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synpulse Rubrik | 1
The MagazineManagement know-how for practical use
1 | 2016 int‘l
How to Turn Passive into Active B2B Sales
Next Generation of Private Banking Operating Models
The Internet is King – Channel Management in the Digital World
synpulse | 3
«The future has already arrived. It‘s just not evenly distributed yet.» William Gibson
4 | Rubrik synpulse synpulse
Editorial ................................................................................................................................................................................. 4
Operational Excellence Next Generation of Private Banking Operating Models .............................................................................................. 6
Digital Banking A Digital Transformation Roadmap ................................................................................................................................. 10
Training Solutions Distribution Training in the Insurance Industry ................................................................................................................ 14
Digital Banking The FinTech Revolution Brings Disruption and Opportunity ...................................................................................... 18
Digital Transformation The Internet is King – Channel Management in the Digital World .............................................................................. 22
Business Strategy How Insurers Implement Effective Strategies ................................................................................................................ 27
Operational Excellence M & A Forecast Unfulfilled? ................................................................................................................................................ 30
Sales and Customer Management How to Turn Passive into Active B2B Sales .................................................................................................................... 34
Masthead .............................................................................................................................................................................. 38
Table of contents | 5
Edito
rial
London calling!I am delighted to announce that Synpulse opened its new office in London. Much more than the capital of Britain, London is Europe s financial heart and plays a key strategic role for many of our clients. With our already-existing offices Synpulse’s expertise is now immediately available in all major financial centres around the world.
The financial industry is deeply rooted in history and has a more conservative approach than many other industries. Yet banks and insurance companies are constantly challenged by innovation. Most recently, Fintechs have stirred up the financial scene. Certainly, the tech-savvy revolutionaries have created many innovations. Banks seem to have anticipated this new trend as they are the largest investors of Fintechs and profit from their growth. Insurance companies are also increasingly investing in them, and other organizations in the finance sector seek to work with Fintech start-ups through co- operation or acquisition. Yet it is less clear if Fintechs will have the same economic impact as the traditional players of the financial industry, or on the other hand if they will even supersede them. Synpulse is deeply involved in addressing the consequences of this development for the traditional banking and insurance sector. On page 18 you can learn how we view them and how Synpulse tries to bring together the old and new world of financial services.
Banks and insurance companies are both equally affected by current challenges like stricter regulation requirements, the digital transformation or low interest rates. We want to show you how banks can successfully implement digital channels in their business models. Also for insurance companies, Synpulse has identified ways how they can improve their digitalization strategy. Read more on page 22.
Global expansion can be challenging. Synpulse must manage global growth while maintaining focus on core competencies and on client satisfaction. To meet these challenges, we have restructured and consolidated our services. Our new competence centres for banks comprise Regulatory and Compliance, Digital Banking, Operational Excellence and Service Scope. Insurance companies can choose between Sales and Customer Management, Product and Pricing Management, Digital Transformation, Operational Excellence and Service Scope. I am convinced that you will benefit from our restructuring, which enables us to offer you our unique blend of strategic expertise and operational implementation in a transparent and deliverable-oriented fashion.
Your Christoph Nützenadel
synpulse synpulse Operational Excellence | 7 6 | Operational Excellence
Next Generation of Private Banking Operating Models
The growth of global wealth accelerated in 2014, with the biggest contributions stemming from Asia. As a result, financial centers like Singapore and Hong Kong have benefited immensely from the sustained boom in the region’s economy. However, in Asia’s private banking industry growth does not always translate into higher profits.
Authors: Yves Roesti | Salomon Wettstein
The growth of global wealth accelerated in 2014, with the biggest contributions coming from Asia. As a result, financial centers like Singapore and Hong Kong have benefited im-mensely from the sustained boom in the region’s economy.
However, growth does not always translate into higher prof- its in Asia’s private banking industry. Although they recov- ered after the global financial crisis, private banks face chal-lenges in dealing with continuously increasing operational costs, compliance with ever-changing and more onerous regulations, and mitigating risks in high-volatility markets. Furthermore, pricing transparency is rapidly increasing, and customers are becoming much more critical about how much value private wealth managers or financial advisers are adding. Customers are demanding better value for their money, leading to downward price pressure on the basis points charged.
The results are a decline in profit margins for banks – while the underlying market is booming. Increasing demands for transparency, decreasing revenues, and rising costs will inevitably force the market to become more efficient, as experienced in other industries. Banks must improve their efficiency, operational excellence and front-office productiv- ity – as well as transform their operating models in order to ensure long-term sustainability.
On the one hand, big banks find it easier to achieve lower operating costs – not only because they can spread overhead over a larger revenue or asset base, but also due to decreas- ing per unit output costs as the scale increases, since fixed costs are spread out over more output units. On the other, small and medium-sized banks note that it is very difficult to cut costs. The only way they can achieve scale is through growth, outsourcing, or M&A. A good example is Switzerland, one of the earliest and most mature private banking markets in the world.
In the face of consolidation, the industry has begun to make a strong push towards operational efficiency, as well as em-bracing industrialization ( 1).
Playing catch-upBanks have to ask themselves: How, and in what areas, should we achieve competitive differentiation? Does it make sense to spend a large part of revenues on back-office and IT services? Can we even justify maintaining back-office and/or IT operations at all? Such back-office related costs are a re-sult of largely operational activities, and generally associ- ated with non-value adding processes. Managing and con- trolling these processes leads to operational risks that result in additional costs.
The front-office staff spends already a substantial portion of their total productive time on administrative-related activ- ities like client reporting, compliance, and general paper-work. Steering their focus away from providing value serv- ices to their clients results in the lack of service differ- entiation – and thus in the commoditization of services. Industrialization of business processes as a concept has been around for a while, but for the private banking industry it is still a recent phenomenon.
Taking a cue from other sectors, the private banking industry has realized that it cannot strive to do everything itself and still remain profitable. After reevaluating core competencies private banks can start focusing on their competitive advan-tages and strengthen core functions. Industrialization can help enable key differentiators and high margin processes.
Outsourcing back-office functions like corporate actions or payment transactions is not new, and banks have been doing so in the past few decades. However, the new generation of operating models look beyond traditional cost-saving op-portunities in the back-office: The goal is to identify non-core functions in the middle – or even front office that are com-mon in all banks.
Nonetheless, industrialization in private banking will not be confined to conventional Business Process Outsourcing (BPO), which mainly deals with outsourcing non-core func-tions to low-cost countries (labor cost arbitrage).
In this case, highly skilled local talent will industrialize back-office activities and provide increased efficiency – for example, in straight through processing (STP). This new
1: Evalution of Operating Models. Every generation inherits benefits from the previous generation and adds new advantages powered throught innovation.
Source: Synpulse1990 – 2010 2007 – 2015 2015 onwards
Value & Flexibility
Generation 1
Labor costs arbitrage Transactional
outsourcing Cost reduction
Generation 3
Global BPO operating through global processing networks
Sourcing best-of-breed banking products and services
Scalability and innovation on value generating areas
3rd Generation Operating Models
Maximum Front-Office effectiveness.
State-of-the-art IT platform.
Efficient, error-free processes.
Efficiently managed product complexity, extended product offering across locations.
Benefits from scale or consistency with an es- tablished pool of resources focused on similar tasks (location-agnostic, scalable operations).
Improved internal controls, granular monitoring capabilities and automated system checks.
Maintain integrity of risk management and compliance procedures.
Generation 2
Value chain fragmentation
Standardization and industrialization
Business Process Out- sourcing with highly automated standard back-office processes
synpulse synpulse Operational Excellence | 9 8 | Operational Excellence
operating model is not just simply about reducing costs, but envisions banks leveraging a utility model to manage outsourced services cost effectively, and using the resulting freed-up Run the Bank (RTB) resources (cash and personnel) on their core business functions.
This model is a new form of BPO. It combines «Software as a Service» (SaaS) and «Infrastructure as a Service» (IaaS) for en-tire business processes. Key features are no upfront invest-ment requirement, on demand scalability, and pay-as-you-go facility (per transaction). The result is a variable cost struc-ture allowing a degree of flexibility in strategic decisions. It combines standardization, outsourcing, and economies of scale; making it attractive for smaller and medium-sized banks that are too small to achieve economies of scales on
their own, and/or cannot afford an in-house, state-of-the art IT platform.
The latest trends now point to third-generation operating models that employ all the aforementioned benefits while adding new advantages. This is the idea behind a global BPO operating through a global processing network. Banks connect to a network of BPO centers, outsourcing best-of-breed banking products and services. Each center in the net-work acts as a service hub (centers of excellence) that com- bines location-agnostic, fully scalable (leveraging a pool of resources focused on similar tasks) and improved internal controls, granular monitoring capabilities, and automated system checks.
Yves RoestiPartner (Synpulse Singapore)[email protected]
Salomon WettsteinManager (Synpulse Singapore)[email protected]
Authors
The banks benefit from maximized front-office effectiveness, a state-of-the-art IT platform, efficient error-free processes, and extended product offering across locations with effi-ciently managed product complexity – thereby maintaining the integrity of required risk management and compliance procedures.
Industrialization helps private banks cut cost-income ratios to less than 50%.
Industrialization in AsiaTo assess industrialization’s potential in Asia, Synpulse con-ducted a high-level market study in two main financial cen-ters, Singapore and Hong Kong. It used a top-down approach to calculate the potential for industrialization in both markets.
In the last three years, the industry recorded an average AUM growth rate of 10.7% per annum. Consequently, Asia Pacific is set to rise significantly in prominence, and many experts predict similar growth in the years ahead. Extrapolating the figures with the same growth rate for the next seven years (until 2020) results in an AUM of more than USD 2.5 trillion – nearly twice the amount of today’s AUM.
If the private banks do not change their operating model nor start industrializing, they will spend USD 9.4 billion on opera-tional costs by 2020. The latest reports have shown that Asian banks spend 30% in non-front related activities, which results in USD 2.82 billion in such costs. Reviewing average bank cost-income ratios in Asia demonstrates there is huge potential for generating cost savings through standardiza- tion, automation, outsourcing, and economies of scale.
An internal survey of Synpulse reveals that the most efficient private banks in more industrialized markets like Switzer-land achieved cost-income ratios of less than 50% ( 2), compared to the market average of 70%. Furthermore, these banks were able to reduce back-office and IT running costs by 50%, as well as maximizing STP rates close to 100%, reducing further non-front related costs (including legal, compliance and risk management functions) even more.
Asian banks report CIR figures of around 70% on average. Le-veraging a third-generation operating model can help them radically reduce back-office related costs. Synpulse believes that most banks are able to cut these costs up to 50% by 2020.
In the next 10 years, half of the small and medium-sized banks in Asia
will either choose the BPO model or consolidate (M&A).
Cost trapBanks in Asia with less than USD 8 billion in assets reported an average cost margin of 87 basis points (bps) last year, with average revenue margin of 84 bps – a clear sign that profit margins will be unsustainable for small and medium-sized banks. High costs owing to consistent regulatory pressures will persist, making it more difficult to sustain high growth in Asia. Banks are struggling to keep up with the increasing cost pressure and lack of service differentiation. It is only a matter of time before the larger players embrace industrialization in order to achieve sustainable cost-to-income ratios and gain competitive advantages – while the smaller and medium- sized banks continue to feel pressure to remain competitive.
2: Enablers for CIR reduction
Source: Synpulse
Organization Organization and IT architecture needs to be adapted in
order to support the realization of the optimal Target Operating Model (TOM).
A streamlined organization contributes itself to a CIR reduction by clear task-to-resource allocation.
Sourcing Options Operational areas that are considered sensitive or control
relevant are to be retained in-house while routine MO / BO functions are carved-out for maximum efficiency and scale.
As-is CIR of 70%
To-be CIR of < 50%
Alig
nmen
t
Lean F2B processes
Lean organization
Automation
Lean Business Model
Core Banking system
Satellite systems
Infrastructure
New IT Architecture
ITO / ASP
BPO
Sourcing Options
synpulse synpulse10 | Digital Banking
A Digital Transformation Roadmap
The digital offering is becoming one of the key propositions for a (private) bank. Digital strategies deal with the shift in business model that will provide a competitive edge going forward.
Author: Patrick Otto
Digital Banking | 11
Within the entire gamut of the financial services industry, pri-vate banks are one of the late adopters of digitalization.
With the business strongly rooted in traditional client inter-actions, private banks only embraced the digitalization wave long after they were faced with evolving client needs, an in-creasingly competitive landscape and sustained regulatory pressures.
This has led to the emergence of three phases of digitaliza- tion. While the market leaders are already expanding, smaller players in the industry are still exploring the right approach to take ( 1).
Phase 1 - ExplorationThe initial phase of digitalization starts with the banks see- ing the need to digitalize and upgrading certain aspects of their online offerings.
Banks look to enhance their online offering and venture into the world of mobile banking with selected features – albeit in silos. For example, popular features during this phase are mobile, optimized websites and online access to client state-ments. However, while institutions digitize select aspects of their service through independent initiatives, they lack syn-ergies across different facets of the bank.
Some wealth management firms introduce online offerings to establish digital access to products and services. How- ever, client on-boarding as well as other functions such as portfolio risk management are usually not integrated into these platforms.
Thus, the touchpoints created for clients are scattered across the different phases of the client lifecycle – from prospecting to account closure.
Phase 2 - IntegrationThe second phase of digitalization is driven by the need to offer competitive products, and to create a differentiated cli-ent experience. For any digitally savvy client, the options in the market are currently wide, which allows them to easily compare services offered by competing financial institutions and start-ups.
As a result, the need for differentiation arises, which prods banks to look at ways of improving their service attributes to enhance the client experience.
Banks are trying to address this need to differentiate, but are faced with a plethora of potential features. Hence, there is a struggle to scope in the most value-adding features, and im-plement them with limited time and resources.
Synpulse has helped key players put this into perspective by developing the eWealth Framework. This offers a structured approach that banks can adopt in order to capture client re-quirements, and set priorities to achieve their goals.
Banks in this phase realize that enhancing the client experi-ence also involves digital transformation of the organiza- tion’s internal characteristics to be in sync with their client- facing initiatives.
1: Three phases of evolution in digitalization
Source: Synpulse
Phase 1:Exploration
Silo digital initiatives Basic digital features Front digital, back manual
Phase 2:Integration
Integrated client journeys Client experience-driven
features Basic rule engines and
automation
Phase 3 :Expansion
Revenue maximization STP and optimization Cross-border offering
Evolution of digitalization in wealth management
synpulse synpulse12 | Digital Banking Digital Banking | 13
The next filter ensures regulatory and internal policy compli-ance and product suitability. The final filter is user-config- urable, allowing the user to define customized views either by grouping or (de)selecting features or portfolios.
Ubiquitous access to digital platforms matched with highly-mobile and global profiles of clients creates a tremendous opportunity for banks to scale up their
offerings across borders.
Moving through the phasesThe initial exploration phase of digitalization is ridden with a siloed implementation of features across the bank. In this first phase, for banks the key is understanding market stand- ards and making a build-or-buy decision. Having established a baseline, in the second phase those banks need to adopt an integrated approach that promotes synergies across the front and back-office functions.
The result would be improved client experience and digital alignment of all services. Integrated digital platforms lay the foundation for the next wave of digitalization that is compris- ed of innovative and personalized features. This includes
mobile access to a wide variety of bank services offered to a broad client base across borders. In this third phase, the banks must focus on higher penetration as well as the usage of their digital platforms. Key success factors include compli-ance with cross-border and internal guidelines, as well as automated digital enrollment.
While the market leaders are already expanding their digital footprint, smaller players are still in the explorative phase. The key is for these banks to seek support and assistance to first assess the maturity of their online offering. Only then will they be in a position to address their challenges in each phase, by applying industry best practices and transitioning towards a holistic and scalable online platform that facili- tates sustainable revenue generation and seamless client experience.
While the market leaders are already expanding their digital footprint, smaller players are still in the explorative phase.
Patrick OttoAssociate Partner (Synpulse Singapore)[email protected]
Author
2: Feature Funnel: Online offering feature pool needs to be adjusted for individual user context
The goal is to create efficiency in all aspects of client interac-tion through alignment of front-to-back operations and offer faster turnaround times.
Phase 3 - ExpansionThe key goal in the third phase is to attract and retain a broader client base. Ubiquitous access to digital platforms matched with highly mobile and global profiles of clients cre-ates a tremendous opportunity for banks to scale up their offerings across borders. However, ensuring compliance with investment suitability, product, and country restrictions on
a digital platform for a diverse and cross-border client base could create stumbling blocks for private banks. Synpulse developed the «Feature Funnel» concept ( 2) to ensure that the offerings presented to clients are inline with both in-ternal and external regulations as well as the banks’ expan- sion plans.
Essentially, there are four layers of the «Feature Funnel». Starting with a fixed set of features, the offering is adjusted according to client profiles – for instance, reduced function- ality for non-account holders.
Individualized feature funnel Filter Examples
Trading Social collaboration Automated advise ...
Feature pool: full set of available features. Irrespective of user role and regulatory requirements.Business capabilities
Client eligibility
Regulatory
Userpreference
First filter: reduced features set based on user‘s individual role in the account, e.g. full, limited or view only access.
Second filter: further reduced features set based on suitability and cross-border requirements on feature and product level.
Third filter: final set of features based on client implicit and explicit preferences.
Full access for account holder Limited access for LPOA View only for 3rd parties ...
No research material for Australia domiciled users
No online advise for Japan domiciled clients
Exclusion or grouping of portfolios Non-acceptance of T&C for specific
features ...
Offe
ring
Cont
rol
Source: Synpulse
synpulse synpulse14 | Training Solutions
Distribution Training in the Insurance Industry
Training is the cornerstone of a professional distribution force. Effectiveness is key – but costs have to be balanced with returns. This entails the need for a flexible training model served by a repertoire of tools and competencies, in which e-Learning solutions factor significantly.
Authors: Clarie Kwa | Daniel Tham
A familiar experienceJohn is a seasoned trainer with one of the largest insurers in Asia. He had just completed a training session on a recently launched distributor portal for 40 newly on-boarded agents. As he put the computer room back in order, he reflected on the efficiency and effectiveness of the portal training. Not only were there latecomers who delayed the session, there were also a few agents who – lacking in IT affinity – struggled to keep pace with the rest of the class. A handful of the partic- ipants did not follow his instructions and stumbled into varying scenarios, disrupting the flow of the class, and even creating frustration with the portal. Noting that there were still agents who complained about being unfamiliar with the portal, John made a mental note to check for resource avail- ability to organize refresher training.
Distribution training is required for professionalism but needs to be productiveThe Asian insurance industry values distribution training and seasoned trainers like John are always in demand. It is a fore-gone conclusion within the insurance industry that training is key to a professional distribution force. A professional dis-tributor is expected to provide sound advice and cus- tomer-centric services. The local mandates that representa-tives providing financial advisory services undergo at least
30 hours of structured Continuing Professional Development training annually. The scope of training should focus on ethics and rules & regulations – without neglecting product and sales competency.
However, training effectiveness is notoriously difficult to measure. Parameters such as number of training hours, assessment grades, or sales and complaint indicators are either unreflective of quality or entangled with too many variables to pinpoint effectiveness. Furthermore training is frequently viewed as face time to build relationships be- tween product or service providers and the distribution force. Hence, traditional classroom training is favored over e-Learning as a delivery mode. The former ensures physical attendance and in-person interaction. Nonetheless the ef-fectiveness of classroom training is constrained by the firm’s ability to invest in time and capacity. Furthermore, John’s session is unproductive for agents who face minimal learning curves, have the discipline to arrive on time or follow instruc-tions.
In other words, distribution training must not only be effec- tive but also productive. While it is important to train distrib- utors in products & solutions they can offer and the tools of trade to be efficient and customer-centric, it is also impor-
Training Solutions | 15
tant to balance the tangible and intangible cost of training with returns. To raise training productivity, John needs to consider value and cost from both the individual and insur- er’s perspectives. How can he ensure that training is custom- ized for each agent’s learning curve? What can he do to reduce the need for repetitive classroom training? John also needs to support change management through training.
Change Management starts with first impressionsTraining the distribution force and operations staff in an in-dustry striving to keep up with digitalization is an unenviable task. Of surveyed customers, 79% said they would use a digit- al channel for insurance over the next three to five years.
Insurers also expect increased IT spending per dollar rev- enue to build end-to-end CRM systems and a digitally enab- led customer experience. As insurers roll out digital plat-forms such as front-end sales portals and back-end claims systems, top management teams are concerned about change management. Almost 60% of surveyed insurers see themselves strongly lacking in one or more areas to success-fully execute this change management.
First impressions count. In order for the local entities to embrace the new tools, first-time user experience must be positive. Some management teams mistakenly believe that a user-friendly digital platform should not require user train-
1: How e-Learning can help to raise learning effectiveness and productivity
Source: Synpulse
Synpulse Example
Integrating modules with LMS enabled pilot content to be pushed to small group of distributors. Enabled faster review cycles and reduced cumulative re-work of content.
During a «train-the-trainer» session, participants were able to navigate e-Learning modules effortlessly by themselves. Distributors were also able to «pull» content to create personalized «play list», facili- tating user empowerment.
e-Learning Solution
On-demand access to e-Learning content reduces coordination efforts. Users pull the content, reducing admin effort to push.
Frees up time to develop meaningful relationships with partners, rather than spending time on mundane and repetitive training.
Pain Points
Scheduling difficulties across different stakeholders (trainers, trainees, compliance etc.).
Limited time and capacity to conduct classroom training.
Synpulse Example
Synpulse created content that guided users to perform steps in a sequence they would be expected to do in an actual business setting.
e-Learning curriculum was structured into mini modules and localized in terms of language and process.
Integrated e-Learning content into a life insurer’s online LMS. Agents were able to access content on the go at any time.
e-Learning Solution
Creating structured content enables users to play and pause on demand as mandated. This allows users to proceed only after obtaining mastery of content.
Content can be broken down into learning nuggets to suit individual needs.
Accessible anywhere, anytime via the online LMS. This enables trainees to refresh knowledge of content.
Pain Points
Varied pace of learning among users.
Unable to have refresher training anytime and anywhere.
Learning Productivity
Learning Effectiveness
synpulse synpulse16 | Training Solutions
ing and choose to invest in big bang events to create enthusi-asm. While tool design and reliability is crucial, first-time user experience is subject to user profiles. As John observed, user profiles and individual learning curves are heteroge-neous - even within the same distribution channel and coun-try. Receptivity towards the sales portal varies according to how easy it has been to learn to use it.
One size does not fit allAn insurer’s training model for distributors needs to be built for flexibility. As described above, distribution training serves multiple purposes – instill professionalism, provide face time to build relationships and facilitate change management. While fulfilling all these purposes, training has to be effective and productive for both individual distribu-tors and insurers alike. In markets where empowerment is commonly practiced, distributors would want control over their own training. To create a flexible training model for distributors, an insurer has to assess its true capabilities. Having a repertoire of train-
ing tools is a key enabler of adaptability. Nonetheless, tools may merely be replacing each other without creating addi- tional value. For example, while e-Learning has often been marketed as a convenient and cost-effective tool, it is often misused. This happens when staff who have neither formal training in instructional design nor sophisticated authoring tools, simply upload PowerPoint slides onto a Learning Management System (LMS) and call it e-Learning. Hence, it is of no surprise that many end users associate e-Learning with «death by PowerPoint».
Success with e-LearningWhile e-Learning is no cookie-cutter solution to all training needs, its potential to enhance training effectiveness and productivity cannot be overlooked ( 1). In Asia, the e-Learn- ing market has grown 17.3%. When used correctly and strate-gically, e-Learning is a very powerful relationship enrich-ment and differentiation tool which insurers can provide their distribution partners. Since e-Learning can be accessed at all times, it facilitates speedy on-boarding, enabling distri-
Training Solutions | 17
bution partners to readily meet their regulatory training requirements, while helping product providers enhance the stickiness of their relationships with these partners.
In conjunction with a new front-end distribution portal launch, Synpulse recently supported a global general insurer in implementing e-Learning solutions for its entities in Asia. To achieve learning effectiveness and authoring productivity in parallel, Synpulse adopted a delayed differentiation approach, where the core user process was recorded and used across all entities as the basis for localization and periph- eral processes. The e-Learning curriculum was structured in a series of mini modules. This gave distributors the option to «pull» modules and form their own playlist, facilitating user empowerment. During a train-the-trainer session, Synpulse noted that participants could navigate the e-Learning mod- ules effortlessly and independently. More importantly, the authoring tool’s recording ability allowed hands-on learning in a self-paced environment. Discipline was instilled in the e-Learning process, where participating distributors had to perform steps according to the recorded process and recom-mended requirements, as would be expected in an actual business setting.
For a life insurer which was starting to face resource and pro-ductivity crunch, Synpulse kick-started the e-Learning curric- ulum transformation. Assessments were incorporated at crucial learning stages throughout the module, and the results could be tracked through the insurer’s LMS. This creat- ed a continuous feedback loop, enabling content revisions and enhancing learning effectiveness. While the e-Learning modules developed by Synpulse could be viewed offline, it was advantageous to integrate the modules with the in- surer’s LMS. The insurer could run a pilot study by assigning a
mini e-Learning module to a small group of distributors and review their series of assessment scores. Such a contained approach not only minimized cumulative re-work, but also provided assurances of positive reception from the distribu-tors when rolled out company-wide. Encouraged by the inte-gration success, the insurer continued the e-Learning trans-formation, focusing on refresher product training in the next phase.
A cost-effective toolkitThe success Synpulse has had with e-Learning solutions vali-dates its relevance in training insurance distributors. Nonet-heless, classroom training has its share of benefits that e- Learning cannot replace. Coaching and role-playing are best done in-person, and provide a human touch that no software can replicate. When e-Learning solutions and in-person train- ing are combined, the insurer’s training model becomes scal-able, and learning effectiveness enhanced. 2 shows the potential cost savings when in-person training and e-Learn- ing solutions are blended.
ConclusionForward-looking insurers are picking up speed on switching and sharpening their training tools and competencies. The insurer which John works for has recently reviewed its train- ing model for distributors, and made investments to ad- vance its training capabilities and expand its repertoire of tools. John’s role matures from being a trainer and adminis- trator to a learning specialist. He strategizes for an optimal balance among the training tools and delivery modes. For John and his peers in the insurance industry, the next chal-lenge is to further refine the training model to to keep up with the next generation of distributors, the evolving distri-bution model, and regulatory requirements.
Clarie KwaHead of Insurance (Synpulse Singapore)[email protected]
Daniel ThamAssociate Consultant (Synpulse Singapore)[email protected]
Authors
Source: Synpulse 2: Blended learning model for distributors
Cost savings Total cost Content delivery cost Content creation cost
1. Fixed admin cost
4. Cost savings
from com- bining scale
2. Identify common
training re-quirements
Duplicate efforts
removed
5. Cost savings
from short- er review
cycles
7. Cost savings
from blended learning
3. Content creation
6. Customiz- ed class-
room train- ing for each
channel
8. Total cost of training
▼ 20 to 30% reduction in cost
Cost
Assumptions: Insurer’s combined distributor size = 1700 people / Classroom size = 50 people / Hourly trainer cost = $50 / Hourly admin cost = $20
synpulse synpulse18 | Digital Banking
The FinTech Revolution Brings Disruption and Opportunity
FinTech is changing – for the better – the way consumers look at financial services, while also creating new business opportunities for the well prepared.
Authors: Mathias Hausherr | Matthew Lebo
Technology has revolutionized industries like retail and ad-vertising, and with the popularization of tech start-ups, the financial services industry is beginning to see its own trans-formation. The seeds of the growth in Financial Technology were sown by discontent with the financial industry, and while this sentiment is long-standing, it did not amount to much change until it met with a rapidly evolving start-up scene. Aptly labeled «FinTech», this new wave of financial firms is offering «Apple like» interactions, intuitive customer experi-ence and lower costs through cutting-edge technology. Some see FinTech as an assault on the financial industry; however, Synpulse believes that FinTech is not here to dis-mantle the financial services industry, but instead to im- prove its offerings and streamline its operations.
FinTech benefits from tech, cheap funding and Wall Street skepticismThe growth in FinTech is the result of three macro factors – abundant financing, technical innovation and industry mis-trust. The famous statement «Where are the customers‘ yachts?» is over 100 years old, but still does much to sum up the skepticism surrounding the financial services industry. In more detail, traditional financial service costs remain high, with products and services that are often complex, lacking transparency, and difficult to access by the general public. Noting this, it is unsurprising that according to the Edelman «trust barometer», the financial services industry
has one of the lowest industry rankings for «overall trust-worthiness» at 54%.
Lack of trust, combined with the occasional financial crisis and high fees, has set the stage for innovative FinTech com-panies to break into the financial services industry. Since they are not viewed – despite similar functions – in the same light as established industry players, FinTech companies are seen as a breath of fresh air and with far less skepticism. FinTech companies have a 69% trust barometer rating, which beats ratings among innovators across all industries.
FinTech’s path to the headlinesSeemingly out of nowhere, FinTech began around 2000 with simple online banking functionalities including recurring bill pay, while PayPal (est. 1998) began offering money transfers and payments. Development slowed during the 2000’s, until the 2008 financial crisis caused innovation to resume in earnest. This began with continued payment innovations, and eventually new technologies including «robo-advisors» and alternative lenders, which started to attack some of the more entrenched and profitable industry verticals.
As shown in the 1, funding began largely with payments and eventually moved on to online lending and personal finance management, which represent alternative lenders and robo-advisors.
Digital Banking | 19
1: Distribution of FinTech investment areas worldwide
Source: http://www.statista.com
2013
2011
2009
2012
2010
2008
20%0% 40% 60% 80% 100%
Banking and Corporate Finance (incl. alternative lenders)
Personal Finance Management (incl. robo-advisors)
Capital Markets
Data Analysis
Payments
synpulse synpulse20 | Digital Banking
traditional asset management by offering competitive differ- entiation, lower costs and improved asset returns. Synpulse believes that a solution that addresses both levels of cus- tomers by helping traditional wealth advisors win over new underserved customers, while also automating and optimiz- ing investment strategies, will be the most impactful.
Big data’s impact on financial servicesWhile FinTech is largely focused on reducing transaction costs and offering services to new customers, there are numerous areas within financial institutions that are primed for transformation. For example, since the financial crisis, regulatory reporting and compliance have increasingly be- come the most challenging areas for banks. With 20 global banks paying fines amounting to USD 235 billion since 2008, it is apparent that proper reporting and close inspection of internal controls have become increasingly important. On top of recent fines, increased scrutiny in reporting standards through a never-ending supply of acronyms – including CCAR (Comprehensive Capital Analysis and Review), MiFID (Markets in Financial Instruments Directive) and AML (Anti-Money Laundering) – have put banks on edge.
One of the best ways to attack these challenges is through advanced data analytics. Amidst stiff competition, big data is becoming one of the most sought-after solutions in FinTech, due to the ever-growing wealth of data. As data volume, vari-ety and velocity increase, a firm often loses data structure and uniformity, making it increasingly difficult to comply with reporting standards. One company focusing on the Reg-Tech issues is Hexanika, who has teamed up with Synpulse to tackle challenging data and reporting issues facing the finan-cial services industry.
Synpulse – The bridge between financial services and FinTechThe path forward for the financial services industry is inno-vation. However, this poses even further questions as the right choice between in-house development, incubators, ac-quisition or partnering with a myriad of start-ups, continues to be unclear. Synpulse not only recognizes these difficult decisions, but also views them as a great starting point for client discussions.
Synpulse USA has positioned itself as the FinTech «bridge», helping guide clients through the technology transformation process. We are able to assist in the development and execu-tion of a financial service provider’s digital strategy with prov- en methods, market knowledge and creativity, while also offering value to select FinTech firms vying for market share by seamlessly connecting their services to industry players. The rise of FinTech has brought the potential for industry upheaval, but for institutions that are well prepared, the revolution will instead create new revenue opportunities and competitive differentiation instead.
2: Percent of FinTech investment 2014
Source: http://www.statista.com
Digital Banking | 21
Mathias HausherrAssociate Partner (Synpulse USA) [email protected]
Matthew LeboConsultant (Synpulse USA) [email protected]
Authors
Online lending
14%
6%
1%
25%
7%
4%
27%
12%
5%
Mobile PoS technologies
Personal Finance Management
Bitcoin
Mobile wallet technologies
«Mobile first» banking
SME services
Crowdfunding
Other
FinTech investors span multiple industries and sectors – from tech giants like Google, eBay and Intel to payment providers like Visa and MasterCard. In fact, financial institutions them-selves are among the most heavily invested in FinTech com-panies through a combination of direct investment, accel- erators and incubators. The largest bank investors have been Citigroup and Goldman Sachs, while insurance companies are also starting to get more heavily involved.
The 2 highlights the significant investment in payments, which remains nominally large to this day, but as a percentage of total FinTech investment has decreased as attention moves towards lending and money management (robo-advisors).
Robo-Advisors gain steam Robo-advisors entered the market to help solve key investing challenges like rising costs, ease of use, changing demo- graphics and a rapidly changing marketplace, through auto-mation. These «robo» solutions offer much lower cost invest- ing and typically charge between 0.15% and 0.9% in fees per year, while typical wealth managers charge between 1% and 1.61% per year for accounts under USD 2 million.
Many current users of robo-advisors are less affluent inves-tors who have historically been unable to invest due to low levels of individual capital and high wealth management fees. Through sophisticated technology and low-touch algo-rithmic investment management, robo-advisors are driving prices down, enabling previously untapped investors to now take an active role in the economy and reap the benefits of investing.
Though many began to design their operations in 2008, robo-advisors were unnoticed until 2014, and the excitement regarding them has only grown since. Robo-advisors have seen drastic growth in assets under management – an in-crease to the tune of 116.2% year-over-year, 57% in the first six months of 2015, and up to USD 8 billion in August. Wealth management is a multi-trillion dollar global industry, and the reality is that this is only a drop in the bucket of the address- able market, but the drop is growing fast.
Synpulse believes that, while the majority of early robo-advis- ors have been geared towards consumers, the second wave will orient their services towards institutions, enhancing
synpulse synpulse22 | Digital Transformation
The Internet is King – Channel Management in the Digital World
Digitalization through social networks, smartphones, big data and cloud technology has led to a power shift that favors the customer. What customer needs must channel management in insurance sales satisfy, and where do opportunities for new business models arise?
Authors: Ingo Muschick | Marco Kamerling
Digitalization is no longer an unknown phenomenon, but in most companies part and parcel of the day-to-day business. There is hardly a company being able to ignore it. Accord- ingly, this trend has also arrived in the more conservative financial sectors, as well as in insurance. Thus, it is important that companies respond and adapt their business models respectively.
The cloud requires a high degree of standardization of applications, and IT
processes as well as procedures must be adapted to the new technologies.
Clear drivers of digitalization are social networks, smart- phones, big data and cloud technology:
Social networks offer great potential for businesses. Users are strongly linked together and share both their positive and negative experiences via these networks. Companies can profit by behaving openly, accepting feedback, and being easily approachable.
Smartphones are a constant companion for more than half of the population, and make mobile applications possible. Insurance companies should take advantage of their awareness of this and align offers and services in the form of apps for mobile use.
Big data is also a very important factor. Today vast amounts of data that can be analytically developed are available.
Irrespective of the customer’s infrastructure, cloud systems can make data and applications accessible at all times. Thanks to the cloud, data can be accessed from anywhere – and on different devices. This requires a high degree of standardization of applications, and IT processes as well as procedures must be adapted to the new technologies.
Digitalization has the potential, like in other industries, to significantly change traditional
insurance business models.
Digitalization has the potential, like in other industries, to significantly change traditional insurance business models. This offers opportunities that many companies still use too little. Using the wide-ranging contact and communication channels optimally is more than just having a successful website. In order to remain competitive, companies need to actively respond to digital transformation and review their business models. The transformation process in this area can also serve as the basis for a new positioning, and open up diverse development opportunities as well.
Research online, purchase offlineThe consumption behavior of clients and how they use pos-sible insurance distribution channels have greatly changed in recent years, as a result of digitalization. Internet portals and the website of insurance companies are becoming in-creasingly important for information retrieval. In this con- text, the so-called ROPO effect (Research Online, Purchase Offline) is when the customer uses the Internet to get inform- ed about insurance products, and then on the basis of this information concludes an insurance contract in person with a local agent. Ever-improving insurance comparisons and deals from aggregators simplify this process, leading to in-creased transparency and customer influence.
Nowadays the ROPO effect comprises of about 50% of new business, while pure online sales is still around 10%, clearly highlighting the importance of the Internet for insurers.
New channels, more demanding customersCustomers have changed their behavior immensely. They use all available channels and expect this flexibility also from companies. Therefore, it is important to ensure high quality on all channels and interfaces to the customer. In recent years, the number of channels in use has clearly risen in in-surance companies – but in many companies a traditional silo mentality is still the norm, which might lead to severe redundancies, as clients are viewed individually in each channel. This is also reflected in the fact that many insurance companies are still operating in a multi-channel mode. In-deed, different channels are operated – but rather uncoordi-nated and disconnected from each other. The ideal goal of a company should be to operate in cross-channel mode, in which distribution channels, processes and systems are inte-grated, and the communication channels are clearly compat- ible with each other.
Digital Transformation | 23
synpulse synpulse24 | Digital Transformation
Multi-Channel-
Mode
high
highlow
Cross-Channel-
Mode
Cross-Media- Mode
Cross-Distribution-
Mode
Integration depth via the channels Definition
Integration of the distribution channels
Inte
grat
ion
of th
e co
mm
unic
atio
n ch
anne
ls
Insurers today
Multiple channels are largely uncoordinated and operated isolated from each other.
Close coordination of the communication channels with low integration of distribution channels drives the procedure in cross-media mode.
The cross-distribution mode requires high integration of all distribution channels, and an initially little communications policy coordination.
Integration of distribution channels (assortment, service and price), processes (e.g., procurement, logistics and IT processes), and systems.
Coordination of communication channels (e.g., media, segments, topics).
Multi-Channel-Mode
Cross-Media-Mode
Cross-Distribution-Mode
Cross-Channel-Mode
Multi-Channel- Mode
high
highlow
Cross-Channel- Mode
Cross-Media- Mode
Cross-Distribution- Mode
Three paths to the target Essential skills needed
Integration of the distribution channels
Inte
grat
ion
of th
e co
mm
unic
atio
n ch
anne
ls
Targetimage
«Client inspiration»
Customer analytics Cross-Channel campaign management
risk: client confusion Cultural impact: rather low
Technological agility Business process reengineering
danger: fear of cannibalization Cultural impact: moderate
Additional:
Change management Network skills danger: employee
resistance Cultural Impact: High
«Service excellency»
«Full package»
Source: Based on Rudolph et al, HSG (2012), Synpulse Research
A
B
C
A
C
B
1: From Multi-Channel to integrated Cross-Channel approach
Insurers today
Digital Transformation | 25
Ingo MuschickPartner (Synpulse Switzerland)[email protected]
Marco KamerlingAssociate Partner (Synpulse Hong Kong)[email protected]
Authors
The road to full integration may take place primarily via com-munication or distribution channels ( 1). To implement these projects, insurance companies have several options. They can set them up themselves, enter into strategic part-nerships, outsource projects, or achieve them by purchasing start-ups.
In all scenarios on the way to cross-channel mode, additional competencies have to be built up in the organization. The use of integrated communication channels requires skills in client-inspiration domains, underscored with analytics, to ascertain what messages are relevant to the customer. The integration of sales channels can only be achieved through service excellence, thus ensuring that increased integrated channel complexity is not accompanied by disproportion- ately rising costs. In the target situation – cross-channel mode – both competence domains and greater organization- al maturity must be present.
The fear of falling victim to cyber risks can be an opportunity for insurers to offer their
clients new product and insurance concepts.
This issue is also very relevant to clients. More and more peo-ple are afraid of falling victim to cyber risks. Insurance com-panies can use that fact in order to provide customers with new products and insurance concepts.
Swift action is demandedHow a company can optimally adapt to digitalization and even use it to obtain new market share is illustrated by the start-up «Community Life». The online insurance company tries to tap into the German direct insurance market by providing term life and occupational disability contracts completely via the Internet while waiving fees, thus offering an attractive alternative to the offline method. The complete process from searching for information to advisory services and the closing of contracts up to its self-management is displayed via a platform, granting the client more flexibility and avoiding time sensitivity. The start-up shows that poli-cies can be completely sold online, paperless, and without media disruption. This makes it clear where the future of in-surance is: on the Internet.
In general, it should be noted that all digitalization processes have to affect the entire organization. Nonetheless, what- ever the challenge being addressed, the customers point the way – in advance – to a digital business model to be taken by insurers. Only those who act swiftly won’t be left behind.
synpulse
How Insurers Implement Effective Strategies
The business model of insurers and reinsurers is increasingly under pressure and the long-term competitive success of an insurance company depends primarily on how it prevails in consistently aligning strategic success factors along the value chain – and the Target Operating Model is the lever serving that purpose.
Authors: Silvan Stüssi | Esther Ung
In the past, continuity characterized the business models of European insurance companies. However, the industry has undergone fundamental structural changes over the past few years. The drivers behind this trend include continually falling interest rates and declining cession rates for reinsur- ers, but also the advent of modern information and commu-nication technologies that open up new opportunities for innovative market participants. Traditional insurance busi-ness models are being scrutinized and new business is being developed, by expanding into new markets, selling new pro-ducts, or acquiring other companies. Thus, for sustainable success, a suitable, target-driven operating model (Target Operating Model – TOM) is necessary.
TOM focuses on the «How?»An efficient and effective TOM must align with the business strategy. The latter sets the framework by defining the «what?» (e.g. value proposition, product) and «where?» (e.g. sales channels, countries), but the TOM deals with the «how?» It describes the future shaping of the insurance company along its value chain, and determines the interface of the four TOM dimensions; organization, partnerships, services, and technology.
The following sections illustrate the basic procedures for building up a newly established life insurance company ( 1).
Optimally configuring the Value ChainThe starting point for the TOM design is to configure the value chain and its associated processes. While most estab-lished insurance companies keep a large part of the value chain internal, a newly formed life insurance company can implement an optimal value chain structure. The central question is whether to outsource and what processes should be outsourced. Certain elements of the value chain, such as the provision of insurance licenses, underwriting, claims decisions and financial consolidation are rarely outsourced for regulatory reasons. However, life insurers can outsource almost any element of distribution, policy administration or IT to third parties (third party administrator – TPA). In these cases, the life insurer takes a key coordinator’s role.
The next step is to model the organization along the value chain. Organizational structures and locations must be defined and internal and external responsibilities of the business units assigned. Employees are the lynchpin: Role
Business Strategy | 27
synpulse synpulse28 | Business Strategy
profiles, tasks, responsibilities, skills, as well as perfor- mance, incentive and governance systems are carefully coor-dinated with each other. For a newly established life insurer, it is important to determine the minimally required struc- tures and functions. Regulatory requirements and the expected workload help determine these minimum require-ments. The workload can be modelled by using values obtained through experience, such as the expected number of claims per policy.
Responsibility remains with the insurerIf certain elements of the value chain are outsourced, then the appropriate business partners need to be identified, evaluated and their services integrated. It is increasingly popular to outsource distribution to partners who are not
active per se in the insurance business, but instead have, for example, good access to customers. With such cooperation models, it is important to draw clear lines of responsibility along the individual process steps. This is achieved by using a process reference model like INSURANCEINABOX®. Further-more, governance is of central importance, since the life insurer might outsource the operational execution of pro- cesses, but not the responsibilities that come with it.
It is important to document all services that are necessary to achieve the desired market performance in a service catalog. Each service needs a provider, a user and service level requi-rements. For example, if policy administration is outsourced to a TPA, then the maximum processing time for each techni-cal policy change is defined.
1: Target Operating Model
Strategic Goals: WHAT? / WHERE?
What value proposition?
Which customer segments?
Which products?
Which channels?
What countries?
Other targets
Design Principles
Target Operating Model (TOM)
Source: Synpulse
Operational Modeling: HOW?
Organization Partnerships
Services Technology
Transformation Planning and Implementation
Business Case
Management ProcessesValue Creation Processes
Support Processes
Business Strategy | 29
Silvan StüssiPartner (Synpulse Switzerland)[email protected]
Esther UngManager (Synpulse Switzerland)[email protected]
Authors
To provide services, the appropriate IT architecture and data flows are also needed. The insurer may offer the customer the possibility of purchasing insurance online. Here a sales and service platform that allows easy access and innovative data analysis capabilities is required. The key success factor is to optimize the customer journey from the customer’s perspective.
Synpulse uses the above model, including predefined templates, in order to support national and international financial service providers with the definition, implementa- tion, and adaptation of their TOMs for mergers and acquisi-tions, business field expansion, and market entry.
synpulse synpulse30 | Operational Excellence
M & A Forecast Unfulfilled?
The big wave of consolidations in the Swiss banking sector has not taken place yet. Why this is the case – and why banks should have M & A more than ever in their playbooks.
Author: Adrian Hartmann
Operational Excellence | 31
Not long ago, Switzerland’s entire banking center was un- equivocal: Nothing would stand in the way of a large consoli-dation wave. Profitability in wealth management has already been under pressure for a long time. Organic growth has become increasingly difficult to achieve because of the tremendous pressure on margins and operational costs in-creased by additional compliance programs. Furthermore, the maneuvering room of major banks is limited by Basel III regulatory capital requirements, new liquidity rules, stress testing, SIFI obligations, and the Banking Secrecy Act. Small- er institutions are faced with increased compliance costs and need to grow in order to gain access to larger platforms and consequently increase their efficiency. Thus, the widely shared belief that it is only a matter of time before consolida-tion takes hold remains.
A glance at the statistics ( 1) of recent years shows that although there is a steady decline of banking institutions in Switzerland, the number of acquisitions initiated by dome-stic banking institutions has been fairly stable. The largest deals in the recent past have still been the acquisition of Merrill Lynch’s non-US wealth management business by Bank of America via Julius Baer (JB) in 2012; and the acquisi-tion of Coutts by the Union Bancaire Privée (UBP). In recent years both JB and UBP have acquired reputations as «inte- gration machines». Even Bank Vontobel is increasingly active again, such as with the acquisition of Finter Bank in Septem-ber 2015. Other financial institutions are pretty much holding back from acquiring new targets. Why?
Obstacle 1: Complexity of integrationThe euphoria about integration efforts has died down. Accord- ing to surveys, up to 90% of the acquisitions have not brought the desired return on investment. Lack of quality in project execution, under-utilized potential synergies, and the chang- ing market landscape are often cited as the three main rea-sons behind the lack of success. Today a bank thinks a lot harder about whether it is capable of mastering the challeng- es of integration.
One major issue here is that the integrators do not attach the necessary importance to post-merger integration (PMI), or accept key management support from start to finish. Legal advisors leave the project immediately after contract nego- tiations are concluded – without proper follow-up in handing over to the PMI organization. Line managers are abandoned and left with the task of bringing it all together.
Successful integration requires consideration of overlapping hard (processes, products, IT) and soft (culture, communica-tion) factors. The integration team is well advised to first focus on critical areas of integration. Their prioritization depends on various factors (such as time horizon, system compatibility, etc.) ( 2).
1: Number of bank transactions that are initiated by Swiss buyer and number of Swiss banking institutes
Sources: Thomson Reuters, SNB
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
30
20
10
0
3403303203103002902802700
Line of business (partial)
Number of banks
Entire companyIntegration type:
338
275
synpulse synpulse32 | Operational Excellence
Obstacle 2: Fear of current penaltiesThe constant fear of high fines resulting from legal violations prevents many Swiss banks from looking for new takeover candidates as this is a threat to their liquidity. Banks have learned their lessons well in the recent past and are wary of having additional risks on their books.
This means that banks are increasingly opportunistic and look into low hanging fruits. A look at the numbers confirms it: In the past five years, the proportion of acquisitions coming from completely private or public companies has gotten smaller. Buyers increasingly seek out specific lines of business. As an example, the «asset deal», which focusses on client relationships and their assets, has established itself in
2: Integration areas and factors that influence prioritization
Source: Synpulse
Culture and Positioning
Processes and Know-how
Customer and Sales
IT Architecture and Infrastructure
Products and Services
Staff and Organization
Business Strategy
Transaction Size Transaction Goal
Integration Experience
Acquisition Type IT Compatibility
Number of Locations Time Horizon
Regulatory Conditions
RangeInternal External
Fact
ors
Har
dSo
ft
Influencing FactorsIntegration Areas
Operational Excellence | 33
recent years as the new standard, and has overtaken the traditional «share deal», which involves the purchase of all contracts, infrastructure, and commitments. The transfer of clients in this type of transaction might be drawn out – but the risks can be better controlled.
Will consolidation still take place?Many experts have now revised their ambitious forecasts. And yet there are increasing signs that the M & A carousel will soon gain momentum again.
Agreement with the USFirstly, banks are reaching agreements over debt disputes in the United States. For example, Julius Baer has recently been able to settle the tax dispute in the U.S. «Being able to close this regrettable legacy issue is an important milestone for Julius Baer», Julius Baer CEO Boris Collardi said in a state- ment. «The settlement ends a long period of uncertainty for us and all our stakeholders.» Rising pricesSince 2009, the prices of assets acquired in the Swiss private banking market have steadily declined – a crucial barrier hin-dering takeovers, however, the trend is changing. For the
first time in five years, assets under management are again on the rise. The «multiple» - the key pricing factor of a deal - rose from 1.3% in 2013 to 2.1% last year. This is exactly in line with what is being paid for the worldwide assets of private banks.
Serial buyersThe disillusionment with recent sampled acquisitions show just how challenging integration projects are. Banks with strong balance sheets, adjusted customer books, and a strong M & A focus will know how to better use their expertise in integration, and become «serial buyers» in the future.
DigitalizationIn the digital age, acquisition targets are increasingly chosen in accordance with technological criteria. An integration pro-vides the perfect opportunity to quickly make up for a lack of technical maturity, and to cleverly obtain the most advanced know-how. Modern processes thereby increase customer satisfaction and provide greater agility in dealing with new business requirements.
Adrian HartmannAssociate Partner (Synpulse Switzerland)[email protected]
Author
synpulse synpulse Sales and Customer Management | 35 34 | Sales and Customer Management
How to Turn Passive into Active B2B Sales
Competition in the commercial insurance market is rising. In the future, insurers must turn more cost-efficient, while maintaining strong broker and client relationships that are becoming more important than ever. This is only possible by tiering relationships and focusing efforts on the client-facing teams.
Authors: Christian Seidel | Patrick Bühler Applying the example of the accident insurance, the effect gets clearly visible: For several years back, the payments disproportionately rise to the premium. Although some
industry experts have expected it differently, a turnaround still has to happen.
Commercial insurance is still a commodity product in most cases. Comparison between different offerings is simple, and the main difference remains the price. In times of high GDP growth rates, earned premiums of commercial insurers in-crease with the GDP growth. With lower growth rates, insur- ers need to be more effective and active in order to achieve premium growth and profitability targets. If a company wants to grow, then the primary options are new acquisitions and renewals.
In particular, low or declining economic growth are reasons why «boxing» in this competitive market has to be done with ever better «gloves». Due to the practice of retrospective declarations, these effects become only slowly recognizable. Today these even burden growth and profitability rates – yet the gains through declarations are not as negative when com-pared with previous years, but instead, are modest.
Where brokers concentrated on larger companies in the past and exhausted their market share in this segment, they are now expanding their target market to small and medium sized companies. In addition to the increasing number of players in the brokered B2B insurance market, competition is further strained by weakened customer relationships be- tween insurers and insured entities. Especially in commodity
products price sensitivity is everywhere. Thus, it is a usual effect to find price ranges of 50% or more between the cheap- est and most expensive quotes. Many insurers tempt to offer lower prices if affected by the intense market pressure, and they still hope to restructure the contracts in their books to counter a combined ratio that is far too high. As a result, prof- itability gets sapped and the growth potential is negatively impacted ( 1).
Applying the example of the accident insurance, the effect gets clearly visible: For several years back, the payments disproportionately rise to the premium. Although some in-dustry experts have expected it differently, a turnaround still has to happen.
A call to rethink the importance of client relationshipsAs a result of this predatory competition, many insurance companies have to rethink their market approach as well as the efficiency of their core sales processes. Measures include transferring best practices from B2C business such as lead management – and especially process efficiency and tool support to manage their insurance portfolios (renewals). As the key success factors the insurer should segment the many broker relationships and look into their business model
including alternative distribution partners. The result allows for stronger and focused relationship with strategic key accounts and that insurers’ client-facing teams can start working on strategic account planning ( 2).
In order to standardize the changed approach to sales as well as be able to consistently implement the changes, a struc- tured CRM process is required. In renewals as well as in lead processing for new business, CRM always provides up-to- date tiering information of the market (clients) and distribu-tion partners. Key to both concepts is account planning, in order to effectively manage the processes ( 3).
Active selection of distribution partners has to follow the strategyRelationships to strategic distribution partners are increas- ingly important. Existing client networks can be broadened, or a complete new network from the distribution partner gets on-boarded and thereby increases sales effectiveness. These include – first and foremost – the insurance brokers who have massively expanded their market share in the last few years. Here, change on the insurer’s side has to happen: Brokers shall no longer be seen as distribution channels, but rather treated as clients of the insurance company. Just like an industry association is more of a strategic client than a
sales channel that provides homogeneous portfolios on the basis of an insurer’s preferred offers and pricing, the broker has to be regarded as such, too. Long gone are the times in which the insurance company issued a broker’s execution orders for a particular customer.
Instead, the broker determines what action (whether renew- al, quotation or contract amendment) they intend to carry out with the policy holder. Thus, decisive for an insurer is not passively approaching broker cooperation, but identifying via broker segmentation those who show the greatest poten-tial for the insurer’s portfolio needs, and whose portfolio profitability matches tactics and strategy at the product level. Here the industry or company size that the broker focus- es on are also to be viewed as criteria.
From the insurer‘s own strategy to tailored measures in broker relationshipsSince brokers are considered clients, they will become more involved in the decision-making processes and marketing approaches than ever before. Ultimately, insurers – like al-ready the case between brokers and policyholders – must start to discontinue unprofitable relationships. The insurer’s limited resources do not allow them to manage all accounts the same way. Only the precise nomination of key accounts
1: Profitability in insurance in CHF thousands (LAA / F, UVGZ, collective accidents)
Source: Finma
Total premium accident insurance B2B (UVGO/F, UVGZ, collective accidents)
Total payments accident insurance B2B (UVGO/F, UVGZ, collective accidents)
Total loss ratio 1* accident insurance B2B (* Loss ratio 1, disregarded provisions, financial overview)
90%80%70%60%50%40%30%20%10%0%
2007 2008 2009 2010 2011 2012 2013 2014
3.0 mill.
2.5 mill.
2.0 mill.
1.5 mill.
1.0 mill.
0.5 mill.
0
synpulse synpulse Sales and Customer Management | 37 36 | Sales and Customer Management
2: Measures for a successful positioning in a competitive market
Source: Synpulse
Process Efficiency / Tool Support
Relationship Management
Account Planning & Tiering
Lead Management / New Business
Broker Management
Renewals Process
Alternative Distribution Channels
Christian SeidelManager (Synpulse USA)[email protected]
Patrick BühlerAssociate Partner (Synpulse Switzerland)[email protected]
Authors
3: End-to-end B2B CRM process
Source: Synpulse
Market Segmentation Client Tiering Account Planning
Broker
Renewal Contract Prioritization
Renewal Contract Implementation
Renewal Contract Management
Alternative Distribution
Channels
Lead Prioritization
Lead Development
Lead Management
Performance Reporting
Implementation of Client Retention
Measures
1 2 4
3.1
5.1 6.1 7.1
3.2
5.2 6.2 7.2
8 9
on the basis of a firm client strategy and account profitability grants success in short to mid-term.
Main criteria of broker / distribution-partner segmentation:
Size of policyholders
Preferred industry sectors for acquisition
Total profitability
Growth potential
Expectations to products
Once key accounts are identified, a further step is to examine their own understanding and that of the broker’s needs and goals. If this understanding exists, then the account rela- tionship is analyzed based on strengths and weaknesses. This way it can be identified that, for example, brokers great-ly appreciate sales and marketing support, but that there al-ways occur complaints over the settlement of claims. Based on the needs of the broker and the weaknesses of the rela- tionship first measures can already be deduced.
Make success measurable and achieve itHowever, before implementing measures, the own goals with the accounts have to be defined as measurable and assess- able targets. Quantitative objectives range from the number of broker interactions to profitability and the amount of premium from new business. Once actions are defined and
linked to the objectives, then a comprehensible and meas- urable annual plan can be compiled.
Now it is up to sales management to track progress and take corrective action throughout the year. Only structured account planning enables long-term and transparent expan-sion of strategic account relationships. Necessary efficiency is ensured by the right level of tool support. Modern CRM systems – via real-time feedback – provide a dialogue about the client situation between the strategic and operational units in order to find optimal solutions for insurers as well as customers and equally achieve objectives.
Increase efficiency in renewal processesIn particular, in terms of volume and profitability, the renew- al process as part of the insurance portfolio management is one of the most important and influencing drivers. Thus, it is crucial to actively control and steer the process. Nowadays the renewal process is broadly manual and impeded by media breaks. As a consequence, the success of renewals with respect to targets can only be retrospectively monitored at the end of the renewal season. A reasonable measure for process efficiency is provided by CRM tools which support the process by enabling real-time feedback and reports and therefore allow to actively control the process. CRM, in addi-tion, ensures that customer needs even if these contradict the renewal targets are considered. These needs can include changes terms of cover as well as increase or decrease of pre-mium and are managed consistently. Especially in the given, competitive market, flexibility constitutes an important component to achieve client loyalty.
Success through strategic segmentation, account planning, and the right level of tool supportIn order to survive in the B2B insurance market with standard products, the client and distribution partner relationships have to be redefined. Strategic segmentation and efficient account planning are essential to turn the sales process into
an active, efficient, and effective journey. This is the only way to achieve differentiation in this market currently governed by pricing. There is no time left to take rapid action in this competitive market. Both measures are valid entry points: business concepts ready for implementation and tool support.
MastheadThe Magazine is published three times a year. Articles can be accessed via www.synpulse.com. Published by: Synpulse Switzerland AG, Zurich | Editor: Synpulse Group | Realization: Synpulse Switzerland AG, Zurich | Printer: Feldegg Medien AG, Schwerzenbach/Zurich, using FSC-certified paper | Feedback and inquiries to: Synpulse Switzerland AG, Thurgauerstrasse 32, CH-8050 Zurich, phone +41 44 802 2000, fax +41 44 802 2001, [email protected] | Copyright: The reproduction of articles is permitted with the agreement of the publisher if the source is acknowledged. Articles by guest authors do not necessarily represent the opinion of the publisher. | Photos: Fotolia | Layout/illustration: Match Communications GmbH, Zurich
40 | Rubrik synpulse
Switzerland (Headquarters)Zurich
GermanyHamburg | Frankfurt
United KingdomLondon
SingaporeSingapore
Hong KongHong Kong
USANew York
