Customer Management in Life Insurance


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Life Insurance industry has been witnessing low persistency (a policy's ability to be active and sustained premium payment)rate hence the proactive need for customer retention and maximizing renewal premium collection and need for monitoring the performance of intermediaries and agents could gain immense value from deriving highly usable recommendations.

The need for such inferences, importantly in a timely basis can't be more important than now as the rightful and the revised guidelines by the regulator ensures the need to minimize wrong selling, increased persistency and performance of all the stakeholders in Life Insurance to make business a flourishing one.

How did the evolving need of the industry coupled with constant change in market and competitive landscape was married and focused approaches were espoused through with tangible benefits on Customer Value Retention and Maximization & agent's performance improvement were met.

What are the recommendations from Sameer to individuals & enterprises who intend to devise their Analytical Vision for their respective organization, what are the areas to be considered before embarking such a journey

Published in: Economy & Finance, Business

Customer Management in Life Insurance

  1. 1. make connections • share ideas • be inspired India’s Largest Analytics ForumCustomer ManagementSameer SeksariaSenior Vice President – Business Retention and Sales SupportReliance Life Insurance Co. Ltd Copyright © 2011, SAS Institute Inc. All rights reserved.
  2. 2. Content… Industry Summary - An Outline - The Journey - The Developments - The Future Changes Expected - The Opportunity Reliance Life Insurance – An Organization Profile Challenges in Life Insurance Role of Data Analytics Customer Management in Insurance and our Approach Persistency – Our Approach and the ResultsCopyright © 2011, SAS Institute Inc. All rights reserved.
  3. 3. Industry Summary – An Outline Representing Life Insurance Industry • Life Insurance Industry regulated by the Insurance Regulatory and Development Authority (IRDA) • Life Insurance Industry opened up for Private players in the year 2000 • 26% FDI allowed in Life Insurance Companies • Currently 24 Life Insurance companies operating in India (including LIC) • Total Premium Collected by all life insurance companies during Apr11- Dec11 stands at about 72,000 Cr by issuing 2.7 Cr policies • Private Insurers market share in terms of premium stands at 28% • Penetration of the insurance industry, premium as percentage of the countrys GDP, has improved from 2.3 per cent in 2001 to 5.2 per cent in 2011.Copyright © 2011, SAS Institute Inc. All rights reserved.
  4. 4. Industry Summary – The Journey… India life sector performance review Nascent Stage: High Growth Stage: Growth Rationalization Stage: Stable Growth Build-out Phase Focus on market share Focus on breakeven Stage 10-20% p.a. PVT LIC 394 384premiums ( bn) New business 338 342 195 864 709 103 559 592 56 530 3 10 24 196 207 256 160 170 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 – 102% -18% 6% 22% 24% 118% 6% -11% 34% 22% LIC – 4277% 257% 155% 128% 84% 90% 74% 1% 12% 3% Private – 105% -15% 15% 35% 37% 110% 23% -6% 25% 15% Sector 4 Copyright © 2011, SAS Institute Inc. All rights reserved.
  5. 5. Industry Summary – The Developments Recent changes Impact in 2011 Impact in 2012 onwards ULIPs now more customer friendly Charges on ULIPs down Drop in distributor commission More balanced mix Cap on surrender charges Short-term impact on top line Improving persistency levels Products Longer lock-in period Expense Management critical Time-to-market critical Short-term and long-term impact Higher life cover amounts per policy Pension product effectively Operating efficiency is key withdrawn(1) Lower upfront commissions & Dominance of variable / low Revamp of selling practices Incentives cost channels Distribution Commissions to be disclosed Re-design of Agency model Agency productivity a Stringent guidelines on Referral differentiator Slowdown in last 2 years as against More focus on Traditional Structure / initial years of high growth Near-term lag (Protection) products Growth LIC likely to grow higher than LIC gained market share Distributor force to shrink private players in the interim Note: (1) Recent changes introduced guarantees on pension policiesCopyright © 2011, SAS Institute Inc. All rights reserved. 5
  6. 6. Industry Summary – Future Changes Expected Likely timing of Regulation Beneficial changes effected Maximum 26% currently Foreign Direct Likely to move from 26% to 49% Medium Investment Requires parliamentary approval No listed companies currently IPO norms Short IPO norms already approved Single tie regime currently Bancassurance Medium Multi tie regime proposed Life insurance products currently enjoy EEE status(1) Tax benefits status Proposal to move to EET(2) status by introducing taxation at maturity (for Short endowments and ULIPs) Current tax rate of 12.5% Tax(3) Medium Potential increase in tax rate to 30% proposed Beneficial Short - < 6mths Medium - 6mths to 2 yrs(1) EEE = Exempt Exempt Exempt status. Amount invested or contributed would be Exempt, the returns or the interest generated would be Exempt and lastly the final maturity amount would also be Exempt from tax(2) EET = Exempt Exempt Tax status - Amount invested or contributed would be Exempt, the returns or interest would be Exempt, but the final maturity amount would be Taxed‘(3) Potential implementation of DTC legislationSource: News articles, expert discussions Copyright © 2011, SAS Institute Inc. All rights reserved. 6
  7. 7. Industry Summary – The Opportunity Opportunity Structural positives India growth story Favourable demographics Rising income levels High savings rate Under penetration Insurance penetration in India is still very low(1) Protection levels are low compared to developed markets Distribution Introduction of multi tie-up for banks Improve agency professionalism and productivity With increasing internet penetration, Online channels will grow Product Push for higher protection element in products ULIPs becomes more customer friendly Untapped profitable market segments Huge potential – rural and health insurance Micro-insurance through MFIs, regional rural banks and co-operative banks Note: (1) On a per capita basis Copyright © 2011, SAS Institute Inc. All rights reserved. 7
  8. 8. Reliance Life Insurance – An Organization Profile Representing Reliance Life Insurance Co Ltd (RLIC) • RLIC is an associate company of Reliance Capital Ltd., a part of Reliance Group. • Reliance Capital is one of India’s leading private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. • RLIC partnered with Nippon Life Insurance, also called Nissay. Nissay is Japans largest private life insurer with revenues of about Rs 350,000 Cr (US$ 70 Billion) and profits of over Rs 12,000 Cr (US$ 2.5 billion). • Nissay is largest private life insurer in Asia and It is ranked 81st in Global Fortune 500 firms in 2011 • RLIC has large branch network with 1200+ branches across India with 1.9 Lakhs of Individual Agents working with usCopyright © 2011, SAS Institute Inc. All rights reserved.
  9. 9. Continued Strong Growth of RLIC Initial Entry(1) Present Key Performance Indicators FY 2005-06 FY 2010-11 Customer Base ( Issued Policies) 0.1 m 7.5 m Market Position in No of Policies (Pvt) 12 1 New Business Premium (Rs bn) 2 30 Market Position in New Business Premium (Pvt) 11 5 Total Premium ( Rs bn) 2 66 Assets under Management ( Rs bn) 4 179 No. of Branches 153 1,247 Note: (1) Acquired AMP Sanmar in Oct 2005. Name changed to Reliance Life in Jan 2006Copyright © 2011, SAS Institute Inc. All rights reserved. 9
  10. 10. Challenges in the Insurance Sector Challenges Sector & Company profitability Product & Customer Segmentation Analysis Near-term dip in business profitability Attrition/Retention Prediction Improving product mix, expense and persistency Gap Analysis in Product Mix management to offset profitability pressures Customer Service & Persistency Low persistency at private players Attrition/Retention Prediction & Win-back Strategies Effective communication Customer expectation for differential treatment Incentive & Commission Analysis Limited Service differentiation exist in Insurance industry Customer Satisfaction Analysis for customers and distributors Large number of “Orphaned policies” with little service support Distribution Agent & Sales Force recruitment Improving profitability and productivity of channels Agent Productivity Analysis Distributor attrition leads to Cross-sell and Customer Satisfaction Analysis Low customer satisfaction Customer Agent Association Analysis Low Cross-sell / Up-sell Sales Force Attrition Analysis Low persistency Difficulty in attracting talent for distribution Competition Competitor New Product Launch Impact Analysis Increasing intensity of competition for new business and Bench-Marking & Business Performance Analysis distribution channel acquisition Marketing Mix Analytics Potential new entrants Copyright © 2011, SAS Institute Inc. All rights reserved. 10
  11. 11. Role of Data Analytics in Insurance Industry • Customer Acquisition • Customer Management •Segmented sales approach •Attrition/Retention Prediction • Campaign Management •Lifetime Value Analytics •Marketing Analysis •Customer Segmentation Analysis •Customer Satisfaction Analysis • Channel Management •Win-back Strategies • Agent & Sales Force recruitment •Cross-sell / Up-sell •Productivity & Success Factors • Product Mix Gaps • Agent / SM Attrition •Product Identification Customer Customer •Incentive / Commission Analysis •Channel Profitability Management Acquisition Policy Underwriting • Risk Management • Claims Management • Fraud Identification Models Servicing & & Risk • Same Client Multiple policies • Claims Estimation Analysis Claims Management analysis • Portfolio risk management • Servicing Channel • Risk Assessment and pricing • Automation Opportunity Assessment • Selective Health Underwriting • Performance Analysis • Business Performance Analysis • Premium Trend AnalysisCopyright © 2011, SAS Institute Inc. All rights reserved.
  12. 12. Customer Management in Insurance• The business of insurance is to bring together persons with common insuranceinterests (a) sharing the same risks (b) collect the share or contribution (calledpremium) from all of them, and (c) pay out compensations (called claims) to thosewho suffer from the risks. Hence, It is important that •Insurer chooses right customers, Agents and other sales forces • Insurer launches right product mix • Also, Life Insurance is a long term contract, hence servicing the customer and managing the data for a longer period is very important Life cycle of a life insurance policy Policy Servicing period Pre - Sales Customer Maturity Acquisition Copyright © 2011, SAS Institute Inc. All rights reserved.
  13. 13. Changing Customer Expectations: Life Insurance Examples Pre- Privatization (1 State Company) Post Privatization (24 Companies) Banks, Brokers, Internet, Telemarketing, phone etc Purchase option only through Advisor and far wider range of products Basic Medical examinations Efforts on to make Medicals a good experience: mobile labs, home visits Generally no correspondence from either company or agent except for premium reminder Mailers from companies on products & services, greeting cards on birthdays, new year Payment in the Company Branch or to Advisor etc, reminders on premium, Phone calls from call centers, SMS, Emails, Welcome Calls Not much expectation except that Policy Document is received Payment at bank branches, SI on Credit Cards, Direct Debits, ECS, Drop Boxes, Internet, Kiosks, Pick Up Runners etc Policy Document to be received within 7 – 15 days, Premium Notice received, Lapse warning in advance, quick Claim payment, more awareness on Free Look cancellation, Surrender/ withdrawalsCopyright © 2011, SAS Institute Inc. All rights reserved.
  14. 14. Our Approach to Customer ManagementCopyright © 2011, SAS Institute Inc. All rights reserved.
  15. 15. Persistency Management – Our Approach Persistency drivers Actions Taken Customer education campaigns Market related Re-instatement campaigns & Interest waivers Renewal alerts sent on SMS, email, mail, IVR and available on portal ECS mandatory for monthly and quarterly modes effective October 2008 Process related Information to the customer on login/issuance on policy term and premium mode via SMS/welcome call Multiple renewal collection mechanisms – internet banking, online payment gateways, kiosk, mobile, branch, collection service, etc Awareness building through retention team meetings with sales and operations teams in the offices to drive focus. Also building awareness campaign thru e-mailers Field Force drivers Target setting for renewal collections for TMs and RMs Retention as one of key KPIs of the branch operations teams Contest for Ops, Sales, Distributors Source: Reliance Life Copyright © 2011, SAS Institute Inc. All rights reserved. 15
  16. 16. Persistency Modeling: Approach Predictive modeling: Predictive Modeling can be defined as an analysis of large data sets to make inferences or identify meaningful relationships, and the use of these relationships to better predict future events. It uses statistical tools to separate systematic patterns from random noise and turns this information into business rules, which should lead to better decision making The prerequisites for a effective model are: A clearly defined target variable, i.e. what the model is trying to predict The availability of suitably rich data set, in which at least some predictive variables correlated with the target can be identified A large number of observations upon which to build the model, allowing the abiding relationships to surface and be separated from random noise An application by which model results are translated into business actions Copyright © 2011, SAS Institute Inc. All rights reserved.
  17. 17. Persistency Modeling – Our Approach & the Results Model Performance : 84% Persistency Improvement : 10% Model Performance : 79% Persistency Improvement : 5% Customer Segment Model Performance : 67% + Product Variables Customer Segment + + Customer Vintage Model Performance : 57% + Product Variables + Agent Demographics Customer Segment + Customer Vintage + Orphaned Policies Customer Model Performance : 54% + Product Variables Service Experience Agent Demographics + + + Customer Segment Customer Vintage Orphaned Policies Customer Market Performance + + Service Experience Product Variables Economic Indicators Customer Segment Source: Reliance Life Copyright © 2011, SAS Institute Inc. All rights reserved. 17
  18. 18. Scoring & Segment based Campaign Design Segment 1 – Urban A Contract Segment Probability of Lapse Common Contact Processes Premium Notice, SMS & Email Customer Classification for Campaign Management High Net Individuals Persistency Experience Non High Net Individuals Persistency Experience Early Warning Early Warning High Moderate Low High Moderate Low Signals Signals Tele-Calling Tele-Calling IVR Calling IVR Calling IVR Calling IVR Calling IVR Calling IVR Calling IVR Calling IVR Calling IVR Calling Tele-Calling Tele-Calling Tele-Calling Tele-Calling Tele-Calling Tele-Calling Tele-Calling Runner Pick-up Runner Pick-up Runner Pick-up Runner Pick-up SM / Advisor SM / Advisor Follow-up Follow-up Source: Reliance Life Copyright © 2011, SAS Institute Inc. All rights reserved. 18
  19. 19. Credits RLIC Analytics Competency Center Partners Business Retention Analytics & Program Management SAS India Chander Mahalingam Amul Desai Raghavendran Kandaswami Senior Manager, Business Retention, Principal Consultant, SAS IndiaSenior Program Manager, RLIC Business RLIC Technology RainMan Consulting Kaizad Gazdar Kiran Kamat Chief Manager, Business Chief Manager, RLIC IT Program Krishna Kumar CS, Chief Analytics Officer Retention, RLIC Management Office Satish BK, Project Manager & Analyst Source: Reliance Life Copyright © 2011, SAS Institute Inc. All rights reserved. 19
  20. 20. make connections • share ideas • be inspiredIndia’s Largest Analytics ForumThank YouSameer SeksariaSenior Vice President – Reliance Life Insurance CompanyMobile : + 91 9324899240Email : Copyright © 2010, SAS Institute Inc. All rights reserved.