Product Design 101: Developing Products That Cater to Client’s Needs

1. Product Design 101: Developing Products That Cater to Client’s Needs Calvin Foo CFP Asia Regional Head Financial Advisory & High-Net-Worth Development

2. Agenda • Product Strategy • Different Stakeholders’ Roles & Points of View • Client Segmentation • Client Life Cycle • Case Studies • Singapore – ASEAN Wealth Management Hub • Bancassurance – Multiple products for multi-channel distribution • The FMCG Approach – to simplified product marketing • Micro-insurance – one countries success

3. Objective Discuss the strategy behind designing products for the client

4. Developing Products That Cater to Client’s Needs First issue • most clients don’t know what they need Second issue • some insurance companies are weak at marketing Third issue • some insurance companies have reverse strategies Fourth issue • some insurance companies don’t tend to align the interests of clients, distributors and the finance/actuarial operations…..each may have their own personal agendas Fifth issue • regulation is not embraced

5. Agenda • Product Strategy • Different Stakeholders’ Roles & Points of View • Client Segmentation • Client Life Cycle • Case Studies • Singapore – ASEAN Wealth Management Hub • Bancassurance – Multiple products for multi-channel distribution • The FMCG Approach – to simplified product marketing • Micro-insurance – one countries success

6. Strategy • Starts and finishes with the customer • Is aligned to product (differentiated where possible) • Distribution and the who’s, the where’s, the how’s and the when’s, is how you execute the strategy • The definition of marketing: "the management process that seeks to maximize returns to shareholders by developing relationships with valued customers and creating a competitive advantage.“ • Product→Solution • Promotion→Information • Price→Value • Place→Access

7. Constructive criticism helps marketers adapt offerings to meet changing customer needs.

8. Product Positioning Influencing Factors for Product Design Existing Product Range Sales Competence of Distributor Technology(POS, Underwriting, MI, Web-site) Product Positioning Profitability Fee Income (Up-front and trail)Persistency Marketing / After-sales Service Facilities Competition(Insurers and Fund Houses) Clients’ Needs / Target Group (Clients) Regulation (Tax System, ILAS) 8

9. Product Strategyfrom Cradle to Grave……. Starts with the Client Ends with the Client

10. Life expectancy when state pensions were first introduced…matching needs to expectation!! “ WHEN Otto von Bismarck introduced the first pension for workers over 70 in 1889, the life expectancy of a Prussian was 45. In 1908, when Lloyd George bullied through a payment of five shillings a week for poor men who had reached 70, Britons, especially poor ones, were lucky to survive much past 50. By 1935, when America set up its Social Security system, the official pension age was 65 - three years beyond the lifespan of the typical American. State-sponsored retirement was designed to be a brief sunset to life, for a few hardy souls.” - “The End of Retirement”, The Economist, Jun 25th 2009

11. Singapore philosophy… “ A universal problem we had to resolve was retirement benefits or pensions when a worker became too old to work. In Europe and America, the government provided these pensions, paid by taxpayers. We decided that every worker should accumulate his own savings in the CPF for old age” - Minister Mentor Lee Kuan Yew, in his memoir “From Third World to First”

12. Product StrategyActuary’s Role Deals with the financial impact of risk & uncertainty

13. Product StrategyDistributor’s Role Sells, solicits & negotiates for compensation

14. Product StrategyClient’s Role Achieve financial security & independence for self & dependents

15. Product StrategyDifferent Stakeholder’s Point of View • Actuary • Risks, Pricing, Experience, Profit • Distributor • Features & Benefits, Market Competitiveness • Client • Funds for Major Illness Protection, Peace of Mind

16. Product StrategyDifferent Stakeholder’s Point of View • Actuary • Risks, Pricing, Experience, Sustainability of Future Bonuses • Distributor • Features & Benefits, Market Competitiveness • Client • Funds for retirement, Peace of Mind

17. The Customer Franchise Understanding the customers’ product and service preferences drives the creation of offers and needs-based approaches that are relevant and seamlessly integrated Secure my future & reduce my risks Give me peace of mind Save time for me Help me enjoy my life Simplify my life • Lifestyle needs • Security • Life-stage needs • Long-term relationship • Household budgeting • Financial planning • Asset management • Tailored products • Financing • Retirement planning • Emergency planning • Disaster planning • Best of breed product • Charges transparency • Fair choices • Trust and integrity • Demystified guidance • Convenience • Non-financial help • Complete delegation for managing assets and liabilities • One-stop shop • Anytime, anywhere • Prompt service • Flexible options • Non-financial needs • Innovation • Financial planning • Prestige & exclusivity • Performance • Value for money • Account aggregation • Entrepreneur management • Long term relationship • Simple administration • Integrated services • E-payments • Product aggregators • Automated optimisers Long term products require an ongoing relationship with the distributor and insurer and may require specialised servicing.

18. Agenda • Product Strategy • Different Stakeholders’ Roles & Points of View • Client Segmentation • Client Life Cycle • Case Studies • Singapore – ASEAN Wealth Management Hub • Bancassurance – Multiple products for multi-channel distribution • The FMCG Approach – to simplified product marketing • Micro-insurance – one countries success

19. Client Segmentation Client Life Stages

20. Agenda • Product Strategy • Different Stakeholders’ Roles & Points of View • Client Segmentation • Client Life Cycle • Case Studies • Singapore – ASEAN Wealth Management Hub • Bancassurance – Multiple products for multi-channel distribution • The FMCG Approach – to simplified product marketing • Micro-insurance – one countries success

21. Singapore Population: Growing, ageing, increasing longevity and wealth Chart 2: Population Age Pyramid Chart 1: Resident Population Chart 4: Per Capita GDP (US$) Chart 3: Life Expectancy Source: Department of Statistics, Singapore

22. High Net Worth Market GlobalHNW wealth will grow at an annual rate of 6% By 2010, Asia’s HNW assets expected to reach US$10.6 trillion, close to the European wealth market • Singapore has the highest rate of growth of HNWIs of 21%! • There are 67,000 of HNWIs in Singapore with US$323b in total assets! • This is 2.5% of the adult population! • This also means 5 out of every 200 adults in Singapore are millionaires, with very real Estate Planning needs !! World Wealth Report 2007 by Capgemini and Merrill Lynch

23. High Net Worth Market Asia-Pacific HNWI Wealth Distribution, by Market,2006 HNWI Wealth,2006 (US$ Billions) • Others US$810 • Indonesia US$70 • Taiwan US$220 • South Korea US$270 • Singapore US$320 • India US$350 • Hong Kong US$460 • Australia US$510 • China US$1730 • Japan US$3680 Total HNWI Wealth in Asia-Pacific Region = US$8.42 Trillion Comprised of 9 countries namely Kazakhstan, Malaysia, Myanmar, New Zealand, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam Asia-Pacific HNWI’s financial wealth forecasted to reach US$12.7 trillion by 2011 Source: Asia-Pacific Wealth Report 2007 by Capgemini and Merrill Lynch

24. Mass Market Singapore will be among the world leaders when it comes to increasing the number of mass affluent people. The number of mass affluent residents (individuals with > USD60,000 in liquid assets)in Singapore will grow from 410,000 last year to more than 600,000 by 2011 (close to 20% of resident adult population)! Additionally, Singapore is likely to benefit from greater inflows of wealth from regional (e.g. Indonesia, Malaysia & Thailand)and global market (e.g. Middle-East), as investors look to diversify portfolios in safe havens such as Singapore. Wealth Hence, the number of mass affluent non-residents adults in Singapore will also grow! * Wealth Management in Singapore 2007 by Datamonitor

25. Client Segmentation Assets Under Management > USD20mio USD1mio to < USD20mio USD500k to < USD1mio USD100k to < USD500k < USD100k Based on AUM Sources: Credit Suisse Global Wealth Databook 2011, Cap Gemini & Merrill Lynch World Wealth Report

26. Client Segmentation Life Stages Needs & Products

27. Agenda • Product Strategy • Different Stakeholders’ Roles & Points of View • Client Segmentation • Client Life Cycle • Case Studies • Singapore – ASEAN Wealth Management Hub • Bancassurance – Multiple products for multi-channel distribution • The FMCG Approach – to simplified product marketing • Micro-insurance – one countries success

29. Product Positioning Alignment by Client Segmentation Multi-Channel Distribution Model Retail Br Managers /RMs Retail RMs/ISs Corporate (SME) RMs/ISs HNW RMs/ISs Telemarketing Investment Linked & WM Products Need-based Products Employee Benefits Key-men Insurance Universal Life WM Products Low premium, high perceived value products Privileged Youth Life Stage / Value Segment Strivers Achievers High Net Worth Mature Manulife’s product and distribution expertise positions us to support RHB in realizing its full financial services potential 29

30. Product Range of Retail Banks Equities Foreign Exchange Business Financing Funds Credit Cards Complexity Mortgage Bonds Current Accounts Consumer Loan Savings Accounts Investment Loan

31. Insurance Offers a Third Dimension: Protection Business Financing Equities Security Complexity Funds Mortgage Bonds Credit Cards Consumer Loan Savings Accounts Current Accounts Investment Loan

32. Insurance Offers a Third Dimension: Protection Guaranteed Products with LA Equities Unit Linked Assurance Complexity ULA + Riders Funds Endowment Assurance Bonds EA + Riders Term Assurance Savings Accounts Investment Protection

33. Insurance Offers a Third Dimension: Protection Term Ass. Group Life Ass. Pensions Business Financing Home Ins. Complexity Mortgage Assurance Motor Ins. Mortgage Credit Life Consumer Loan Loan Protection Travelers Ins Investment Protection

34. Product PositioningCase Study - Bancassurance Channel 34

38. Direct and Telemarketing Model TRADITIONAL MARKETING MODEL CONTEMPORARY MARKETING MODEL OVERALL STRATEGY Sell Products Serve Customers OPERATIONS Product Led Customer Led MIND-SET Portfolio of Products Portfolio of Customers MARKETING TACTICS Increase Product Appeal Increase Customer Profitability SALES APPROACH How many customers can we sell this product to? How many products can we sell to this customer? STRATEGIC OBJECTIVE Sales Maximisation Customer Lifetime Value Maximisation

39. Basic Marketing Style Follows Up On Value Proposition: Value-for-money, Simplicity and Convenience

40. Agenda • Product Strategy • Different Stakeholders’ Roles & Points of View • Client Segmentation • Client Life Cycle • Case Studies • Singapore – ASEAN Wealth Management Hub • Bancassurance – Multiple products for multi-channel distribution • The FMCG Approach – to simplified product marketing • Micro-insurance – one countries success

41. FMCG Approach in Stores • 20,000 units in 650 stores • Permanently displayed

42. Instant Products For Sale in Stores

43. Agenda • Product Strategy • Different Stakeholders’ Roles & Points of View • Client Segmentation • Client Life Cycle • Case Studies • Singapore – ASEAN Wealth Management Hub • Bancassurance – Multiple products for multi-channel distribution • The FMCG Approach – to simplified product marketing • Micro-insurance – one countries success

44. Manulife Vietnam Life Insurance (MVL) began its operations in September 1999 as the first foreign life insurance company in Vietnam since the country opened its insurance market to foreign companies MVL operates in 12 cities through a network of 7,000 agents, serving 300,000 urban middle class customer We also partner with selected banks to distribute life insurance in major urban cities In 2007, Manulife established Manulife Vietnam Fund Management Company (MVFM) to enter the wealth management business. MVFM managed third party institutional asset and is one of the three companies in Vietnam offering local retail mutual fund. Manulife Vietnam

45. Established in 1930 A political mass-based national organization aiming to promote the welfare of Vietnamese women in all aspects: economic, political, health and education VWU has 13 million women membersnation wide, through an extensive administration network at national, provincial and district level Since 2003 the VWU acts as the main partner of the Vietnam Bank for Social Policies for disbursing their loans to low income families VWU manages about 40 microfinance and credit programs Vietnam is considered one of the most successful countries in reducing poverty, the percentage of the population living under the poverty line has reduced from 58% in 1993 to 14.87% at the end of 2007 and VWU plays an important role in Vietnam’s poverty reduction efforts Vietnam Women’s Union (VWU)

46. The rural market in Vietnam is a large market with approximately fifteen million households and around sixty million people. This market largely remains under-served due to the remoteness of the locations and the lack of accessibility to financial services In 2008/2009 the Vietnam Ministry of Finance (MoF) started to look into rural area insurance needs and encouraged commercial insurance companies to develop commercially viable micro-insurance for the mass rural market Manulife went through an extensive distribution partner selection process with the following criteria: NGO & non-profit organisation focusing on low income families Nationwide network with administration capability – Vietnam Post Office & Banks Experience with micro-finance or micro-insurance projects Identified VWU as an ideal partner for the micro-insurance project and signed an MOU in early 2009. Project officially launched in Sept 2009. Micro-Insurance Project Background

47. Partnership – Manulife & Vietnam Women Union’s Signing of MOU

48. Product & Benefit Coverage

49. Engagement Process • Presentations of micro-insurance via pre-scheduled seminars at the commune level organized by VWU commune and district leaders • Over 1,000 seminars held during 12 months period • About 50 to 200 attendees per seminar, sign up rate over 70% and signed up 60,000 micro-insurance customers so far • Product introduction and fulfillment conducted by Manulife employees • Simplified business process at the end of the seminar • Pre-scheduled sales seminar to avoid anti-selection • The seminars also serve as an introduction to the concept of insurance and protecting family welfare to the rural mass

50. A Typical Engagement Seminar The meeting house was too small so some sat outside along the corridor There was not enough seats so VWU members had to stand or sit on the ladder on the right hand side of the house.