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Channel Metrics: Trends in Consumer Distribution Channel Usage in UK Financial Services - Overview Report

Finaccord Ltd.
January 1, 2008
300 Pages - SKU: FIN1649471

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Countries covered: United Kingdom

Channel Metrics is a series of 25 briefings and an overview report based on original consumer research with a total sample of 3,600 respondents investigating trends in consumer distribution channel usage in UK financial services. In addition to gathering data for overall take-up rates and annual churn rates across the various financial products and services considered, the research also yields results regarding the distribution interface and specific distribution channel used to purchase or take out the same financial services during 2007. Moreover, with a view to understanding how distribution dynamics are changing, this data is compared with the results from the original Channel Metrics survey in 2005 as well as the choices made by customers in all years prior to 2007. In order to provide clear insights into the subject, this analysis of distribution interfaces and channels incorporates only the responses of consumers making an active choice of distribution channels during the period in question. Consumers making or intending to make an active choice are defined as those who switch provider for a given financial product or service during the time frame under review or those buying the product or service having not held it during the previous year, thereby excluding respondents who merely remain with the same provider. As such, the Channel Metrics series constitutes the most detailed and up-to-date guide to distribution trends in consumer financial services in the UK available on a published basis. Key questions addressed by the research include the following: - what is the rate of progress of the Internet as a distribution interface and web-based brokers and intermediaries as a specific distribution channel and how does this vary from product to product? - for which financial products and services does there appear to be a consistent requirement on the part of consumers for face-to-face interaction? - to what extent are banks and building societies defending their market share for insurance products that they distribute on an intermediated basis? - what impact are commercial partners such as loyalty schemes, the Post Office, supermarkets and other retailers having on the distribution systems used for consumer financial services? - what are the distribution trends for rarely researched niche financial products such as car finance contracts, Child Trust Funds, dental insurance, extended warranties for electronic appliances and home emergency insurance? Overall, the Channel Metrics series offers detailed and unique insights into current and future trends in distribution channel usage across 25 distinct financial products and services - with a dedicated briefing having been produced for each - as follows: car and home - motor insurance, breakdown recovery insurance, extended warranties (for cars), household insurance, home emergency insurance; life and health - life insurance, critical illness insurance, private medical insurance, dental insurance, health / hospital cash plans, personal accident insurance; loans and related insurance - mortgages, mortgage payment protection insurance, personal loans, loan payment protection insurance, car finance contracts, credit cards; niche insurance - travel insurance, pet insurance, mobile telephone insurance, extended warranties (for electronic appliances); savings and investments - interest-bearing savings deposits, cash ISAs, Child Trust Funds, personal / stakeholder pensions. Channel Metrics: Trends in Consumer Distribution Channel Usage in UK Financial Services is based on the results of an on-line survey of c. 3,800 consumers arranged by Tpoll Direct, the market research division of Interactive Prospect Targeting (IPT), during November and December 2007.

0.0 EXECUTIVE SUMMARY: Research background and structure; Switching rates are highest for motor insurance, credit cards and household insurance; Face-to-face transactions are generally declining in importance as a distribution interface…; … primarily as a consequence of rising utilisation of the Internet for a majority of financial products .; The continuing growth of the Internet is also reducing the volume of inbound telephone sales…; … although the effectiveness of outbound telephone sales is increasing for a number of products...; The long-term trend is for consumers to make less use of the post for acquiring financial services...; In a majority of cases, there is an increasing trend towards intermediation in financial services…; … which is being caused by the strong progress of office-based as well as web-based intermeds. ..; Not-for-profit affinity groups may be struggling to adapt to the changing env. for distribution…; The Post Office is making the greatest gains of any single non-financial commercial partner…; … and it seems possible that the influence of the supermarket dist. model has now peaked…; … although other categories of partner organisation can also offer viable niche dist. potential; In most cases, the worksite appears to be holding its own as a dist. conduit for financial services; The Internet and web-based brokers will triumph in some but not all areas of financial services…; … as consumers migrate to the interfaces and channels that are best suited to individual products .
1.0 INTRODUCTION: Research rationale; A number of motivating factors underpin the Channel Metrics report and series of briefings; Research sample and mechanics; Finaccord; Channel Metrics briefings; Other UK consumer research publications; UK affinity and partnership marketing publications; IPT / Tpoll
2.0 CHANNEL COMPARISONS: Introduction; Overall customer take-up rates, 2007; Over three quarters of respondents possess household insurance and motor insurance; Brand new purchases, 2007; Travel insurance records the highest implied number of brand new sales in; Switching rates - 2005 and 2007 compared; Switching rates remain highest for motor insurance, household insurance and credit cards…; … a situation that is largely similar to that recorded for; Health and hospital cash plans register the lowest annual switching rates in 2007…; … with switching rates having increased since 2005 for nine out of 20 products; Distribution interfaces - 2007, 2005 and all previous years compared; Face-to-face environment; Almost 80% of customers take out car finance contracts in a face-to-face environment; For a majority of financial products, face-to-face transactions are declining in importance; Internet; In all but three cases, the Internet is increasing in importance as a distribution interface; Inbound telephone; Inbound telephone calls account for more than 20% of transactions in only six cases…; … with their decline in share being most acute for motor, household and travel insurance; Outbound telephone; Outbound telesales programs account for a share of transactions below 5% in 12 cases…; … although their effectiveness appears to be increasing for a majority of financial services; Post; The post is a frequently used distribution interface for Child Trust Funds…; … but seems to be losing share of transactions over a long-term time frame; Specific distribution channels - 2007, 2005 and all previous years compared; Direct sales; The direct channel accounts for more than 70% of sales for three of the products reviewed…; … although appears to be declining in importance over time for a majority of financial services; Advisers, brokers and intermediaries; Office-based advisers, brokers and intermediaries; Office-based brokers hold a high share in mortgages and mortgage payment protection ins.…; … and appear to be strengthening their position as distributors in both these and other markets; Web-based advisers, brokers and intermediaries; Web-based advisers and brokers continue to experience rapidly rising rates of utilisation…; … which throws up a key sales and marketing issue for virtually all financial services firms; Not-for-profit affinity groups; Automotive clubs; Automotive clubs can be used to distribute financial services linked to car ownership; Charities; Charities are active as intermediaries for a broad range of financial products and services…; … although their distribution channel share is small in all of these markets; Educational institutions; Educational institutions constitute an infrequently used channel for financial services; Professional and trade associations; Professional and trade associations record particularly high utilisation rates for dental insurance; Trade unions; The distribution channel share of trade unions exceeds 1.0% for eight financial products; Financial partners; Banks and building societies (acting as intermediaries); Banks and building societies hold a distribution share in excess of 10% in many cases…; …but may have to work hard to maintain their position in future for a number of products; Credit card companies (acting as intermediaries); Credit card companies hold a distribution share above 1% for several financial services…; … although they may struggle to expand their share for higher value insurance policies; Insurance companies (acting as intermediaries); Around one in five customers obtain road and home assistance cover on a packaged basis; Commercial partners; Automotive associations; Automotive associations are effective distributors of several categories of financial service…; … although their market share appears to be under pressure in the key motor insurance market...; Car dealers and manufacturers; The automotive trade holds a distribution share of around two thirds for core financial services… ..; … but is struggling to make an impact in the highly competitive motor insurance sector; Catalogue and other retailers; Catalogue and other retailers offer a viable niche channel for a variety of financial services; Estate agents; Estate agents are potential distributors of products linked to home purchase and ownership…; … although their distribution channel share for mortgages appears to be retreating over time; Football and other sports clubs; Few respondents admit to using football or other sports clubs to take out financial services; Loyalty schemes; Loyalty schemes achieve a distribution share in excess of 2.0% in 2007 for seven products; Magazines, newspapers and other media entities; Media affinities achieve the highest rates of utilisation in 2007 for accident and health insurance; The Post Office; The Post Office is emerging as an increasingly significant distributor in a number of areas…; … with its share in 2007 having fallen back relative to 2005 only in the case of travel insurance; Supermarkets; The influence of supermarkets as distributors of financial services is likely to have peaked…; … although their channel share remains in excess of 2% for 12 financial products and services; Utilities (electricity, gas and water) companies; The share of utilities companies in home emergency insurance is in the process of collapsing; Sector-specific distribution channels; Sector-specific channels dominate distribution for niche insurance and warranty products; The position of the travel trade in the market for single trip travel policies continues to decline; Worksite marketing; The worksite; In 2007, over 40% of sales of personal / stakeholder pensions occurred in the workplace…; … with this channel also holding a distribution share in excess of 5% for five other products
3.0 PRODUCT ANALYSIS: Introduction; Motor insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Breakdown recovery insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Extended warranties for cars; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Household insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Home emergency insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Travel insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Pet insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Mobile telephone insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Extended warranties for electronic appliances; Switching rates and brand new sales -; Distribution interfaces - 2007 and all previous buyers compared; Distribution channels - 2007 and all previous buyers compared; Overview; Detailed analysis; Life insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Critical illness insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Private medical insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Dental insurance; Switching rates and brand new sales -; Distribution interfaces - 2007 and all previous buyers compared; Distribution channels - 2007 and all previous buyers compared; Overview; Detailed analysis; Health / hospital cash plans; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Personal accident insurance; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Mortgages; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Mortgage payment protection insurance; Switching rates and brand new sales -; Distribution interfaces - 2007 and all previous buyers compared; Distribution channels - 2007 and all previous buyers compared; Overview; Detailed analysis; Personal loans; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Loan payment protection insurance; Switching rates and brand new sales -; Distribution interfaces - 2007 and all previous buyers compared; Distribution channels - 2007 and all previous buyers compared; Overview; Detailed analysis; Car finance contracts; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Credit cards; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared; Distribution channels - 2007, 2005 and all previous buyers compared; Overview; Detailed analysis; Interest-bearing savings deposits; Switching rates and brand new sales -; Distribution interfaces - 2007 and all previous buyers compared; Distribution channels - 2007 and all previous buyers compared; Overview; Detailed analysis; Cash ISAs; Switching rates and brand new sales -; Distribution interfaces - 2007, 2005 and all previous buyers compared

Distribution channels - 2007, 2005 and all previous buyers compared

Overview

Detailed analysis

Child Trust Funds

Switching rates and brand new sales -

Distribution interfaces - 2007, 2005 and all previous buyers compared

Distribution channels - 2007, 2005 and all previous buyers compared

Overview

Detailed analysis

Personal / stakeholder pensions

Switching rates and brand new sales -

Distribution interfaces - 2007, 2005 and all previous buyers compared

Distribution channels - 2007, 2005 and all previous buyers compared

Overview

Detailed analysis

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Channel Metrics: Trends in Consumer Distribution Channel Usage in UK Financial Services - Overview Report

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