Pension provision for the digital age

Pension and insurance firms must stay agile in the modern economy, or risk being cannibalised by smaller, more tech-savvy competitors

 
The headquarters of Danica Pension are based in Kongens Lyngby, Denmark 
Interview with: John Glottrup, Executive VP of Business Development, Danica Pension
July 7, 2016

Competitive returns and low expenses are critical for maintaining customers in the present day, and both are “basic” parameters that give providers “a license to play” in Denmark’s pensions market, according to John Glottrup, Executive VP of Business Development at Danica Pension.

Speaking with World Finance, Glottrup spoke at length about the question of competitiveness and how providers in the here-and-now must look to create unique products and services if they’re to keep abreast of the latest developments. This value proposition, he said, will have a greater bearing on both customer loyalty and winning over new customers, and Danica’s experience of the industry offers an insight into the importance of the customer and the extent to which the pensions landscape is shifting.

Can you describe the link between your vision as a company and the value proposition you offer?
Danica’s vision is to become the most trusted pension provider, and we pursue this ambition by providing financial security to our customers. Our main task is to ensure that our customers always have the right pension plans. We strive to get a step ahead of them, and a step ahead of our competitors’ products and services. In this way, our customers need not worry about their retirement savings and insurance, and can instead concentrate on what’s important in their lives.

Every year, one out of three pension savers experience life-changing events that require an adjustment to their pension

We know that, every year, one out of three pension savers experience life-changing events that require an adjustment to their pension scheme. We also know that 80 percent of our new customers are not covered by their former pension plans. Ongoing contact between pension providers and customers is key to ensure schemes are up to date. Digital finance might be the technical basis that provides financial advice for everyone, and anthropological analysis shows that customers want their financial advice to be high-quality, easy to use and understand, accessible and ongoing.

Danica has implemented a prize-winning digital solution PensionCheck, which provides a full financial overview of a lifetime budget. Based on customers’ pension savings and insurance with Danica, other life insurance companies and banks, the solution gives customers a clear recommendation on their savings and insurance cover, based on a simple traffic light system (green, yellow or red).

Two-thirds of these customers subsequently choose to follow our recommendations and adjust their pension scheme to fit their needs. Most do not necessarily increase their contributions, but merely choose to adjust the proportion of their contributions towards their savings versus insurance cover.

Insurance cover and related health offerings are becoming increasingly important parameters when companies choose their pension provider. In 2013, Danica became the first pension company to offer a digital tool (Danica Health Check) through which customers could obtain advice on healthcare issues and individual recommendations on healthier living.

In 2015, Danica introduced a new health package with several new offers for our customers, including a stress hotline with personal guidance from authorised psychologists, an annual blood pressure and cholesterol check, assistance in finding the right public health services, and a second opinion on health matters from Best Doctors.

This collaboration with Best Doctors is unique in the Nordic region, and is only available to Danica Pension customers. Best Doctors collaborates with 53,000 medical experts from around the world, and has more than 25 years of experience in providing second opinions.

What advantages are there in being one of the largest pension providers in Denmark?
Basically, we have a number of economies of scale that enable us to deliver strong solutions to our customers and give us a competitive advantage. This can be seen in relation to our investments, where we can enter all types and sizes of investments, and have exposure to the market via direct investments in well-run Danish and Nordic companies. Our volume is such that we can offer our customers tailor-made exclusive products such as Danica Select, an investment product for those who wish to trade single securities on 17 stock exchanges all over the world.

Danica Pension is a subsidiary of Danske Bank. What does that mean for the company and its customers?
This relationship facilitates a lot of advantages in terms of advisory services and recommendations, accessibility, digital solutions, return on investment, and economies of scale. It’s also worth noting that emphasising pensions and pension planning cannot be viewed independently of the customer’s other financial matters.

Therefore, Danica collaborates closely with Danske Bank on offering holistic solutions for both businesses and private customers. For example, in Q1 2016 Danica Pension commenced the rollout of simple, clear recommendations that optimise customers’ pension schemes for retirement, including all financial assets.

For Danica Pension’s strategy, how important is innovation?
The financial sector is facing an unprecedented transformation and customers are demanding increasingly simple, accessible and personalised products. The digitalisation of financial services has created a world where people are used to living their lives through mobile phones, and we are now in a market situation where new players who know how to adapt to these trends can quickly achieve a strong position.

In the short term, we are of course considering competitors from our own industry, but we are convinced this issue pertains to completely different players in completely different industries than our own. This is going to challenge us in the long run. These may today be small and unknown start-ups, but we are already seeing established companies like Google and Apple, as well as retail giants like Starbucks, move into core financial areas, and this will also eventually come to the pension and insurance industry.

The financial sector is facing an unprecedented transformation and customers are demanding increasingly simple, accessible and personalised products

We are at the beginning of a journey. As an industry we need to look to completely different businesses than our own. We have to focus on customers and their needs, and we must be ready for change. We have something to build on, because we have strong customer relations, and we have proven that we can deliver solutions that match our customers’ needs today. It gives us a lead with customers right now, but it is not certain we’ll have it in five or 10 years, so we must act now to stay on top.

How does Danica Pension respond to changing customer needs?
As we mentioned earlier, our main task is to ensure our customers always have the right pension plans and are covered by the right insurance. We do this by being one step ahead of our customers, ahead of advice, and a step ahead of other products and services on the market.

You can only be one step ahead of your customers if you know their needs before they even do. It is a task that cannot be solved with simple questionnaires and surveys. We find our answers through anthropological studies. Therefore, we have a close cooperation with Red Associates, which is the world’s leading firm of anthropologists, based in Copenhagen and New York. This helps us with an outside view of our business by enabling us to understand the needs of our customers. Needs are actually quite stable – with a clear overview, understandable advice and an appealing customer interface will never go out of fashion.

Can you expand on how Danica Pension recently went through a digital revolution?
Our industry is falling behind what customers expect from providers and, for this reason, we have invested – and will continue to invest – heavily in digital solutions that cover all important touchpoints for our customers.

We always view digital as part of the solution. All our digital work starts with mapping out the entire customer journey and identifying the areas where digital solutions can come into play. Solutions should be intuitive, easy to use, attractive and, first and foremost, effective in delivering what the customer needs.

We test all our solutions intensively and work with designers, usability experts and customer interface experts to make our solutions the most attractive on the market. Consumers of the future will have no forgiveness for poor solutions that are difficult to use, so we put a lot of emphasis on making our digital transition robust and sustainable.

Finally, what does the future hold for Danica Pension?
We will definitely be focusing more on making our customers safe through straightforward recommendations and proactive advice. This is also reflected in the products and offers we’ll launch in the long term. Innovation in the digital area will continue with the purpose of offering our customers the best digital advisory tools, just as we do today.

Our close cooperation with Danske Bank is clearly decisive for us being able to deliver our ambitions. We may be large for a pension company, but in cooperation with Danske Bank we are also large globally. It gives us unique possibilities in terms of advice and service, and there is no doubt that digital solutions will be an even larger competitive parameter for us in the years to come.