Reimagining insurance distribution
There are a number of factors that are driving the transformation of insurance distribution at a constantly accelerating pace. There are some insurers who are still trying to stay with the tried and tested distribution models of yesteryear and are resisting the push to change. This resistance is seen despite the demands for higher service standards, rising expectations of customers, opportunities for growth and continuous and rapid innovation seen in the digital arena.
Among all of the disruptions in the field of insurance, the opportunities provided by the Internet of Things (IoT) are probably the most disruptive but one that holds the maximum potential as well. A recent survey conducted by Accenture showed that many insurers are increasingly looking at accelerating the shift to the emerging digital model where the role of digital is critical in most interactions and the role of agents can be fined tuned to derive more value.
With only one out of five carriers not in favour with this model, most respondents are, to an increasing degree strategising implementation, piloting or launching products and services that utilise IoT. Most of these companies expect a two or three fold increase in connected products and services over the next three years — not only in the auto sector but also in home and buildings, health and fitness monitoring devices and other wearables.
An analysis of the survey findings shows six key distribution-related areas that insurers are focusing on:
- Channel digitization
- Insight-driven customer experiences
- The changing role of the agent
- The future of aggregators
- The role of ecosystems
- The Internet of Things
Each of these areas requires a clear cut strategy and plans for development, testing and deployment if insurers are to retain customer confidence and reap the benefits of the advantages the these new technologies promise.
The decisions that insurers make today will determine their growth trajectory over the next three to five years. Insurers who are slow off the blocks or who do not invest the time in adequate strategising and planning their digital distribution platforms will risk losing their competitive edge and will have a harder time catching up with industry leaders with the passage of time.
1. Channel digitization: shifting roles
Over the last few years, insurers have been restructuring their processes to meet the changing demands of their customers. This shift to digitisation is most evident on the services side of distribution. This is due not only because of customer expectations and a need to improve their convenience but also by the need for a reduction in the costs of distribution. The main features of this trend have been a renewed focus on the contact centre, the redirection of agents to handle more complex service transactions, and a continued shift toward a full self-service capability.
2. Insight-driven customer experiences: striving for intimacy
With the recognised need to complete this shift to customer intimacy, insurers are focusing on customer centric capabilities within their organizations. A significant number — 58 percent are prioritizing the move to a model that clearly places the customer as the focus point. Almost 50 percent of insurers either already possess or have firm plans to build a customer-centric hub, and 60 percent are taking the creation and extension of their omnichannel capabilities as a key priority to provide a seamless and responsive customer experience across all channels. For insurers, this represents a paradigm shift from the traditional channel where customer service was more often than not, outsourced to an agent or broker.
3. The changing role of the agent: adding value in an omnichannel environment
Today, almost two-thirds of insurers are investing significant resources to realigning all stages of the sales process where they can add the greatest value. Insurers want agents and brokers, to also realign themselves to increase their portfolios by improving their cross-selling efforts and selling more profitable products. They also want agents and brokers to improve their advisory skills and levels of sales interactions with customers across multiple channels especially with regard to products that are complex.
4. The future of aggregators: strategies for engagement
One of the strategies for engagement that insurers are focusing on is the aggregator platforms. These platforms give customers the ability to get and compare products from across the market and are a key component of the channel mix. It is expected that most consumers will gravitate to such platforms especially at the earlier stages of the sales process such as information gathering and price comparisons. This has driven insurers to develop specific strategies to engage with their customers at this stage itself. Fifty-one percent are considering low-cost product sets specifically for aggregators, either as part of their main brand offering or under a sub-brand. Insurers currently inclined to use a sub brand are 42 percent and that is expected to grow to 55 percent in three years. Fifty-seven percent of carriers are considering the launch of their own aggregator service. Life insurers have been found to be more open to adopting this approach than their P&C counterparts. Whatever view that insurers hold on the role of aggregators, it is apparent that they are here to stay and insurers need to consider them an additional channel of distribution.
5. Ecosystems: end-to-end buying experiences
With a view to offering customers a larger range of products and services that are relevant to them, many leading insurers are building the means to facilitate end-to-end buying experiences for customers. The concept of enhancing insurance offerings by creating opportunities for improving the quality of customer engagement as well as fine tuning the relevance of products and services offered are critical focus areas for many large carriers. In the Accenture survey, 40 percent of insurers have already aligned with non-insurance companies to offer customers a wider range of products and services, or regard it as a high priority area that needs to be developed in the near future. Along with collaborations established with leading players in various markets, leading insurers are aligning with start-ups to speed up digital innovation. It is clear today that insurers will not be able to meet customers’ expectations by themselves. And, the industry leaders have no inclination to take this route to meet expectations of their customers. They are actively considering tie-ups with highly agile, flexible and efficient new partners to rapidly extend the gamut of products and services that they can offer in order to give their customers a holistic buying experience.
6. The Internet of Things: the next big game-changer
The IoT is a prime example of the speed at which digitisation is sweeping through the domain of insurance distribution. Most of the early focus was primarily on vehicle telematics but that is changing rapidly. In the recent past, there has been a two to three fold growth seen in the number of IoT related products that are out in the market. These are predominantly in the areas of homes and buildings, health and fitness and other wearables. Forward looking insurers look at the widespread disruption caused by IoT as an opportunity to reinvent their approach to customer engagement and to drive growth. It is a clear move up the value chain — from providing indemnification for a loss to a proactive and positive role of continuously helping customers to prevent any losses.
Insurers are taking different approaches to the disruption in distribution. While some of them are waiting it out and hoping that the best approach will be evident soon, others are reinventing their approach to business to be disrupters in their own right. However, insurance distribution as we knew it is changing — and changing rapidly. So the only question that remains for insurers is, will we set the pace for our transformation or will we let it be dictated by others?
With specialised solutions for the insurance industry, Neutrinos is helping leading insurers take impactful digital transformation decisions. Leveraging on inherent technical experience and expertise along with a deep understanding of client requirements, Neutrinos helps its clients build effective and efficient solutions that are robust and high impact and that resonate with the need of the hour. Neutrinos is excited to help clients make their digital transformation journey an ongoing success.