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  1. 1. Innovation and Distribution Osvaldo do Nascimento Taipei, Taiwan July, 2008 International Insurance Society, Inc 44th Annual Seminary V6 – 30/06/08
  2. 2. <ul><li>Brazil: - Prepared to develop its Insurance Industry </li></ul><ul><li>Insurance Market - Need of Growing </li></ul><ul><li>Information Technology to develop insurance sales </li></ul><ul><li>Micro-insurance: Definition and Challenge </li></ul><ul><li>“ Brazil Case” – CRM and Life Insurance Sales at Itaú </li></ul>
  3. 3. Brazil Area (km 2 ): 8,511,965 GDP 2007: US$ 1,3 trillion Population 2007: 191.8 million About Brazil...
  4. 4. Conditions to Develop the Insurance Industry in Brazil <ul><li>Inflation under control </li></ul><ul><li>Wealth distribution </li></ul><ul><li>Market Growth </li></ul>
  5. 5. Inflation in Brazil (INPC - % p.y.) Source: IBGE (*) 2008 until May (*)
  6. 6. Nominal and Real SELIC Rate (in 12 months, % p.y.) Interest Rate Source: Brazilian Central Bank 12.2% 0% 4% 8% 12% 16% 20% 24% 28% 32% Jan-97 May-97 Sep-97 Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Nominal Selic rate Real interest rate (ex post) Average real rate
  7. 7. <ul><ul><li>Net Debt </li></ul></ul>Source: Brazilian Central Bank Net debt of public sector (% GDP) -9.4 41.0 -15,0 -10,0 -5,0 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 abr-01 jul-01 out-01 jan-02 abr-02 jul-02 out-02 jan-03 abr-03 jul-03 out-03 jan-04 abr-04 jul-04 out-04 jan-05 abr-05 jul-05 out-05 jan-06 abr-06 jul-06 out-06 jan-07 abr-07 jul-07 out-07 jan-08 abr-08 Dollar denominated debt 30,0 35,0 40,0 45,0 50,0 55,0 60,0 Net debt Dollar denominated debt/GDP Net debt/GDP Apr / 2008
  8. 8. <ul><ul><li>Foreign Reserves </li></ul></ul>Source: Brazilian Central Bank US$ Billion 195,8 (*) (*) Apr, 2008 US$ Billion Investment grade by Standard & Poor’s Upgrades on April 30, 2008 – long-term foreign currency Brazil: BBB -
  9. 9. Source: ACLI Fact Book, 2005 Mutual Fund Companies Life Insurance Industry Robert A. Kerzner, President and CEO of LIMRA International presented this slide during the LIMRA 2007 Annual Meeting in Boston last October.
  10. 10. And more… According to LIMRA , 60% of consumers in the USA say they prefer to buy “face-to-face”. (*) But , to be physically present to sell “face-to-face” nowadays we have to consider: (*) Trillion Dollar Baby, LIMRA International, 2005 So, we can be available, but not physically present, offering the most recent technology to interact with clients. <ul><ul><li>Costs of transportation </li></ul></ul><ul><ul><li>Traffic jam into big cities </li></ul></ul><ul><ul><li>New stile of life </li></ul></ul><ul><ul><li>Face-to-face preference </li></ul></ul><ul><ul><li>Personalized approach </li></ul></ul><ul><ul><li>Opportunity to establish relationship </li></ul></ul>X
  11. 11. 1.4 billion Internet users worldwide! Source: Internet World Stats Brazil: 46.2 million
  12. 12. Wealth Distribution in Brazil Bolsa Família – a Brazilian program to reduce the poverty <ul><li>11 million families supported by Bolsa Familia </li></ul><ul><li>45 million people are covered </li></ul><ul><li>US$ 6.8 billion * is the budget to 2008 </li></ul>(*) US$ 1,00 = R$ 1,597 – 06/30/2008 Mr. Luiz Inácio Lula da Silva (President Lula) President of República Federativa do Brasil
  13. 13. 15% 15% 18% 34% 36% 46% 51% 46% 39% 2005 2006 2007 Source: Ministry of Finance - Research IPSOS (O Estado de São Paulo, pages B16, 03/30/2008). Class A/B Class C Class D/E Wealth Distribution in Brazil More than 86 million people Changes in the population distribution by classes
  14. 14. Micro-insurance Micro-insurance is a type of insurance with low premiums developed to protect low-income people against specific risks. As the premium price is very low, there is a need of a large scale to allow its economic viability and one important issue is to define the distribution model to be adopted by insurers. In Brazil SUSEP (the Governmental Supervisor) and FENASEG (the insurance market institutional representative) are working hard to create the adequate environment to develop the micro-insurance. Of course, some partnerships will be relevant to sell micro-insurance, like utilities companies (electricity and gas bills), retail market, credit cards providers and financial institutions. China, India and Russia have significant experience in micro-insurance distribution, but Brazil certainly will be a expressive player in this business considering its technological structure provided by the financial industry and specialized insurance brokers developed inside the communities. Challenge! Regulatory changes…
  15. 15. INSURANCE COMPANIES BROKERS AGENTS DIRECT SALES BANKASSURANCE FINANCIAL ADVISORS CLIENT Distribution Players at Insurance Industry Mobile Phones (SMS & 3G technology) Internet Call Centers Financial Services Providing the distributors… … with high technological tools 122 million of mobile phones in Brazil (1) 46.2 million of internet users in Brazil (2) and 99% of Income Tax Declarations delivered by internet (3) 166,773 ATM’s (5) 18,308 Bank Braches (4) <ul><li>Source: ANATEL – Brazilian's Telecommunications Agency </li></ul><ul><li>Source: Internet World Stats – Dec/2007 </li></ul><ul><li>Source: O Estado de São Paulo, 04/may/2008 – Mrs. Renata veríssimo, Jornalist </li></ul><ul><li>Source: Tribuna do Brasil, 28/may/2008 </li></ul><ul><li>Source: Research “O setor bancário em números” by FEBRABAN – Brazilian's Association of Banks – Dec/2007 </li></ul>
  16. 16. Experience of Itaú in Segmentation and Distribution <ul><li>Key Information (*) : </li></ul><ul><li>2 nd largest financial institution in Brazil </li></ul><ul><li>2,594 branches </li></ul><ul><li>11.2 million current account holders </li></ul><ul><li>US$ 138.7 billion** billion in AUM </li></ul>(*) March, 2008 (**) US$ 1,00 = R$ 1,597 – 06/30/2008
  17. 17. CRM Environment CLIENT Internet ATM Video Phone E-mail SMS Mailing Insurance Products Insurance Products Insurance Providers <ul><li>Brokers </li></ul><ul><li>Agents </li></ul><ul><li>Financial Advisors </li></ul><ul><li>Insures </li></ul><ul><li>Banks </li></ul><ul><li>Partners </li></ul>Stimulation Interaction Insurance Products Service Interactive Providers Material prepared by Banco Itaú, Brazil
  18. 18. Post-Sales Valuation Segmentation Control of stand-by Contacts Policies for Product-Channel 2 Elected Customers to offers 1 Sales Probability Models Sales Optimization Budgets/Scenario, Capacity Planning 7b Warnings optimization Algorithm 7a Customers CRM Feedback Registers 3 Potential Offers Basket for each Customer  % (Stimulated x Controlled) $ post-sell <ul><li> % x $ = </li></ul><ul><li>Potential stimulations </li></ul><ul><li>Valuation </li></ul>Products Uses (renew cancel, attrition, up-sell, etc) Stimulation feedback (acceptation/refuses) Operational Return (no-call, phone and address actualization and signalization good/bad) Performance Manage Customers Feedback Feedback analysis to support the Correct Value Proposition (price, product, channel, communication/script) Warnings and Telemarketing Committees Bureau 4 5 6 Control Groups Feedback (to determine  Stimulus) Objective:  Total Valuation Maximization Channels 8 Intranet accompaniment / alert triggers 9 CRM Operational Platform DW CUSTOMER Telemarketing Bankline Direct Mail e -mail Telemarketing ATM Bankline Bankfone Cashier Branch Valuation João Crediário - 281 PPI – Tomadores Renda < R$500 Cartão - Tomadores Renda < R$500 Residência - Tomadores Renda < R$500 Mini PIC - Tomadores Renda < R$500 PIC – Tomadores Renda entre R$500 e R$1.000 PPI – Tomadores Renda entre R$500 e R$1.000 Cartão – Tomadores Renda entre R$500 e R$1.000 Residência – Tomadores Renda entre R$500 e R$1.000 Mini PIC – Tomadores Renda entre R$500 e R$1.000 Valuation João Crediário - 281 PPI – Tomadores Renda < R$500 Cartão - Tomadores Renda < R$500 Residência - Tomadores Renda < R$500 Mini PIC - Tomadores Renda < R$500 PIC – Tomadores Renda entre R$500 e R$1.000 PPI – Tomadores Renda entre R$500 e R$1.000 Cartão – Tomadores Renda entre R$500 e R$1.000 Residência – Tomadores Renda entre R$500 e R$1.000 Mini PIC – Tomadores Renda entre R$500 e R$1.000 Custo de Venda Valuation 500 375 250 125 0 Material prepared by Banco Itaú, Brazil
  19. 19. Filters: Customer File Quality and Contact Restrictions 100% Active Customers & Prospects 31,5% Elect for Telemarketing 65,2% Elect to Offers Unique Selection Optimization CRM Policies 24,7% Sent to Operation 19,6% Effective Contact 15% Conversion (Sell) $ - Results (Valuation 7 years) <ul><li>Relation Customer-Channel saturation </li></ul><ul><li>Relation Customer-Product saturation </li></ul><ul><li>Preferred Channel to buy </li></ul><ul><li>Profile: Investor, Mixed, etc. </li></ul><ul><li>Product propensity </li></ul>CRM Feedback for each Customer Modeling  CRM by Customer / Product / Channel CRM x Valuation 50% effective Call Operational Optimization Workflow  Filters: Elect to Offers and Standby Policies Material prepared by Banco Itaú, Brazil
  20. 20. 2008 (Jan to May) 2007 30% 70% 27% 73% Sales by electronic stimulation (1) Sales by “face-to-face” (2) <ul><li>ATM, Internet, Bank Cashier and Telemarkting </li></ul><ul><li>Sales Team and brokers </li></ul>277,000 646,000 115,000 312,000 Experience of Itaú in Life Insurance Sales (Number of individual polices sold) Material prepared by Banco Itaú, Brazil