customer may have about brand/issue

Preferred Manner of Contracting Insurance 2Q09 – Czech Republic

Contracting of MTPL is still dominated by personal contact at a branch. More than one in four respondents named the Internet as the first preferred way of contracting MTPL. Overall, MTPL was contracted by 38% of people on the Internet and 16% of drivers did so over the phone.

in % FIRST NAMED OPTION At branch in person

How would you like to contract MTPL?

ALL NAMED OPTIONS FOR MTPL CONTRACTING At branch in person 52 On the Internet On the Internet 28 Through mediator \ insurance agent Over the phone 7 10 Over the phone Through mediator \ insurance agent Contract will be concluded by a lease company or a dealer 2 Other place 1 DKNA 1 Contract will be concluded by a lease company or a dealer Other place DKNA

base: n=650 [all respondents , 2Q 09]

in %

Contracting Manner of Insurance – Year of Purchase 2Q09 At branch in person On the Internet

How did you contract MTPL for your latest car?

Could you please remember when it was?

Over the phone Through mediator \ insurance agent Contract will be concluded by a lease company or a dealer DKNA Other point of sale 1 13 13 1 19 3 13 21 2 11 26 4 3 15 9 4 11 4 20 16 6 67 58 56 47 45 2005 and earlier 2006 2007 2008 2009

Change of Customer Shopping Behavior - Internet Channel

Important non-life personal products becomes commodity Customer value the Internet, because it offers wider access to information than physical networks, allows for a better comparison of policies and services and offer higher convenience and simplicity.

34% of customers said they intend to buy their non-life policies online in 3 years; 28%-life insurance policies (WIR 2008)

Change of Customer Shopping Behavior - Internet Channel

11% of policies (life & non-life) are purchased online today (WIR 2008) Nearly 40% of non-life customers have switched providers in the last 5 years >60% of motor insurance policies in UK are purchased on-line today >13% of motor insurance policies in the Czech Republic are purchased on-line today

12 10 8 6 4 2 0

Change of Customer Shopping Behavior - Internet Channel

Czech Republic: # of insurance companies offering individual products on-line

Internet Vision

DIRECT Pojistovna Internet

Internet Strategy Internet strategy building bricks

Strategy

 DIRECT as a preferred choice for on-line arrangement of an insurance prod./serv.  „New style of insurance matching the new style of living.“  Communication shift toward internet - SEO, PPC, emailings, promotions  Websale redesign to consumer faster & simpler flow/shopping  Enhance the client zone (customer selfservice zone) to up-sell, cross-sell  Increase CASCO and riders share on new websale policies  Maximize potential through Callbacks, Websale follow ups, Website soft sell content Continuously

TRACK

&

ANALYZE

bottom-line results within a set process Drive more

TRAFFIC

recruited from our target group through marketing communication vehicles Enhance

ENGAGEMENT

via content & tools appropriate to the target groups Demand

INTERNAL & EXTERNAL SUPPORT

with defined service level agreement (SLA) Make them respond to call to action and increase

CONVERSION

through testing and optimization

3 key areas of focus how to fulfill Internet strategy

   Online media Website Websale

Most of the customers see price as key criteria when buying insurance

Declared Significance of Factors for Arranging an Insurance with DIRECT Pojistovna

Sales Channels 100 75 77 77 72 81 74 67 CC MTPL CC CASCO Websale MTPL Websale CASCO Settlement CASCO 50 42 38 37 51 49 46 25 20 23 19 13 8 23 5 5 7 5 7 4 7 7 7 8 15 9 4 4 8 3 7 4 0

Insurance policy price The speed with which the insurance was taken out Attitude of the insurance company employees while contracting the insurance Range of additional services and supplementary insurance Extra services/insurance that were included in the basic insurance price free of charge Gift I have received The most important factors when deciding whether to conclude a contract with DIRECT insurance company are the price and the speed with which the insurance is arranged.

Most of the customers see price as key criteria when buying insurance Non-live insurance products like car & household insurance become commodity for which price is prime customer concern. Internet and call center channels has created environment in which customer have time and information to shop for the right price

DIRECT Pojistovna Pricing Model

Price/Premium structure gross premium = risk premium + loading where

loading = direct costs l. + indirect costs l. + profit

customer price sensitivity = Important factor for profitability

DIRECT Pojistovna Pricing Model

   Sophisticated pricing models based on GLM (Generalized Linear Models) enable adjust prices according to the actual risk involved. Our model has more than 10 variables. Targeting pricing strategies also serves as profit vehicles  Individual tailor made pricing reflecting individual risk  Tariff structure and parameterization reviewed every quarter in order to reflect the last known claims experience  Official, publicly available claims database used in individual policy price setting

DIRECT Pojistovna Pricing Model

Sophisticated pricing models enable us: – Attract lower-risk customers – Drive higher-risk customer to competitors Challenge at early stage of portfolio development: – Drive away high-risk customer before low-risk customers have been acquired

Innovation as driver of DIRECT Pojistovna Products and Services Differentiation

Value of potential product synergy for customers Product bundling/one stop shopping

•2/3 of customer would buy multiple products from one provider if it were cheaper than individually priced products. 1/2 say convenience would encourage them to buy multiple products.

•Current promo campaigns

Innovation as driver of DIRECT Pojistovna Products and Services Differentiation Bad road conditions

Insuring the damage cased by the bad road conditions such as road holes for free

Launched 2007

Accident MINI for motorbikes

Launched 2008

Limit for each claim equals 50 % of sum insured, i. e. providing cheaper casco insurance covering fully small damages

Summer assistance for cars

Launched 2008

so called cars travel insurance meaning services such as emergency driver, emergency cash or travel advice

Child seat theft

Adding child seat/shell as standard equipment paid for if vehicle theft insured

Launched 2008

Multicar discount – “My fleet product”

Launched 2008

If the same client insure the another car with DIRECT, automatically gains 15 – 20 % discount

Insurance for electro bikes

Insuring pure electro bikes for MTPL and CASCO while CASCO no other insurer provides

Launched 2009

Garden and balcony insurance

Insuring plants, garden furniture and other garden equipment (e.g. grill) against natural hazard and vandalism for free

Launched 2009

MGM

Launched 2009

Recommending/loyalty program – if someone recommends DIRECT and the insurance for a new client is withdrawn, than the new client as well as recommender gains 1 months of the policy for free. (1 person can earn up to 12 months (whole year policy for free!)

Product Innovation DIRECT

“Copying” of bonuses

Launched 2009

offer for good drivers. Possibility to copy bonuses from MTPL to CASCO.

Handbag insurance

insuring women handbag for all risk if women present in the car

Launching autumn 2009

DIRECT Pojistovna Awarded The Most Dynamic Insurance Company of the Year 2008

Segmentation Background

Key segmentation objective is increase company’s profitability by: – Efficient customer acquisition (↑ response rate, ↓ cost per acquisition) – Efficient sales process (↑ average premium, ↑ product per customer) – Increased loyalty/retention (keeping most valuable customers, ↓ cancellation, ↑ renewal rate)

Segmentation Evolution

Actuarial

– Hard data collected while closing policies – (Age, Driving experience, Region, Car make, Vehicle age,…)

Behavioral

– Adding the knowledge gained in the market research – Mass campaigns derived from underwriting rules Actuarial / Technical segmentation 360° degree view Behavioural / Demographic al

360 º degree view

– Segmentation full launch – Integration of global consumer profiles & RSA proprietary know how – Adaptation to Czech market consumer and insurance usage habits and attitudes using advanced business intelligence tools – Impact on Communication, Distribution, Product portfolio, Pricing, Service levels – – Tightly related with Customer Management/CRM Test & learn approach – Campaigns targeted to Women (Handbag insurance); Men over 50 – First pilots of micro campaigns (My Fleet in satellites) in test & learn approach

„Your neighbor“ online campaign to support property insurance lunch

Objective:

– Communicate connection of DIRECT with home insurance product in original and creative way with limited budget – Create buzz amongst target audience (male & female 30-50 YO) – Drive higher sales performance than in 2008 viral campaign

Concept background (CZ specific):

– Everyone is interested in what neighbors are doing …

Form:

– DIRECT branded microsite with fictive database of neighbors with connection to Google Maps („fake“ localization of neighbors) – 6 videos for online published on micorsite, YouTube.com

– Functionality of Facebook sharing – Campaign supported by online banners (display camp.)

Overlay banner on www.tvujsoused.cz home page

Example of profile of your neighbor (fictive)

Microsite www.tvujsoused.cz results (June1 – August 31, 2009)

171.000 unique visitors 1,5 mio pageviews Average time spent on microsite more than 5 minutes (seeing min. 2 videos) Only 9% bounce rate (those who clicked but not stayed with the site)

Microsite delivered:

– far less visitors on our website compared to the viral campaign, BUT – reached much higher performance indicators (not only home insurance websale visitors and quotations, but also car websale 12 times higher than for viral camp.; 10times higher sales performance than with viral camp.) –

Customer loyalty & Satisfaction

Customer satisfaction index (CSI) Customer loyalty index (CLI) Positive solution unites Watch the inclination to churn

The customer satisfaction index is higher for customers who took out an insurance in comparison with customers involved in an insurance settlement. With loyalty this ratio is reversed.

The total satisfaction (CSI index) of DIRECT customers is on average higher if compared with other banks and insurance companies

Thank you