Effective distribution strategies to boost productivity and sales

Insurance sales via Distributive channels – „Dunav Osiguranje“ a.d.o.

Vienna September 2009.Vienna September 2009.

EFFECTIVE DISTRIBUTIONSTRATEGIES TO BOOST PRODUCTIVITY AND SALES

Margerita BoskovicDUNAV Insurance Company


Vienna September 2009.

Agenda:

1.Structure of channels developed on the Serbian market

2.Focus on profitable channels and actions in that matter

3.Balanced development of internal and external sales

4.Differences between domestic market and foreign market of insurance via distribution channels



...and the most significant indicator is the continous growth since year 2004.

2004 2005 2006 2007 2008 2008 Mill.EUR

TrendBill. RSD

Global premium income 22,6 34,7 38,3 44,8 52,2 580Life Premium 1,7 3,3 4 4,9 6,3 70

Share in Global premium 7,4% 9,5% 10,6% 11,0% 12,2% 12,2Non Life premium 20,9 31,4 34,3 39,8 45,8 508,9Insurance density € 38 € 55 € 65 € 77 € 80 € 80Life insurance density € 3 € 5 € 7 € 8 € 10 € 10Premium share in gross domestic product 1,6% 2,1% 1,9% 1,9% 1,9% 1,9%

Estate 30,8 46,4 56 70,6 84,8 942,2Net assets 15,6 18,6 20,7 24,7 25,3 281,1Technical reserve 11,5 22,9 28,9 39,5 51,5 572,2Number of insurance companies 40 19 17 20 24Number of employees 5407 7283 7876 9697 11713



AMOUNT OF INSURANCE PREMIUM

DUNAV SERBIA DUNAV SERBIA



TYPES OF INSURANCE PRODUCTS IN SERBIAN MARKET

Serbia



PREMIUM STRUCTURE

Gross premium by types of insurances in the first trimester of 2007. and 2008. quarter I

Property Motor

CascoOther non‐life insurance

Life Insurance



•Our financial sector did not operate with complex financial instruments, and was not plagued with so called toxic assets.

•IMF forecast: Serbia will record 2% of GDP decrease in 2009;

•Activities in the next period should be focused on: development and improvement of risk management

functions UW developing in the selling policies process strengthening corporate management, that

requires education of insurants and improved sales network, also all kind of distributive channels

FINANCIAL CRISIS IMPACT ON THE SERBIAN INSURANCEMARKET



Primal strategic directions which contain all of the standard and nonstandard products:

creating packages ‐ better image of company thatoffers an integrated product and services

Improvement of cross‐selling and up‐selling techniques of selling – better focus on the client

developing of distribution channels – to concentrateon comparative advantages

CRISIS IMPACT ON INSURANCE ‐ DUNAV



Agenda:

1.Structure of channels developed on the Serbian market2.Focus on profitabile channels and action in that matter3.Balanced development of internal and external sales4.Differences between domestic market and foreign market of insurance via distributive channels



Sales Channels according to Legal Act:

• INTERNAL – sales force • EXTERNAL:‐Brokers ‐ 32‐Legal Entities ‐ 65‐Physical Entities ‐ Enterpreneurials ‐ 123‐Banks ‐ 13‐Tourist Agency ‐ 1‐800 Physical Entities licenced in insurance.

Additionally, insurers tend to develop alternative channels essential for segmentated clients, various by structure and types of sales and consistant with the needs and comfort aproach to the client.

STRUCTURE OF CHANNELS DEVELOPED ON THE SERBIAN MARKET



DISTRIBUTION CHANNELS



Elements of encouragement ambient in insurance:a)Tax deductions in part that is in correlation with the development of life insurance;b)Expanison of distributive channels ‐ sales force by legal changes that are expected in the following period.

Main goal of these changes is to increase the number of employees, it is assumed that 5000 people can be educated in life insurance sales, therefore this can be practised as an additional business (current legal stand inhibit insurers from having any additional practise).

SALES FORCE



Agenda:




Dunav evenly developes external and internal network guided by the following principles:

1.Maximum usage of advantages in internal network expertise (UW capacity, claim adjustment, extended network), with the concern on profitabillity of internal network.2.Operating with large number of external network sales – conditioned by the structure and client demands as well as actions on the market;3.In the process of Company transformation focus has altered from product to client. Client segmentation has conditioned defining sales channels determening which is the best way of aproaching a certain client category.

FOCUS ON PROFITABLE CHANNELSAND ACTION IN THAT METTER



• Internal network – 30% in the MTPL area and 50% in other types of nonlife insurance• Main objective is to increase sales via internal network using the following tools:Sales plans and defining product mix (for empolyees) Cross sell tehnique, education Recuperation of businesses that maintain MOT’sInvesting in our own capacity, in developing our front desk sales, instalation and purchasing new Tehnical inspections (MTPL) of the highest standards

Maximum usage of advantages in internal network expertise



DISTRIBUTION CHANNELS

Client Segmentation and distributive channels eligable for sales:

Individual segmentSmall and medium businesses segment

Large Commercial Clients

“Dunav” Sales network “Dunav” Sales network “Dunav” Sales networkMOT’S Independent Agents Independent AgentsIndependent Agents Brokers BrokersMunicipal utilities Leasing companiesAssociations AssociationsTravel agencies Call centersCall centers InternetInternet BanksBanksMobile phones



Individual Small & Medium Businesses

Large comercial utilities

Products / Segment

Automobile liability insurance

Hard Asset

General liability

Accident

Travel insurance

Life insurance

Pension insurance

Health insurance

Product liability

Farming insurance

Marine insurance/Cargo

Machine breakage insurance

Group Accident insurance

Group Health isnurance

Group Life insurance

Group Pension insuranceMain product

Aditional product

Periodical product

Unnecessary product

DISTRIBUTION CHANNELSPRODUCTS BY SEGMENT



Product importance Products Sales network. "Dunav"

Vehicle Inspection

Agents (independent)

Brokers Companies/Associations

Leasing companies

Municipal Utilities

Banks Call centres

Internet Travel agencies

Very importantAutomobile liability insurance

Very important Estate

Very important General Liability

Medium important Accident insurance

Travel insurance

Less important Life insurance

Less important Pension insurance

Less important/out Health insurance

Medium important Product liability

Very important Farming insurance

Medium important Marine insurance/Cargo

Medium importantMachine breakage insurance

Very important Group Accident inurance

Less important/out Group Health isnurance

Medium important Group Life insurance

Medium important Group Pension insurance

Main channel

Additional channel

Periodical channel

Future chanell

Unnecesary channel

DISTRIBUTION CHANNELS AND PRODUCTSBY SEGMENT: INDIVIDUAL



Product importance Products Sales network. "Dunav"

Vehicle Inspection



Leasing companies

Municipal Utilities

Banks Call centres




General Liability

Very important Accident insurance

Medium important Travel insurance

Medium important Life insurance

Less important Pension insurance

Less important/out Health insurance

Product liability

Medium important Farming insurance

Medium important Marine insurance/Cargo

Medium importantMachine breakage insurance

Group Accident inurance

Group Health isnurance

Group Life insurance

Group Pension insurance

Main channel

Additional channel

Periodical channel

Future channel

Unnecesary channel

DISTRIBUTION CHANNELS AND PRODUCTS BY SEGMENT: SMALL AND MEDIUM BUSINESSES



Product importance

Products Sales network. "Dunav"

Vehicle Inspection



Leasing companies

Municipal Utilities

Banks Call centres




Very important General Liability

Accident insurance

Travel insurance

Life insurance

Pension insurance

Health insuranceMedium important Product liability

Very important Farming insuranceMedium important Marine insurance/CargoMedium important

Machine breakage insurance

Medium important Group Accident inuranceLess important/out Group Health isnuranceMedium important Group Life insuranceMedium important Group Pension insurance

Main channel

Additional channel

Periodical channel

Future channel

Unnecesary channel

DISTRIBUTION CHANNELS AND PRODUCTSBY SEGMENT: LARGE UTILITY USERS



Agenda:




SHARE OF EXTERNAL SALES CHANNELS IN COMPANIES GROSS PREMIUM

External sales channels gross premium: 7.353.358.000 din.Companies gross premium: 15.142.985.426 din.

External sales channels gross premium: 7.353.358.000 din.Companies gross premium: 15.142.985.426 din.



What determens insurance market in Serbia is high presence of Motor third personel liabillity (MTPL) –30% of the total premium is generated from MTPL.

Sales structure of MTPL:• 70 % via external sales channels – agencies and tehnical inspections (MOT)• 30% is sold via internal network.

BALANCED DEVELOPMENT OF INTERNAL AND EXTERNAL SALES



The only way in conducting a concept of enhancement market share and cost decline is investing in our own capacity:• Front desk salesFront desk invesments Development of Precompensation system• Sales channels of „Dunav Auto“Recuperation of businesses that maintain MOT’s Instalation and purchasing of new Tehnical inspections in

cooperation with „Dunav Auto“

BALANCED DEVELOPMENT OF INTERNAL AND EXTERNAL SALES



Agenda:




• Brokers – relatively new channel on Serbian market• Problem characteristics of MTPL – MOT• Banking insurance is used for non‐life products selling

DIFFERENCES BETWEEN DOMESTIC MARKET AND FOREIGN MARKET OF

INSURANCE VIA DISTRIBUTIVE CHANNELS



• Brokers – relatively new channel on Serbian marketPreferences:

Rarely extrapole for physical entities Mostly clients are taken by the insurer





• Concerning Tehnical inspections

obsolete Motor pool (around 2 million vehicles –average age of the vehicles is 12 years)MOT’s are conducted every year appliance of the new legal act that standardise the rules of tehnical inspections (MTPL)





It still in its conception allthough in the end of the year 2006. it was enabled by an legal act for the banks to do business in presenting insurance.Characteristics and variety in relation to the foreign market:a)This sales channel is more succsesfull in non life insurances and thereby is uprising;b)Life insurances are sold less trough this channel for multiple reasons:•Low level of developing in life insurance due to historical reasons (inflation, war, etc);•Life insurance policy is not a liable element with credit products.Productivity trough banks sales is 2 times larger in relation with the traditional agent network.

• Bankaassurance





Asumption for good cooperation between Banks and insurers is contribution and benefit for both sides. Foreign insurers in cooperation with foreign banks that are present on the domestic market use the same mechanism and similar is with the leading domestic insurance „Dunav Osiguranje“.

Partner Provides Gain

Bank• Brand• Client base/distribution• Complementary products

• Cross sales income• Additional barrier of client exiting

Insurer • Expertise in insurance and damage costs• Capacity in risk bearing

• Brand and client base access • Margin on the core business

Client • Loyalty to the Brand• Keeping record of other products

• Adapted products that provides magnitude for money from a reliable provider of services



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Effective distribution strategies to boost productivity and sales