How to Determine the right Channel for the Right Customer Trond Bergestuen VP Commercial Marketing, Gjensidige (Norwegian Mutual) Vienna, 17 September 2009

How to Determine the Right Channel for the Right Customer2 Agenda Determine who are the decision makers in the purchase of insurance in the SMEs Assess how customer channel preference varies according to the situation Understand what factors affect their decision process How to create the optimal customer journey

How to Determine the Right Channel for the Right Customer3 New Business Areas in Norway General Insurance Norway 2,040 New Businesses 753 General Insurance Nordic/Baltic 892 Total: 3,685 Customers Leading Market Position in Norway Market Shares 1) Total number of customers 992,000 (30 June, 2009) –897,000 in the private segment –95,000 in the commercial segment Headcount 30 June 2009New Businesses Pension and savings (Gjensidige Pensjon og Sparing) Online retail bank (Gjensidige Bank) Health care services provider (Hjelp24 NIMI) 1)The Norwegian Financial Services Association (“FNH”), general insurance per 30 June Segments are based on company definitions, but drawn directly from FNH report. Gjensidige market shares include Tennant 2)Products sold to private and agricultural customers. Product groups include: motor, property, personal accident, agriculture and other (travel insurance, leisure boats and animals) 3)Products sold to SME and corporate customers. Product groups include: motor, property, personal accident, liability and marine Diversification into Nordic/Baltic Region LF’s Baltic operations (2H-2009, contingent upon regulatory approvals) RESO Europa (Baltics, May-2008) Fair and KommuneForsikring (Denmark, Mar-2006, Jan-2007) Parekss (Baltics, Sep-2006) Tennant (Norway and Sweden, Aug- 2007) Nordic/Baltic OperationsFY2006 (GWP)6M2009 (GWP) Nordic/Baltic 2.6% Norway 97.4% Nordic/Baltic 22.3% MNOK 2,239 Norway 77.7% MNOK 7,780 Snapshot Gjensidige Total Market29.1% (#1) –Private 2) 27.7% (#1) –Commercial 3) 32.5% (#1) (Same market share as If.. within Commercial)

How to Determine the Right Channel for the Right Customer4 Key Figures (MNOK) Earned premiums general insurance, net of reinsurance Underwriting result general insurance Net income from investments Combined ratio * * * The 2006 and 2007 figures include net financial items in Pension and savings and Online Retail Banking. As from 2008 only financial items that relates to the return on the company portfolios in Pension and savings and Online Retail Banking are included in net income from investments (i.e operating items are included in Operating income and Claims, loss etc)

How to Determine the Right Channel for the Right Customer5 Cost Discipline Continuous Improvements A continuous focus on efficiency in the Norwegian general insurance operations has yielded results Reduction of employees in the Norwegian general insurance operations from approx. 2,750 in 1999 to 2,040 at the end of Q Number of branch offices in Norway reduced from 151 in 2005 to 54 at the end of Q Cost Ratio improvement in the Norwegian general insurance operations in the same period; starting at 30.6% in 1999 improved to 16.4% in 2008 (16.8% as of Q2 2009) GWP growth from MNOK 7,000 in 1999 to 13,131 MNOK in 2008 A.D. Little: Gjensidige is among the top ten most efficient non-life players in Europe

How to Determine the Right Channel for the Right Customer6 Agenda Determine who are the decision makers in the purchase of insurance in the SMEs Assess how customer channel preference varies according to the situation Understand what factors affect the decision process How to create the optimal customer journey

How to Determine the Right Channel for the Right Customer7 Decision makers in the purchase of insurance Source: Market study SMEs, Norway, 2008 n=400

How to Determine the Right Channel for the Right Customer8 Agenda Determine who are the decision makers in the purchase of insurance in the SMEs Assess how customer channel preference varies according to the situation Understand what factors affect the decision process How to create the optimal customer journey

How to Determine the Right Channel for the Right Customer9 What factors affect the decision process? Brand Price Providers industry insight Risk management advice Key account manager Local branch Internet services

How to Determine the Right Channel for the Right Customer10 What factors affect the decision process Source: Conjoint analysis, SME segment, Norway PA Consulting Group, 2006 n = 409 Attribute importance when purchasing insurance Internet services Local branch Industry insight Risk mgmt. advice Brand Key account mgr. Price

How to Determine the Right Channel for the Right Customer11 n= 409 Relative importance (sum = 100) There are small differences in the preferences when we segment based on geography Segmentation by geography Price Brand Internet services Local branch Key Account mgr. Industry insight Risk mgmt. advice East Inland South West North

How to Determine the Right Channel for the Right Customer12 Relative importance (sum = 100) The difference in preferences is noticeble when we segment based on industry n= 409 Segmentation by industry Price Brand Internet services Local branch Key Account mgr. Industry insight Risk mgmt. advice Financial services Healthcare services Manufacturing Industry Construction, transportation, communcation Retail, hotels and restaurants Public services and education Primary industries

How to Determine the Right Channel for the Right Customer13 n= 370 The differences are also noticable when we segment based on size (premium paid) Relative importance (sum = 100) Segmentation by size Price Brand Internet services Local branch Key Accout mgr. Industry insight Risk mgmt. advice Micro Small Medium Corporate

How to Determine the Right Channel for the Right Customer14 The average decision maker does not exist! Five needs based segments: Price Segment: 16% Competence Segment: 29% Local Relation Segment: 25% Internet Segment: 9% Key Account Segment: 22% Relative Importance (sum = 100) Needs based segments Price Brand Internet services Local branch Key Account mgr. Inudstry insight Risk mgmt. advice Price Competence Local relation Internet Key account Source: Conjoint analysis, SME segment, Norway PA Consulting 2006

How to Determine the Right Channel for the Right Customer15 The Price Segment selects almost entirely based on price Relative importance (sum = 100) Price (16% of sample) Segment 1: 16% in sample Price Brand Internet serv. Local branch Key Account mgr. Industry insight Risk mgmt. advice Source: Conjoint analysis, SME segment, Norway PA Consulting 2006

How to Determine the Right Channel for the Right Customer16 For the Competence Segment it is important to have a contact person that knows the customer’s industry Relative importance (sum = 100) Price Brand Internet serv. Local branch Key Account mgr Industry insight Risk mgmt. advice Segment 2: 29% in sample Source: Conjoint analysis, SME segment, Norway PA Consulting 2006

How to Determine the Right Channel for the Right Customer17 The Local Relation Segment prefers a contact person locally and a brand they trust Relative importance (sum = 100) Segment 3: 25% in sample Price Brand Internet. Serv. Local branch Key Account mgr Industry insight Risk mgmt. advice Source: Conjoint analysis, SME segment, Norway PA Consulting 2006

How to Determine the Right Channel for the Right Customer18 For the Internet Segment price is an importance factor but internet services are also important (self service) Relative importance (sum = 100) Source: Conjoint analysis, SME segment, Norway PA Consulting 2006

How to Determine the Right Channel for the Right Customer19 The Contact Person Segment would like a key account manager that can handle any issue/situation Relativ viktighet (sum = 100) Source: Conjoint analysis, SME segment, Norway PA Consulting 2006 Segment 5: 22% in sample Price Brand Internet serv. Local branch Key Account mgr. Industry insight Risk mgmt. advice

How to Determine the Right Channel for the Right Customer20 Segment composition varies by population density Needs based segments by population density 0 % 20 % 40 % 60 % 80 % 100 % RuralSmall town Medium town Large town Key account Internet Local relation Competence Price

How to Determine the Right Channel for the Right Customer21 Agenda Determine who are the decision makers in the purchase of insurance in the SMEs Assess how customer channel preference varies according to the situation Understand what factors affect the decision process How to create the optimal customer journey

How to Determine the Right Channel for the Right Customer22 In order develop an effective service model we need to understand in what situations the customer wants to use the different channels Up to this point we have focused on attributes when the decision maker selects a provider of insurance It is also important to understand the customers’ preference related to service in different situations Situations with need for contact Service channel BranchInternetPhone Buy ProposalComplaintUpdateClaim Seek info.

How to Determine the Right Channel for the Right Customer23 Choice of channel depends on the situation, but calling a contact person is most often the preferred channel Total sample Internet/ /mail Branch/Visit Phone Complaint Complex claim Simple claim Report claim Update Purchase Proposal Risk mgmt. advice Seek information Internet Letter/fax Local branch KAM visit Call center Contact person Broker Respondent could indicate several channels for each situation, therefore sum > 100

How to Determine the Right Channel for the Right Customer24 Local relation and Internet segments have very different servicing preferences Lokal relation segment Internet Segment Internet/ /mail Branch/Visit Phone Complaint Complex claim Simple claim Report claim Update Purchase Proposal Risk mgmt. advice Seek information Complaint Complex claim Simple claim Report claim Update Purchase Proposal Risk mgmt. advice Seek information

How to Determine the Right Channel for the Right Customer25 Agenda Determine who are the decision makers in the purchase of insurance in the SMEs Assess how customer channel preference varies according to the situation Understand what factors affect the decision process How to create the optimal customer journey

How to Determine the Right Channel for the Right Customer26 The use of field sales, the phone and the internet as direct sales tools SegmentMicroSmallMediumCorporate Premium/ complexity

How to Determine the Right Channel for the Right Customer27 The use of field sales, the phone and the internet as direct sales tools SegmentMicroSmallMediumCorporate Premium/ complexity Sales/ service Call centerCorporate unitField sales Effective sales and service channel for micro and small segment (phone, ) Tailored personal service to larger customers by local sales force Specialist service to Corporate customers

How to Determine the Right Channel for the Right Customer28 The use of field sales, the phone and the internet as direct sales tools SegmentMicroSmallMediumCorporate Premium/ complexity Sales/ service Call centerCorporate unitField sales Effective sales and service channel for micro and small segment (phone, ) Tailored personal service to larger customers by local sales force Specialist service to Corporate customers Roles Inbound Outbound Service consultants Key Acc.Mgr. Brokered customers Key Acc.Mgr. Service consulants Service of indirect customers (through) brokerage houses

How to Determine the Right Channel for the Right Customer29 The use of field sales, the phone and the internet as direct sales tools SegmentMicroSmallMediumCorporate Premium/ complexity Sales/ service Call centerCorporate unitField sales Effective sales and service channel for micro and small segment (phone, ) Tailored personal service to larger customers by local sales force Specialist service to Corporate customers Roles Inbound Outbound Service consultants Key Acc.Mgr. Brokered customers Key Acc.Mgr. Service consulants Service of indirect customers (through) brokerage houses Internet and Log in services

How to Determine the Right Channel for the Right Customer30 How to create the optimal ”customer journey” Contact: Purchase Servicing Renewal The customer ”travels through” different channels Face to face Phone/mail Internet Customer lifetime Customer satisfaction Loyalty Profitability Example Segment x

How to Determine the Right Channel for the Right Customer31 Tusen takk! (A thousand thanks!)