Attributes for Digital Insurance Distribution Success

Out of adversity comes opportunity (Ben Franklin), as we noted in our prior post.  The pandemic has provided a strong tailwind for online retail, and the same pressures will accelerate online insurance buying and digital service interactions in insurance distribution.

The national lock-down makes people realize that they can buy insurance online – the same way they order goods from Amazon or food with UberEats. There is a realistic possibility that this shift towards digital insurance will last. (here)

Customers who have become familiar with digital distribution in other sectors, like retail, increasingly demand the same flexibility, performance and personalization they experience in those venues. (here)

This digital shift will drive significant change in insurance distribution.

The way insurance is purchased will change dramatically in the very near future. Insurers, brokers, and agents need a strategy if they intend to survive. (here)

This new environment of online shopping will be an opportunity for those insurance distributors that can deliver a customer experience model with four key attributes:

  • Accessible
  • Informative
  • Effective
  • Efficient

Digital distribution encompasses a wide range of functions and models, and no one model is necessarily best for any particular customer or segment of business.  Customers will migrate over time to the model(s) that suit them best.

In some segments, the traditional agency model is not far off of digital distribution.  Many SMB (small and medium-sized businesses) insurance transactions take place entirely via email in the traditional agency model, with limited in-person or phone contact.  In most cases, however, this is driven more by agency economics rather than a well thought out digital strategy, and the model may not deliver on the key attributes necessary for success.

On the other end of the spectrum, there are pure digital distribution platforms that have delivered on some of the key attributes, but not all.  For example, online facilities have been created which efficiently deliver a quote for one product from one insurer.  But a one to one distribution model does not provide the comparative functionality that most buyers want.

If they [customers] can’t easily compare a product or service with others, they will likely avoid purchasing the product they can’t compare…Business buying trends are reflecting similar patterns and preferences to those of consumers…  In their online searches, they are looking for high quality, factual, objective information. (here)

As Matt Chesky of Insuritas notes, a focus on the customer is critical for distribution success, whether in a traditional model or the new digital model, and the digital agency model is uniquely positioned to deliver.

The agency model has unique, structural advantages over direct writers and lead-gen platforms in insurance distribution in that it is best aligned with consumer desire for objective, transparent, and trusted advice for their risk management needs. A customer-centric agency that can deliver efficient customer acquisition, a frictionless shopping experience, and trusted, ongoing advisory services can create immense value for today’s insurance consumer, and is the only way to re-establish the independent agency as the risk management model of the future. (here)

Distribution innovation in the form of ecosystems and digital platforms will be well positioned to take advantage of the digital shift, and a threat to those businesses that are not innovative.  Digital platforms and “ecosystems” (here, here) are creating online marketplaces, often blended with call centers, for insurance buying and other service interactions.

The ecosystems that are forming around insureds have the same goal. The difference is that rather than focus on a single aspect of a person’s or a business’s needs, they are delivering clusters of services that offer a far more holistic approach to meeting those needs in a way that is integrated into the way people live, and business work. (here)

What does this mean for the traditional agency distribution network?  Those distributors that remain purely traditional may struggle to compete, and the digital disruption may create a digital divide in insurance.

Alternatively, enabling technology, technology-enabled services and new tech-related products can help forward-thinking insurance distributors be successful in the new digital insurance environment.  Agents and brokers may add digital resources available from Insurtech vendors to enhance their online capabilities, creating a hybrid model.   What is not clear is whether the economics will allow the hybrid model to survive long term across a broad spectrum of products.  It is likely that there will be customer or product situations for which the hybrid model will prevail.

How a particular insurance distributor delivers a customer experience with the four key attributes – accessible, informative, effective and efficient – is the key to success.  Examples of innovative approaches, each of which may have a unique model, are currently demonstrating both metric and financial success.

Innovate Insurance – Innovation & Entrepreneurship in Insurance

 

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