What is \u201cdistribution\u201d in the digital context? Is it buying and selling things via the internet?\u00a0 Connecting providers and consumers of goods and services remotely?\u00a0 Comparing options?\u00a0 It is all of these, of course, and much more, particularly when it comes to insurance.<\/p>\n
In insurance, the term distribution can be a bit of a misnomer, as the products themselves are virtual \u2013 how do you \u201cdistribute\u201d indemnity against risk?\u00a0 But this virtuality also makes insurance a perfect fit for digital \u2013 and thus virtual \u2013 distribution.<\/p>\n
However, this runs against traditional and deep-seated insurance assumptions. Insurance is \u201csold and not bought,\u201d right?\u00a0 And so we need agents or brokers, right?\u00a0 Not anymore. As noted in our thought leadership report, Succeeding in a Multi-Channel World: Channel Efficiency, Optimization and Speed to Value<\/em><\/a>, the ever-changing business landscape requires insurers to rethink distribution-related strategy and execution; namely to one that requires a digital, multi-channel focus\u2014from back to front office.<\/p>\n So, in this post I will explore some of the challenges and opportunities that the digital age has brought to the insurance industry, as well as some strategies you can employ to navigate the shifting tides of customer demand, technology advancements, market pressures and regulatory requirements.<\/p>\n The Five Forces at Play<\/strong><\/p>\n In considering how to break down the effect of the digital age on the insurance industry from a distribution standpoint, Michael Porter\u2019s famous \u201cFive Forces\u201d model provides an interesting framework for assessment.<\/p>\n Agents and Brokers Under Pressure<\/strong><\/p>\n At first glance, this is the channel that would be most adversely affected by digital disruption in distribution. In the past, insurers could only grow their business by growing their agent networks, but that began to change with the advent of phone-based direct insurers like GEICO.\u00a0 But even those direct insurers, while they didn\u2019t need brick-and-mortar agencies, were still constrained by call center size.\u00a0 Digital has enabled insurers to grow beyond the agent and call center channel options, and many InsurTech startup insurers, like Lemonade, are showing how they can rapidly grow in a pure digital channel.<\/p>\n And, with fewer people choosing careers as agents or brokers, particularly in the mature markets, insurers need to look at alternative channels to maintain their growth strategies and support customer retention and loyalty.<\/p>\n Digital disruption has caused or accelerated this pressure on traditional distribution channels.\u00a0 But, if leveraged correctly, can also be a boon to them. Technologies that enable insureds to research, buy and service their policies online can also be used to boost producers\u2019 productivity and effectiveness.\u00a0 Artificial intelligence bots can harvest institutional knowledge to bring even the most junior agent up to speed quickly. Advanced analytics can give agents the ability to model many different coverage options and illustrate them graphically in real time while sitting with a prospect. Denim, an InsurTech startup, is reimagining insurance marketing and distribution through an innovative app that links social media ad responses to local agents, digitally empowering both the customer and the agent.<\/p>\n The possibilities are nearly limitless. But to realize them, the insurer first needs to thoroughly document its business needs through journey mapping (of both customers and the agents that serve them), rather than just jumping blindly at cool new tech.<\/p>\n Direct to the Point<\/strong><\/p>\n Naturally, digital distribution fits nicely with a direct model which the Millennial and Gen Z generations and small-medium companies prefer, according to our consumer<\/a> and SMB research<\/a>.<\/p>\n InsurTech disruptors such as Trov, Slice, Lemonade and Oscar have intensified the move to direct channels, leveraging digital technologies.\u00a0 AI-powered Chatbots are their method of choice, and they are seeing strong uptake among buyers of all ages. Attune is applying the same digital-first methodology to the small commercial space. \u00a0Direct distribution is seeing a strong focus in life insurance \u2013 once the heart of that \u201csold not bought\u201d mentality: Haven Life can underwrite and issue a policy immediately up to $1 million and Sagicor sells term and whole life insurance online, asking applicants just 5 questions to get them covered in minutes.<\/p>\n A New Digital Era Demands a New Way of Thinking<\/p>\n Regardless of the channel, mapping customer journeys to understand your buyers\u2019 needs is essential.\u00a0 Just creating an electronic version of your current application forms is not enough \u2013 you have to think differently about digital distribution. Mapping customer journeys helps you avoid \u201cshiny object syndrome\u201d \u2013 when you invest in a technology because it is cool rather than because it will help you achieve a defined business goal.<\/p>\n Traditional insurers must think hard about their distribution models in the digital era. While agents are not going away any time soon, the channel is in the midst of disruption and insurers must be prepared to reach customers in the manner they want, which is increasingly digital and multi-channel.\u00a0 Many insurers have espoused a \u201cfast follower\u201d approach: see what works well and then replicate it.\u00a0 But with the pace of change and combination of new technologies, changing demographics and shifting market boundaries, the gap is growing so fast that fast followers will struggle to close the gap, let alone keep up, as we noted in our Strategic Priorities 2017 \u2013 Knowing vs. Doing<\/em><\/a> report.<\/p>\n We are now in a digital age that demands a multi-channel model. In this world, you need to support your existing customers, many of whom may be oriented to agents and brokers, but also offer full digital distribution capabilities to the newer generations of customers. In both cases, you need to optimize your existing channels as well as invest in technology and capabilities that provide them with the experience and engagement methods they want.<\/p>\n Regardless of your focus, don\u2019t wait to be a fast follower by waiting for the dust settle before you decide and execute. More dust is getting kicked up every day, creating a storm of change and disruption.<\/p>\n","protected":false},"excerpt":{"rendered":" What is \u201cdistribution\u201d in the digital context? Is it buying and selling things via the internet?\u00a0 Connecting providers and consumers of goods and services remotely?\u00a0 Comparing options?\u00a0 It is all of these, of course, and much more, particularly when it comes to insurance. In insurance, the term distribution can be a bit of a misnomer,…<\/p>\n\n