Competing With The Directs Field Sales Resource Center JD Powers Customer Insights Version 1.1 (July 2007)

Competing With Directs Based on Customer Insights Despite The Agressive Marketing Push By Directs. Agents Can WIN! According to JD Power customers want: more than price Excellent Service Proactive Contact Coverage Counseling Value! Agents Can Compete With The Directs By: Proactive Contact (Using Travelers Tools) Proactive Annual Coverage Reviews (Using Travelers Tools) Building Relationships Balance The Playing Field With Help From The Travelers Marketing Campaigns Using InSync Tools

Market Situation – Mature Slow Growth Trends Organic Growth Limited Can’t Build Demand “One Home/One Car = One Policy” Drivers & Households Grow at 1% Annually * AM Best,Bureau of Transportation Statistics, US Census Data

Market Situation – Increased Advertising Spending Competition Aggressively Using Media Advertising To Reach Your Customers DOUBLED Progressive Allstate If we go back to 2003, we can see that that the top players in the insurance category spent about $700 in total. Fast forward to 2006 and we can see the GEICO alone spent $xx while Progressive spent $xx. The advertising category itself is extremely dynamic… advertising spending in the auto/home insurance category increased almost 20% last year, while general insurance advertising only increased by x%. ANDREW… what are some other interesting soundbites re: the advertising category? SHARON – see AM Best data to quote market share of these players….answer re: Allstate spending as they pay commission as well We can see that our competitors are significantly spending to go after our customers in the advertising arena, let’s take a look at direct mail… State Farm Geico Source: Competitive Media Reporting 2006

Market Situation - Insurance Direct Mail Trends Competition Using Targeted Direct Mail To Reach Your Customers Direct Mail Volume Growing @ 4% per year to more than 765 Million Company 2005 GEICO State Farm Allstate Progressive Total 589 87 43 46 765 Million Here we can see that our top competitors are sending almost 800 million pieces of mail a year – that’s over two direct solicitations a year to our customers, and probably more with targeted modeling.. Consider this: the total volume of first class mail is actually down a couple points from 2000 to 2004… While the volume of Insurance direct mail solicitations is UP 4% Tremendously competitive marketplace! YOUR Customers will receive 8+ pieces of INSURANCE direct mail each year – From the COMPETITION!

What do consumers have to say? Can independent agents compete with these Players? What do consumers have to say? So, how are we feeling? Tough business we are in… Slow/no growth category – can’t create demand – people don’t even like to buy it nor have a need to buy extra product Distribution channel that’s being outspent every day from the big guys – and we are all going after the same consumers What are we to do? Do we give up? Can we compete against these big players? Let’s touch base with consumers first… one shared attribute of many successful companies is that they have their fingers on the pulse of their customers – what’s important to them, what drives their shopping/sales behavior, what drives their retention, what drives referrals, re-purchase and advocacy In order to get underneath these types of question, we purchased JD Power data last year and I selected a few slides to share with you from their studies, along with a couple from some customer research that we’ve conducted at Travelers. Although JD Power data relates to customer satisfaction for insurance carriers, some of the consumer insights are quite applicable to IAs because YOU control much of the customer interaction and YOU create much of the customer satisfaction…

Why Do Customers Leave. Price is Important, But NOT Everything Why Do Customers Leave? Price is Important, But NOT Everything! Service Is The Real Reason Why Most Leave..... In the absence of value customers will shop for price! We just saw some information on how our competitors are soliciting our customers… every day in almost every media…. This must mean that if we were to ask customers why they left, it was largely due to solicitations from other companies… Let’s see…. When JD Power asked customers who shopped last year to list the reasons why….being solicited came up as the 6th most often mentioned reason (Although the reference may understate the actual impact of it… they may not remember the ad, its not top of mind… its not necessarily driving folks to leave…when shopping they find that they may have a good thing going.. But when they decide to cancel, it’s almost always based on service or something within agents control. You control how many customers shop and choose to leave. What’s another reason why people shop? Anyone? Price – YES. Let’s see where that one came up… #5. Interesting… although price is critically important, it’s not everything What do we think the number one reason is that consumers mentioned most often as a reason to shop their insurance… Service! #2 – Lack of account rounding…#3 – Life events – which create shopping triggers and #4 – recommendations… which relates to service – good service = recommendations So, this is interesting, but why should we care about what JD Power has to say….. Source: J.D. Power and Associates 2006 Insurance Study

In The Absence of Value, Customers Will Shop For Price Agent Interaction & Relationship Building Creates Value, Loyalty & Satisfaction! % of Shoppers Overall CSI 1 2 3 1”Serial Shoppers” shopped in the past 12 months and intended on shopping again 2”Recent Shoppers” shopped in the past 12 months but do not intend on shopping again 3”Non-Recent Shoppers” shopped more than 12 months ago

Time Since Customer Was Contacted Auto Policy Review Proactive Agent Contact Drives Customer Satisfaction When you don’t interact -- satisfaction & value will suffer over time! Time Since Customer Was Contacted Auto Policy Review Source: J.D. Power and Associates 2006 Insurance Study

Customer Satisfaction Drives Business Results More likely to Recommend, Renew, & Remain Loyal Referrals I’ll tell you why, because, according to this JDPower study, customer satisfaction drives business results… it has a bottom line impact…. JD Power takes the top 25-30 carriers (anyone with over 1% share) surveys 500 of their customers, asking them 50-60 questions to ultimately prescribe a satisfaction index to each carrier based on five components. 2/3 mail and 1/3 internet, Spring each year, incented $2-5 as part of a panel. They then cross tab the satisfaction index to consumers propensity to renew, switch carriers and recommend to others. So, I bucketed the carriers into three tiers with Tier One having high satisfaction, tier two being medium and tier three being below average. Take a look at the first metric, % that would definitely renew…tier one companies have a x% higher incidence of customers that would definitely renew Now let’s look at the difference in the % of consumers that said they would not switch among top tier companies, vs. the lower tier companies. Finally what’s the number one source of new business – referrals right? That’s a bottom line number right? Let’s look at the % of customers that would definitely recommend among Tier 1 carriers…. So this is your best kind of virul marketing…. No cost… getting one customer getting to recommend you personally to their friends may be more effective than spending millions to bring in more customers.. High satisfaction carriers enjoy an advantage across all of these measurements. Source: J.D. Power and Associates 2006 Insurance Study

Customers Want Coverage Counseling Customer Coverage Counseling Can Even Mitigate Price Increases! % of Total Customers Index Scores Premium Change in the Last 12 Mths **Key Performance Indicator

IMPLICATIONS Customer Satisfaction Drives Business Results Agents Drive Customer Satisfaction Through Service & Interaction Customers Want Interaction Coverage Counseling Expertise Proactive Added Value Options

Travelers Provided Tools To Compete (Customers Want Proactive Contact, Coverage Counseling, and Value) Recommended Tools (One2One Program): One2One Retention – Proactive Timed Customer Contacts One2One Rounding – Coverage Counseling One2One Specialized Mailings – Relationship & Value Building Communications Recommended Tools (In-Sync Tools): In-Sync Marketing Program Examples

The One2One Advantage How One2One Creates An Agent Advantage Supports Business Imperatives Keeps an ongoing dialogue in highly competitive market place Increases Retention & Builds Customer Loyalty/Relationships Generate Revenue From Account Rounding & Cross Selling OPL’s Re-engage lost customers with Win Back communications Differentiate your agency from competition Unique program developed with Agents in mind Strategically timed mailings, segmented based on your book of business Promotes value of using an Independent Agent Coverage counseling, experience, individualized attention Have your own marketing department Turnkey communication solutions lets you focus on running your business

Proactive Value Building Customer Contacts The One2One Retention Program Proactive Value Building Customer Contacts Strategically Timed Communication Brand Promise Welcome Kit Re-affirms Purchase Decision Share of Customer Building Relationship Forming Questionnaire 2-way Dialogue Potential Sales Opportunity Mitigate Unhappy Customers Value Added Postcards Thoughtful Driven Contacts Pre-Renewal Consultation Evaluate Needs “Sales” Opportunity

Value Building Coverage Counseling The One2One Rounding Program Value Building Coverage Counseling Maximizing Relationships Through Communication Account Rounding Coverage Counseling Provides Value To Customers Auto To Home Savings Home To Auto Savings Provides Best Coverage Counseling For Non-Travelers As Well Offers Electronic Communication Customer Preferred E-mail Contact De-Mystify Insurance Customer Friendly Communications

Relationship Building Coverage Counseling Communications The One2One Specialized Mailing Program Relationship Building Coverage Counseling Communications Customer Specific Revenue Generating Mailings: Meet The Unique Needs of Customers Boat Insurance Flood Insurance Valuable Items Coverage Umbrella Coverage

Targeted Direct Mail Communications Use The Travelers Value Pack Insert Template To Get Your Own Ad Into The Hands of Customers & Prospects Available To You Through In-Sync Tools & AgentHQ

Leverage Your Local Presence To Drive Business Customize & Use The Travelers Door Hangers Target Condo & New Home Developments Local Students Can Do The Leg Work -- At A Low Cost. Sales Opportunities Abound Renters Home/Auto Rounding Endorsement (Water Back Up) Available Through In-Sync Tools & AgentHQ

Leverage Your Local Presence To Drive Business Use Customized Travelers Tent Cards Partner With Local Real Estate Offices, Auto Dealerships, Home Shows, Wedding Shows, etc. Sponsor local events where tent cards can be displayed. Sales Opportunities Abound New Movers & Renters Home/Auto Rounding Wedding & Valuables Available Through In-Sync Tools & AgentHQ

Four Simple Easy To Use Steps Beat The Directs With FREE e-Mail Communications Use The FREE Travelers e-mail Option. Stay connected to customers and communicate to them instantaneously. Available Through In-Sync Tools For up to 5 & One2One for a larger lists Four Simple Easy To Use Steps Need up to date….notify agents re: one to one annual reviews are good E&O protection…