The document discusses several challenges facing the insurance industry, including the shift to digital and multichannel operations, digital transformation, maintaining a client-centric approach, and preventing commoditization. It argues that marketing has a key role to play in addressing these challenges by focusing on the client experience across channels, linking digital transformation to business strategy and objectives, generating visible value for clients, and developing attribution models to measure marketing's contribution to profitability. The document outlines how marketing and sales goals should be set and measured based on positioning, education, interaction, costs, income, and return in order to optimize marketing's contribution to business results.

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CHALLENGES OF THE
INSURANCE
INDUSTRY
Is the insurance industry prepared to
face the challenges of the market? The
Role of Marketing
What’s happening?
The insurance industry (like almost all industries) is conditioned by the
market situation. Even so, there are certain characteristics, behaviors,
reactions, and actions that are common to the various markets at
international level, that somehow allow us to infer certain reflections
and draw useful conclusions for planning and managing 2017 and the
immediate years for come.
In this context, the insurance industry is linked to the following trends:
PAPER
13%
MARKET GROWTH IN
LATAM (2014)
€4 TRILLIONS
THE WORLD MARKET
83%
CONSIDERS THE CLIENT
AS THE CENTER
GROWING MARKETS:
O NEED TO MODERNIZE
OPERATIONS & DISTRIBUTION
MODELS.
O MIDDLES CLASS AND YOUNG
POPULATION EXPANSION.
DATA ANALYTICS &
PREDICTIVE
MODELLING
THE CHALLENGE
www.roimarketinginstitute.org
Lucerne, Switzerland

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Multichannel… of course!
Although multichannel operations are a common practice, brokers and agents remain the most important
distribution channel, albeit in decline in favor of digital channels. The relevance of agents diminishes and
aggregators, web pages, online companies, etc. consolidate their importance. This phenomenon is
fundamentally due to two factors: on the one hand, the drastic change in consumers’ behavior and attitude,
and, on the other, the increasing penetration these channels have in broader social environments arriving
quickly to the base of the socio-economic pyramid of most developing countries (especially in Latam with
a young population pyramid) and markedly in the shrinking younger population layer in the more developed
countries. That is why these last countries are developing initiatives with different degrees of maturity
(some consolidated and others experimental) that are increasingly pushing the use and optimization of
digital channels for all ages.
Both cases have pushed decisively, and to a large extent they determine, the digital transformationthrough
which, to a greater or lesser extent, insurers are reformulating their offer in its broadest sense. However,
we are more inclined to think that, rather than walking towards a slow death of traditional channels, the
market is heading towards a convergence aiming to achieve economic business results (or at least that is
what we predict and recommend) between on and off-line.
Digital transformation is OK as long as it is not a strategy
Most insurance companies in the more mature markets, rushed (pressured by the market) to walk the road
of digital transformation. It was about not being "hit" first and outrun competitors moves. Companies
acquired talent and technical capabilities, expanded supplier data base and IT consultants, and launched
(and continue to launch) a series of products and services aimed at addressing the market in an alternative,
always digitized way. However, this transformation was assumed as a strategic posture in which tools were
added and processes were transformed as layers (one over another, new ones over old ones), which led to
a series of negative consequences that many insurance companies are currently suffering: data redundancy,
lack of integration of tools and information, lack of objectives, lack of evaluation criteria, assimilation of
traditional metrics to evaluate the performance of innovative tools, absence of attribution models, etc.
Perhaps the main mistake was to consider that digitalization was a strategy when it is actually a tool. Before
we use to talk about agencies and call centers, now we also talk about clicks, how to measure them, how to
get them, and which "click" really matters. But, in the end, this ("the digital") must serve a strategy (business,
commercial,and marketing) and objectives that, in mostcases are not well defined and cannot be measured
in an impartial and undisputable way.
Client-centric…at least that’s what they say.
Most companies claim that they have moved from product-based management to customer-centric, and
it is true ... partially. The same companies that say they have gone to a customer-centric management
strategy continue to manage their offer from the product point of view and look for ways to identify the
customer's needs, as long as they fit the mix of available products. In fact, most seek to identify customers
who need the products they offer rather than satisfying all real demands from the market. And this is due
in part to the intrinsic nature of the insurance business that needs a large volume of policies. While in
other industries the offer seeks market capillary segmentation or segments of "one", it will be very
difficult for the insurance industry, even using all the available big data, to leave the product stereotypes
and to segment in a capillary way. Therefore, concrete answers to the needs of the clients that are said to
be the center, are not given in an intensive way. Certain new needs remain unsatisfied, either because of
the lack of ability to design new products (most large insurance multinationals are slow movers), or
because of the limited ability to legislate quickly and evenly, new forms of consumption that need to be
regulated and ensured (i.e. Airbnb, Uber, drones, second hand shopping online, etc.)

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Commoditization
This lack of individualized responses (effusively promised by marketing and commercial departments)
increasingly leads to the commoditization of the offer that seems more price sensitive and at the same time
insensitiveto other value added services that companies striveto offer (at the cost of their combined ratios).
Sweepstakes, discounts, extra services, loyalty clubs, do not seem to make as much dent in the decisions of
clients, although in reality, this is not measured rigorously. In addition, digital channels that eliminate or
reduce intermediation, consequently reduce the price as well. A price that in these years of crisis, has
strengthened its position as a fundamentalcriterion in the decision-making process of all types of purchases
(including insurance).
The Kind is dead; long live the King!
And King "issuance" finally gave in to the evidence that issuing is not equal to making money. There are
many insurers that in their strategic plans have marked in bold and underlined: "profitable growth", and it
is known that issuing do not rigorously and exhaustively reflect the profitability of the business (even if it is
to generate the so-called "profitable issuing"). While most diagnostics, plans, and evaluations were
previously based on issuance, it is increasingly common to see how companies in the industry use more
concrete indicators that have direct impact on the company's cashflow. Obviously, the combined ratio will
continue to be the most widely used economic
performance indicator for many years, but it only
reflects the photofinish. Low accident rates and
optimum cost handling are not the only way to extract
profitability. Nor is it completed with non-technical
profitability alone. It is necessary to look for more
sophisticated ways of measuring business
performance that demonstrate the economic
efficiency of management in a more disaggregated
way. And this, precisely, is what must be demanded
from sales and marketing: to make visible its real
economic efficiency.
Dark clouds on the horizon
The time when only insurance companies could grow, consolidate, merge or create new insurers (as was
done with the irruption of online sales in the past) is over. According to recent surveys, Google appears as
the company with the greatest potential to break into the insurance industry (although despite having
experienced how the business is with some English companies, they have not yet made their way into the
market). Not to mention few others that are already approaching and have large and competitive
opportunities to offer insurance through alternative business models such as banking (will it continue in a
trend towards transforming from channel to insurer?), online sales, or as some initiatives of the North
American market that emulate the model of air ticket issuance, etc. A hyper-fragmented supply market,
highly competitive in price, with new operators that perform better than insurance companies in digital
channels,backed by other solid businesses that minimizetheir risks and marginalcosts, seriously jeopardize
long term competitiveness for traditional and vertical insurance companies.
So, now what?
We are convinced that marketing plays and will play a fundamental role in facing the challenges mentioned
above, offering concrete answers to each one of them. Obviously, no one pleads not to do anything, the
question is what to do? It is difficult (although not impossible) for insurers to start selling other financial

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products more typical of banks (I repeat, but not impossible ...) or that suddenly, a company in the sector
makes a bet to be the new Google or Amazon of the world (this is less viable). So, what contribution can
marketing make in this context? The answers vary, but considering each challenge, we can say that:
1. Multichannel: to the challenge of multichannel sales, the answer is to change the vision from one
oriented to the offer (multichannel) to another focused on the client: omnichannnel. This vision
recognizes that the customer journey is quite indecipherable and typifiable, and that it is therefore
necessary to integrate and develop channels (online and offline, on-trade and off-trade) that
converge into a strategy and tactics that identify points of entry, exit, and conversion; to generate a
flow that has the capacity to respond to each transaction need in an individualized way regardless
of this need (information, budget, contracting, renovation and/or drop-off) through whatever
channel the customer uses to approach and interact with the company. It is well known that this
change requires an adaptation, modification, and mutation of complicated processes and systems,
however, insurance companies that do not undertake this mutation will struggle to grow and will
most likely decline into obsolescence.
2. Digital transformation: Marketing departments (along with commercial) are the ones that have
adopted a more open (although initially forced) stance towards the adoption and use of new
channels of communication, the addition of new technologies for information management in a
bidirectional way, and towards an analytical based on big data. However, in many cases, not with
the proper depth or link to the business. They have also been the first ones to use digital
transformation as a tool and not as a strategy. For this transformation to be relevant to the business,
it is necessary to establish a link between marketing inputs and business outputs and in this, most
marketing departments of insurance companies still have a long way to go. The digital
transformation of marketing activities responds to the strategy and objectives of the general
marketing plan although in many cases, it is not yet directly linked to the business or at least in a
visible and accountable way. This (a ROI Marketing model) is a model that should be followed by the
other departments that continue to think that digital transformation is a strategy, which, in our
times, is equivalent to saying that "our strategy is to sell through the channels that our customers
use to buy.”
3. The client at the center: It is necessary for insurance companies to switch back from a pseudo-
customer-centric model to one based on value generation. Value for the customer (which still stays
at the center) but value also for the company, ergo: profitability. Marketing is the right link to ensure
customers keep feeling at the center through communication and it should also be a great visible
and accountable contributor to the number one value indicator for the business: profitability.

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4. Commoditization: As Warren Buffett said, "Price is what you pay, value is what you get." If
customers are price sensitive it is largely due to their economy (and that of the market in which they
are immersed), but it is also because they somehow do not see the added value proposed by
insurance companies as a differential and influential factor for making a purchase decision.
Marketing is the only way to make this value visible. Considering the needs of the company business
plan and taking into account the client's needs, marketing must show and make this value tangible
in a way that it tilts the scale to a positive buying decision. This is the main turning point between a
market-oriented marketing and a business-oriented marketing. For this purpose, it is necessary to
have the appropriate methodology or systems that allow marketing and sales departments to
isolate two effects of any marketing and/or commercial project: the number of purchase acts that
have been impacted by the project, and how much each marketing project has influenced each
decision making. It is thus necessary to work on creating own attribution models and isolation
methods that are sufficiently robust to generate credibility and solid futureplanning. Several leading
companies in the industry are already working on their own
attribution models (leaving aside the most traditional and
obsolete criteria imposed by large operators such as last-click,
time-decay, etc.), learning and implementing robust
methodologies, and executing processes and procedures
aimed at converging marketing, sales and IT systems.
1) Profit as a KPI: This is where the key to everything is, short-term profitability is fundamental to
economic sustainability without which there are no long-term strategies of social or environmental
sustainability. Marketing should aim to measure how it contributes optimally to the real profitability
of the business. Marketing projects can (and usually do) generate different returns that will end up
impacting in the short term on the combined ratio through the costs and through the economic
value generated by each client. It is imperative that marketing and sales departments become aware
of, acquire the capability, and measure in a standard way, the actual contribution of their projects
and campaigns to the business economic results, to the P&L.
2) Threats: marketing should define and portray the insurance industry leadership showing its
strengths and somehow evidencing the intrusion of third parties who are not specialized market
players. It must instruct and train consumers and stakeholders in the value generation of the
insurance industry's proposal versus alternatives of product push by operators of other industries
and/or new players.

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How to measure the economic contribution (ROI) of marketing in the insurance
industry?
To answer this question, it is necessary to destroy a myth: that sales and marketing go and work in separate
ways. The ways to sell insurance (traditional and/or new ones) are directly linked, and rely on, channels of
communication to achieve their various business objectives. It is well known that the insurance industry has
essentially five types of commercial actions:
1. Recruiting
2. Retention
3. Loyalty
4. Cross-selling
5. Recovery
Each one of these types of actions, in turn, have broad goals (to become a client, not to leave, to help selling,
to buy more and to return, respectively) that meet global business objectives (increase revenue, turnover,
customer portfolio, market share, product mix, etc.). All these actions involve communicating with the
clients with the intention of generating a business interaction in the short and/or long term, and this is
marketing. All these actions, whatever their nature, will have an impact on six variables to be measured
throughout their execution and during their period of impact:
Obviously then there is the "other" marketing: advertising and sponsorship, always present (and necessary,
by the way) in the marketing plans of insurers. In both cases (that of commercial actions and that of
advertising and sponsorship) it is necessary to measure the six dimensions mentioned above. The first three
ones are typical of marketing and the last three ones are directly linked to the business bottom line. ROI
Marketing is about establishing and measuring a cause-effect relationship between these two worlds.
Few insurance companies set their business and marketing goals in these terms. Even fewer are those that
set goals that can be measured in a neutral and impartial way, and exceptional those ones that do it with
the sufficient rigor to make conclusions robust and credible. Marketing departments are reluctant to set
business goals in their plans due in large part to the lack of a proprietary, credible and accepted attribution
model. On the other side, commercial departments tend to minimize the impact of brand and customer
experience on the entire sales process.
Positioning
What do I want
them to think
about my brand
or offer
Education
What do I want
them to learn
about my
brand, offer, etc
Interaction
What do I want
them to do
Costs
How much
money do I
want to invest
Income
How much
money to I want
to collect
Return
How much
money do I
want to earn

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But the need to set goals that are not only achievable but also measurable must not be forgotten. All
objectives (whether market or business) should have clear indicators, with a milestone that unequivocally
indicates whether they have been reached or not, and with a clear period of influence to be measured. In
most cases this is not done. At the same time, as in many industries, insurance clientsrepresent a very broad
range of estimated average profitability (or customer life-time value) and, therefore, the return of sales and
marketing campaigns vary according to the type of customer that has impacted and the type of project that
was undertaken.
It is thus imperative to think of marketing and commercial actions in terms of two variables to consider: the
type of action to be undertaken (recruitment, loyalty, cross-selling, retention or recovery) and the type of
customer impacted or impacted and its real profitability. “Not everything countable counts nor everything
that counts can be counted” (A. Einstein). And precisely because of this, the planning, implementation, and
evaluation of projects and results must consider these two variables at all times.
In order to measure the actual return on commercial and marketing actions, the following steps should be
followed:
It is important to remember that the evaluation of the economic performance of commercial and/or
marketing projects is not a post-execution analysis tool. It is necessary to plan not only the project itself,
but also its evaluation cycle starting from its alignment with the business and following with the correct
formulation of objectives that are the foundation of any results-oriented project.
The main challenge of attribution models (to figure impacted sales and influence on each sale) must be
addressed from statistical relevance and mathematical rigor to generate robustness that will make them
acceptable and, above all, credible. In this regard, the convergence between the commercial, marketing
and technology departments is essential since each one will contribute to the generation of information for
analysis and concrete business results.
ROI MARKETING INSTITUTE
ROI Marketing Institute is an organization dedicated to spread the word, teach, implement, and evaluate processes and systems
aimed at measuring the real economic return of marketing and sales for companies, non-for-profit entities, governments, and
non-governmental organizations worldwide. It is also the only certifying body for the ROI Marketing Matrix©, its own
methodology published in the book "ROI Marketing. The New Performance Standard "Author: Pablo Turletti - ISBN-10:
1493759299. For more information: www.roimarketinginstitute.org
• Fundamental
pillars of the
company:
mission, vision,
general
business plans,
marketing
plan, etc.
Alignment
• To define
relating
factors
• To define
monetization
criteria
• For data
collection
Plans
• Positioning
• Education
• Interaction
• Costs
• Income
• Benefits
Objectives
• Breakeven
• Commercial
viability
• Predictive models
Pre-Investment
Analysis
• Based on data
collection plan
Data
collection
• Costs and
income
calculation
Project
Analysis
• ROI
calculation
• Business
intelligence
generation
ROI