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China’s Insurance Direct Marketing: A League of Their Own

time:2011-11-01 source:Taiwan Contact Center Development Association



Direct Marketing in Mainland China is poised to take off in the next few years and break all records seen in this field. The reasons for growth will defy general wisdom and most of the “lessons learned” from the Taiwan and the West will not apply.



One of the first points that Mr. Sean Chen (former FSC Chairman, currently Vice Premiere of Taiwan’s Executive Yuan) emphasized to me during the time he was negotiating the ECFA, that Taiwanese insurers by far have a competitive edge in China given the common culture and language. There is certainly a lot of truth in Mr. Chen’s view, however to fully realize this edge Taiwanese insurers need to manage some of the unique challenges currently faced by all; both local and foreign players. In this article we focus on the fast growing direct marketing space.

The contribution of direct marketing to the overall revenue of China’s financial services institutions has recently started to pass the 1% mark and will continue to outpace more traditional channels in the coming years. While conventional wisdom argues that, with current channels barley able to keep up with the growth in China’s financial services market, there should be less focus on expanding in the direct business. That is not the case, and it is less of a question of addressing the needs of the internet savvy young generation, and more of an issue of control.As an example, regulators and insurers are grappling with agent (intermediary salesperson) fraud and the inability to control what is disclosed to the customer on the products sold (ie returns versus risks etc). These issues are easily addressed with direct marketing, consequently the CIRC (China Insurance Regulatory Commission) has recently started to push their blue chip companies to focus on building this channel. These companies like  the idea of control too and have now put in their plans to double the revenue coming from direct marketing each year for the foreseeable future.



The likes of Ping An (2nd largest life insurer) house a telemarketing call center of up to 20,000 representatives, and they have barely gotten started. Such numbers are unheard of in some markets and even by US standards represent a major operational feat. To contemplate that in the near future Chinese financial institutions will be managing call centers with tens of thousands of representatives, presents a business challenge that is unique to the China market. Compounding this challenge is the fact that current attrition rates for telemarketers can be over 100% annually and qualified talent is hard to come by.

While Taiwanese players will probably not expect to reach size of the likes of Ping An, still they should expect to grow to numbers that are multiple types what they have in Taiwan



Financial institutions will have to be on the leading edge of developing state of the art “Command and Control” capabilities to monitor, diagnose and improve telemarketers’ performance across a vast and geographically diverse call centers. The Command and Control center will not only strive to achieve the needs of regulators but will also ensure the consistency and sustainability of the telemarketers’ performance. Local players have just started to recognize the value of such an approach and over the next 1-2 years we will start to see big investments in technology and data management.

Three key strategies need to be implemented to build the Command and Control capability

Treat the sales process as a “Science” not an “Art”

Analysis has shown that roughly 20% of telemarketing representatives are effective sales people while the remaining 80% have acceptable performance at best. Furthermore when the top 20% attrite, so does the knowledge of effective sales. Companies are looking to build capabilities to ensure this knowledge is kept in house, by analyzing in a scientific way, the phrases that have proven to impact sales with different customer needs/segments. This knowledge can then be taught to the masses at a more granular level of detail. 

This challenge is further amplified in China. As opposed to Taiwan where the direct marketing business has matured over a period fifteen years, China has only been doing this for three years or so. It is virtually impossible to find talent especially in such mass and most likely you will be recruiting the likes of college graduates or former postal workers. Investing in training is critical but not enough. Companies need to find the tools that will provide them the “intelligence” of how to have an effective dialogue with the customer.


Take Advantage of the Honeymoon Before it is Over

Ask any white collar Chinese living along the coast and chances are they have already been “harassed” by tens of phone calls from telemarketers trying to sell them insurance. Now in the US and Europe, avenues to solicit new customers by phone has all but been shut down by regulators, at the request of their citizens. Taiwan’s market too is becoming more restricted. New entrants need to take advantage of this maturing market now while they can, Three to five years from now the customers attitude in China will probably be where Taiwan or even the US and Europe is now.

Investment in data analytics and segmentation to constantly counter the deteriorating response from the customer will be key. Once the customer is in the door, further analytical intelligence is important to build a relationship with this customer and increase revenue and attrition.

Plug the Knowledge Drain

To date it appears that none of the local or foreign players have been able to stem the high telemarketer attrition rate of 15-25% a month. By the time companies are able to get their telemarketers to perform at a profitable level, their investment is ready to leave them for next higher paying job. It maybe a few more years before this problem is better managed and whoever will lead the market in addressing this will see a significant improvement in their return on investment. One approach could be in borrowing best practices from abroad and see how it can be customized to China. Take USAA as an example (a top 10 financial institution in the US providing banking, insurance and investment products to the US military solely through direct marketing). Telemarketer attrition rate is well under 1% per month even though the compensation they offer is average to slightly below average of the industry. One of the key advantages of working there is their ability to provide an attractive career path for their diverse employees. Telemarketers can choose to aspire to different jobs at USAA, from taking a more senior role in the call center to moving into claims, customer service, underwriting etc.

Such a career path requires serious investment in training and career counseling. When talking directly to some of the telemarketers I interacted with in China, I have found that such an approach in career management appeared to be their aspiration as well. If and when such an approach will have a significant on reducing attrition remains to be seen.



While the customer will ultimately be the driver of what role direct marketing will play in buying financial products, this evolutionary change is being accelerated by regulators and financial institutions. Very soon this market will surpass other countries requiring local and foreign companies to build one of a kind capabilities that address China’s size and uniqueness.

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