Analysis and assessment of the IAG B2C Personal Insurance E-Commerce Project.

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Analysis and assessment of the IAG B2C Personal Insurance    E-Commerce Project


Table Of Contents        Page

1.        Executive Summary        

1        Introduction        

2        Overview        

2.1        Company        

2.1.1        History        

2.1.2        Organizational Structure        

2.1.3        Corporate Strategy        

2.2        The Industry        

3        Business Model Analysis        

3.1        Before eCommerce        

3.2        Current eCommerce Strategy        

3.3        How success is measured        

3.4        Products        

3.5        Marketing & Advertising Strategy        

3.6        Pricing Strategy        

3.7        Retail Channels        

3.8        Channel Integration Analysis        

3.9        Order Fulfilment        

3.10        Security        

3.11        CRM Value Chain Analysis        

3.12        Digital Strategy evaluation         

4        Competitors        

4.1        Market Overview, Trends and Statistics        

4.2        Domestic Competition        

4.2.1        Australia’s 5 biggest insurance organizations according to BRW Nov 2001        

4.2.2        Analysis of Competitor Internet Offerings        

5        Analysis Tools        

5.1        SWOT        

5.2        SWOT Matrix        

5.3        Affect of the Internet on the Industry Structure        

5.4        Channel Migration        

5.5        Gap Analysis        

5.5.1        Gaps in Business Focus        

5.5.2        Customer Interaction        

5.5.3        Technology        

5.6        Services Expected by Online Buyers        

6        Recommendations        

7        Conclusion        

8        Appendix A - Tables        

8.1        IAG Product listing        

8.2        Insurance Industry Thematics        

8.3        Australia’s biggest insurance organizations (BRW 1000 Nov 2001)        

8.4        World’s largest Insurance organisations. (Fortune 500 July 2002)        

 Francis Buttle Network SCOPE model        

8.6        Customer portfolio analysis model -need reference        

8.7        Dimensions of Customer loyalty        

8.8        Summary of IAG Financial history        

8.9        Global Insurance Trends        

8.10        Red Sheriff Report        

9        Appendix B – Internet Charts and Trends        

10        Appendix C – Online Quotes        


11        Appendix D        

11.1        Interview Notes        

11.2        Balanced Scorecard (as developed by Kaplan and Norton)        

12        Bibliography        

  1. Executive Summary

Insurance Group Australia (IAG) is major player in Motor and Home insurance and dominates the NSW market place. Through the NRMA brand it still has the edge in the B2C space that has been available since May 2000 and now needs to reconsider what it will do to maintain that position, as competitor offerings are close behind. Web enabling the remainder of its brands is an obvious choice. IAG owns or controls most of its 'Value Chain' to great effect but needs to go one step further and get to know individual customers better, through more effective datamining.  For instance not all of the male 18-25 group are bad drivers; multi variant rating could be used to identify the correlation between age, vehicle types and postcode.

The recently announced loss of $25 million will mean an ongoing focus on costs which should mean that eCommerce opportunities are re-evaluated as internet transaction costs are lower. As a business unit eCommerce has now been incorporated into 'business as usual', so it no longer a key driver in its own right with a separate budget.  It should not be assumed that everyone understands the potential for B2C. 'Getting it Right', the customer focussed initiative should however catapult eCommerce back to the forefront, as one of the key opportunities already identified is the lack of a 'single view of the customer.' At IAG staff cannot simultaneously see all of a customer's information for personal insurance, business, health and retirement products. Similarly to date here has been little cross selling, although Karen Baylis mentions this in her presentation [xxii] but customers are offered a bundling discount of up to 12.5%. This area has great potential especially as Suncorp Metway has just implemented a CRM platform across its entire customer base, which it hopes will "increase its ability to cross sell products." Staff will see a summary page of customer's transactions so they will "know immediately the customers involvement with the bank."

Other traditional strategies such as extending core competencies into say the Public Liability arena will also be pursued along with overseas acquisitions.

Parallel to this would be the rationalisation of the many underwriting systems that exist.

As an insurer IAG is risk averse and has therefore avoided the four perils of CRM by proceeding cautiously. Reicheld et al  list these as

  • Implementing CRM before creating a customer strategy
  • Rolling out CRM before changing your organistion to match
  • Assuming that more CRM technology is better
  • Stalking, not wooing, customers

Importantly they have in place effective leadership and change management that are critical to success.  Rod Bryan of PwC "says that while CRM is definitely an all or nothing proposition…. it is about committing to a way of doing business, not to a set of tools. The key to success lies in the strategy, not the software" [i] IAG has found right the balance between the two.


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  1. Introduction

This analysis and assessment will critically evaluate the current Business to Consumer (B2C) strategy of IAG, compare it to the strategies of major competitors and make recommendations for future improvement of the strategy.

The scope of the analysis will encompass the current B2C model of IAG, in particularly the motor and home insurance products of the Personal Insurance sector. It will concentrate on the Internet offering, which is regarded as the most web enabled in the world. For clarity a complete product listing is shown in Appendix A Table ‎8.1.

Francis Buttle defines CRM as the "intelligent management of the actual and potential customer base with a view to generating optimal long-term customer and company value."  IAG is a customer centric organization that is leveraging off its insurance segmentation expertise to identify groups of strategically significant customers, by using the Internet not only as a cost effective channel but also to provide a wealth of information that can readily data mined.  This project will investigate these assumptions, consider whether is it doing so to greatest effect and make recommendations for the future

The terms eBusiness and eCommerce are used in this report, as they are terms used by IAG to define electronic commerce.

  1. Overview

  1. Company

  1. History

IAG is the largest general insurance company in Australia and New Zealand, with 3.8 million and 700,000 customers respectively. It has 14% share of the $20 billion gross written premiums (GWP) in 2000/1 and 42% of motor vehicle (MV) insurance market share (source APRA). Historically the business has grown from the National Roads and Motorists Association (NRMA), which started in 1923 in NSW; hence MV premiums comprise 47% of GWP, and NSW accounts for 61% of total GWP. IAG dominates the NSW market with 55.9% of comprehensive car and 41.5% of household building insurance.

Chart 1 IAG's Business Mix –                                 Chart 2 IAG's Geographic Mix -

Gross Written Premiums 2000/1                                 Gross Written Premiums 2000/1

                                Chart 1                                                                Chart 2

NRMA Insurance Limited was established in 1925, first with MV insurance, followed in 1942 by Compulsory Third Party (CTP) and in 1969, household insurance. In July 2000 it was 'demutualised' and listed on the Australian Stock Exchange a month later. It continues to share the NRMA brand with NRMA Member Services, the mutual roadside breakdown organization, and is unique in Australia in so doing. Similarly they share a joint home web page and are closely linked through Business Relationship agreements. The company was renamed IAG in January 2002 and is currently undergoing significant change following the appointment in 2001 of James Strong, ex Qantas, as Chairman and Mike Hawker, ex Westpac, as CEO. Both of these organisations are strongly web enabled in the B2C channel and so it is likely that there will be further development in this area in IAG.

"IAG operates under a number of brands - insurance brands that are generally the strongest in their region"

  • NRMA in NSW & ACT
  • SGIO in Western Australia
  • SGIC in South Australia
  • Circle & State in Tasmania
  • Clearview Retirement solutions
  • 70% of Insurance Manufacturers Association (IMA) through which it has formed a strategic alliance with RACV in Victoria
  1. Organisational Structure

IAG has a hybrid structure with departments organised on a traditional functional basis, but is also 'diamond shaped' and part 'virtual network', for the B2C segment. The end vision is for a national model based on the 'virtual network.'[xxii]. Also it has a Group Executive Culture and Reputation, Sam Mostyn, rather than the traditional HR Director role. This is because it recognises that the brand is about more than just the people who deliver it but also about trust and integrity. Customer contact takes place through many direct channels while the related business customers (RACV, IMA, Member Services) are managed by account managers, and this latter part of the organization is 'bow tie' shaped.

  1. Values

IAG's mission is "to be the trusted organisation people turn to for help with their motoring, insurance and retirement services needs."   The CEO often refers to " a set of organisational values, (its something we all need to create together)"  They are honesty, teamwork, meritocracy, transparency and social responsibility.

Sam Mostyn says "if we keep our promises to our customers, our people, the community and to all our stakeholders, from there reputation will flow."  Her focus is on ‘corporate sustainability’, that is “to be profitable without losing human values.”  IAG acknowledges that its values have been shaped by "our staff, customers and shareholders" ix and places great emphasis on its sense of history which together with its staying power is an important attribute in the insurance market. The last value is reflected in IAG's sponsorship and community programs for crime prevention and injury prevention

  1. Corporate Strategy

IAG "is pursuing the following business strategies:

  • Building competitive positions in general insurance and broadening our insurance related product range
  • Growing the retirement solutions business
  • Developing our eCommerce capabilities
  • Enhancing our brands and customer relationships " ix

eCommerce is therefore an integral part of its strategy. IAG attributes its success to "offering customer driven products and services"  and its stated aim is to "become even more focused on building its reputation as serving the community." ix

IAG has three priorities for its core business, including home, motor, CTP, Workers Compensation and Asset Management:

  • Focus on customers
  • Make operations more efficient
  • Reduce claims costs        

Mike Hawker (CEO) has a financial services background but has stated "I have no intention of taking us back into that space."  The intention is to build on the NRMA brand and claims management expertise. At the CEO forum in May 2002 he stated that the focus was on general insurance, direct distribution and strengthening core capabilities. The financial target includes doubling GWP by 2007 and maintaining an AA+ category rating. Growth is anticipated through:

  • Natural premium growth
  • Increase in market share through up selling
  • Entrance to new general insurance pools
  • Underwriting of government schemes
  • Market consolidation
  • International expansion  (has 20% of safety insurance in Thailand)
  • Continued expense management disciplines

IAG sees its "core competencies as:

  • Personnel skilled in insurance
  • Extensive direct distribution
  • Considerable database of information about insurance risk
  • Strong risk management framework
  • Strong claims management skill set" [v]

According to the Project Program Director – Sales and Marketing (Ron Payne) the IAG could diversify into other English speaking markets that have a British system of law and into public liability insurance, though this latter is not a current area of expertise. Suncorp Metway have however just announced that they are entering this market.  Significant opportunities exist for growth especially via the Internet as take up has been slow outside of Sydney and Melbourne. Currently only 52% of metropolitan residents over 18 access the Internet. [xxiv]

  1. The Industry

Worldwide the insurance industry is in a state of flux following the September 11 terrorist attacks, the continuing disclosure of significant fraudulent accounting practices by large corporate entities such as Enron, and higher premium limits set for syndicates associated with Lloyds of London. The aforementioned events have had an adverse impact on the Australian insurance market which has also been impacted by local events such as the collapse of HIH and the substantial increase in public liability premiums and builders indemnity cover. These events have “caused a severe decline in the ability of insurers to offer coverage for a plethora of risks " and has allowed "insurers to raise prices and restore their profitability."

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The above has resulted in some businesses self-insuring for all but catastrophic events and implementing stricter risk management policies. Additionally the Australian Prudential Regulation Authority (APRA) has introduced higher capital requirements, effective July 2002, which will have the effect of reducing the number of players in the insurance market particularly the small operators. The insurance industry is highly regulated with "APRA responsible for prudential supervision and the Australian Securities and Investment Commission (ASIC) which is responsible for consumer protection regulation " 

This overview of the current state of the insurance industry presents several opportunities for well-managed insurance businesses. ...

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