Embracing New Sales Channels in Insurance May 2013 BLOG POST
Introduction Traditionally producers (brokers and agents) have been essential sales and distribution channels for most insurance carriers .Being able to effectively manage and improve sales channel performance is both an operational and performance imperative. In this partnership, insurers have always been at the receiving end as they have limited options to choose from the broker and agent network; whereas producers have ample of options to choose from a large number of insurers. In a rapidly-changing insurance market environment, consumers are demanding new, flexible and direct means of selling. Some companies have started concentrating on the direct channel model comprising individual agents, direct mail, company websites (internet-based selling) and every activity that involves the insurer directly. Development of a new product can provide a competitive advantage for insurers and could help in achieving higher sales and superior customer satisfaction because of producers’ involvement at the crucial stages. Insurers cannot afford to be adamant in its distribution strategy, and stick to a few favorite channels. The need of the hour is to be competitive, by adopting a multi-channel distribution strategy; while being flexible in adopting the modern tools of technology and the Internet in widening the boundaries of the distribution box. In most cases, the right answer will be a hybrid approach that combines the best of both worlds. Social Media Shaping Insurance Trends…. Social media is driving product innovation in the insurance sector and creating new marketing sales and distribution channels. The rise in popularity of social media combined with developments in the technology that underpins “big data” analysis is set to change the actuarial profession and drive innovation in the insurance industry. These trends in the actuarial and general insurance industries will have a significant impact on both individuals and businesses that purchase their products.
Embracing new sales channels in insurance
Page 2
Social Media Universe Blogs/ Conversations
Customers Service Networks
Blog Communities
Location
Comment Reputation
Pictures
Video
Micromedia
Events
SMS/Voice
Social Bookmarks
Video Aggregation
Lifestreams Blog Platforms
Documents
Specific to Twitter
Crowdsourced Content
Livecasting – Video and Audio
Social Networks
Music
Niche Networks
Wiki
Over 30% consumers in the developed countries use online user reviews before making any buying decision. This trend may lead to erosion in the price elasticity of insurance premiums, and actuaries need to allow for these effects when pricing for risks. In the US and the UK, aggregator websites are increasing competition by making it easier for consumers to compare prices. To remain competitive, insurers will need to find areas other than price to differentiate their products and services. A metered, or usage-based, approach to insurance could help companies respond with a healthier model of pricing. US based iMingle is the first direct-to-consumer insurance provider to offer group buying for auto insurance. It allows individual policyholders to qualify for group discounts – and potentially save hundreds of dollars – by tapping into the collective buying power of social networking sites like Facebook and Twitter. Most insurance companies offer discounts if you insure multiple cars within a household. iMingle takes this concept a step further by allowing consumers to link, or “mingle”, their policies with those of their friends, so that all friends linked benefit from the iMingle Network Discount of 10%. This is on top of iMingle’s other policy discounts, which can save customers up to 50% or more. Companies like iMingle believe that multi-policy discounts should not be limited to just those living in the same household, hence they invite customers to share their savings with a friend, neighbor or anyone else in their social network. Elephant Insurance Services, a division of the UK-based insurance giant Admiral Group plc., is a direct-toconsumer seller of auto insurance, selling its products to customers online and by phone rather than
Embracing new sales channels in insurance
Page 3
through a network of agents. Elephant foresees the US market moving toward the online, direct-sales model, just like the UK market. In the US, only about 25% customers buy their car insurance online now. The US does not yet have the phenomenon of most people buying direct, and also of more people shopping through pricecomparison websites. In the UK, about 60% customers who buy car insurance online do so through a price-comparison website. Admiral Group has its own such site, confused.com. The site allows online shoppers to compare prices for about 120 car insurance brands in the UK. This kind of service does not really exist in the US at present but is expected to be available in the next 10 years. Hybrid approach is the need of the hour…Insurers can help their agents withstand the direct sales era Consumers today prefer to make insurance purchases online, but carriers distributing their products through agents are not ditching their long-time partners. Rather insurers are looking for ways to bring the online sales experience that today’s consumers prefer to their agents, with a goal of preserving the value proposition of the agent: personalized service and a long-lasting relationship. Insurers still and will be continuing with the agent representation because they see value in it. Building a strong agent relationship, however, requires significant investment. Insurers are still recovering from the slow growth and low investments and may see slightly larger IT budgets this year. Heavy allocation of resources for core system replacement projects means that tough decisions need to be made about what exactly to provide for agents. Agencies comprise businesses of many shapes and sizes, with different needs and wants, so it can take time for new capabilities to see heavy uptake. Progressive enables its agents to quote new business both on Apple's iPad and on Android devices using a tablet version of the insurer's ‘for agents-only’ portal; but the company does not expect every one of its partners to seize the opportunity immediately. Insurers should take some technology initiatives into consideration to help agents withstand the direct sales era. Firstly, it is important to bring the online shopping experience to agents. It is no secret that direct insurance sales pose a threat to the insurance agency business, and as often is the case when a disruptive threat is introduced to the market, the initial reaction by the establishment is derision. But faced with the reality that consumers are often going to go to the Internet first to look for their next insurance policy, agents are looking for ways to stay relevant. Secondly, to drive social media best practices is also a key to support sales activities. Farmers Insurance provides content for its agents to share with clients and prospective clients via Facebook, Twitter, YouTube and other social networks using Hearsay, a platform for distributing items such as Facebook posts, Tweets and LinkedIn status updates to local field personnel. Insurance carriers are not the only ones who want to reduce their dependence on paper. Agencies are also looking for ways to instantaneously validate important documents, especially when it comes to binding new policies. A platform to support electronic signatures is also important as the policies need to be signed and that is not done electronically at present.
Embracing new sales channels in insurance
Page 4