Cross-selling: key to Aviva Singapore's survival

NOW that the easy part is over, what's left for composite insurer Aviva Singapore to do is the hard part - to quickly devise and execute realistic strategies that it should already have in place, in order to maximise the multi-million dollar group-employee benefits three-year contract it has just secured.

The deal, which may be renewed for another three years, involves providing group term life and personal accident coverage to servicemen of the Ministry of Defence (Mindef) and the Ministry of Home Affairs (MHA).

While observers have said the deal is easily worth at least S$40 million based on past financial filings, this is neither a windfall nor an early Christmas gift for Aviva, which has been struggling since the exclusive bancassurance partnership with local lender DBS ended in December 2015.

The insurer's "win" may sound victorious. It is anything but.

The price it paid to achieve this, market observers calculated, was either breaking even (think: 2015 Oscar and Golden Globe winner Eddie Redmayne with a slight built on hunger strike), or loss-making (think: Redmayne gone).

The British insurer's 2016 first-quarter life business market share (in terms of new business weighted premiums) had plunged so far down the group of nine major life players that it left some observers gobsmacked, even though they half expected it given that it was inevitable.

And it was inevitable because the insurer now distributes its products mainly through the financial advisory (FA) channel, although it has a small in-house team of 50 salaried relationship consultants licensed to provide financial advice.

But despair has no place here. Afterall, there's hope now.

Without understating the gravity of the situation the insurer finds itself in, this turn of events can be viewed as a promising second chance.

The new deal is an expanded one that provides a core scheme where all servicemen from Mindef and MHA will receive the S$150,000 group term life and S$150,000 group personal accident insurance coverage from July 1, with premiums to be paid for by the ministries. This is on top of existing welfare and compensation frameworks.

There is also an optional scheme for the ministries' personnel and their dependants where coverage is up to S$1 million for group term life insurance and up to S$600,000 for group personal accident insurance.

So, while previous coverage was largely voluntary, the government has now moved to build in a mandatory component to improve benefits provided.

It is worth noting that Aviva - the long-time insurer for the SAF - has not only retained the account, but also snatched the MHA one from AIA Singapore, the biggest group (life and medical) insurance provider in terms of market share. This means the number of policyholders Aviva now has to serve in the next couple of years will be higher because of the combined accounts.

The million dollar question left then: how is Aviva going to tap into the existing and future pool of clients and successfully turn them from just a life and personal accident policy owner into a multi-product customer?

If Aviva achieves this and is able to provide other relevant products to this wider pool of clients, its woes in securing new business will be mitigated.

And this all boils down to the execution of its cross-selling and up-selling strategy.

The problem with cross-selling and up-selling is that it is very dependent on a large sales force.

The absence of a large agency force leaves the mammoth task primarily to financial advisers, including those at FA firm PIAS (Professional Investment Advisory Services), a subsidiary of Aviva plc.

This is altogether another obstacle - whether Aviva is willing to let PIAS tap into its client data to execute the cross-selling and up-selling is anyone's guess. And word has it that PIAS prides itself on being independent and will be resistant to being linked too closely to the insurer.

The agency force distribution gap will mean that Aviva needs to go on a hiring or, in the spirit of calling a spade a spade, a buyout spree, to recruit experienced advisers because customers here largely prefer dealing with a fellow human as opposed to a machine.

The silver lining is that the insurer recognises the urgency to strengthen its existing distribution channel and industry players say Aviva has moved to do so.

In recent times, Aviva has gone big on its Digital First strategy that seeks to enhance customer experience through digital ways such as mobile and online.

As it continues on this path, Aviva needs to ensure, in particular, that details of Singapore's servicemen and other Mindef/MHA personnel are impenetrable in a world now fraught with cyber risks.

So, depending on whether you view the situation as a glass half empty or half full, the road ahead might be a long and hard one for the insurer, but it could just as well be one that ultimately rewards those who can turn adversity into opportunity.