Distribution channels have long garnered attention in the insurance industry. However, that "attention" has taken twists and turns throughout the years-the development of technology has contributed to alternative distribution channels, including direct sales by telephone, mail and the Internet. In addition, insurers are using other types of outlets, such as banks, workplaces, associations and car dealers, to access potential policyholders. These emerging channels have spurred speculation about an aging and possibly shrinking agency force. Today, whether due to the economy, technology advances or a changing consumer demographic, INN sees the "attention" squarely placed on the agent.
Although the most recent stats from The U.S. Bureau of Labor Statistics reveal that agents and brokers experienced 2.1% decline in jobs in the past 12 months, carriers nevertheless are building out their channels. News such as Allstate seeking to appoint 150 agents in Indiana alone, and announcements of carriers opening additional offices and developing and enhancing agent portals, leads INN to believe that the agent channel is making a comeback.
Kimberly Harris-Ferrante, VP and distinguished analyst at Stamford, Conn.-based Gartner, agrees. "Looking to the short term, they're not being replaced in any form or fashion," she says. "Insurers may see more and more revenue going direct. Our consumer studies even show that they are going online more often. However, they still prefer a live person to close the sale, whether it's an agent or a call center."
In fact, insurers-both personal P&C and life-are making significant investments in agency-related technologies. "We know from study after study that the agent says one of the things that influence him/her is ease of doing business," Harris-Ferrante says. "And that means electronic communication; portal-based technology; straight-through processing; participation in some of these industry exchanges to once and done processing-the basics."
Des Plaines, Ill.-based P&C insurer Founders Insurance Co. relies on many of these tools to improve how it conducts business with its agents. "The more tools you can provide the agents, in the end, benefits everyone," Armando Martinez, VP of IT, told INN TV. "On our personal side of the business, we do website point-of-sale and document delivery right on the spot. We have integrated a lot of our systems to real-time transactions. And although commercial lines is a bit different, we try to take the same approach-to provide the agents with tools online to enable them to quote, bind and get a policy delivered." The Phoenix Cos., Hartford, Conn., relies on a number of channels-wire houses, banks, brokers/general agencies, etc.-depending on the product. But, over the past year, the insurer has focused on its agent/broker channel for its term life and annuities sales.
In late 2009, The Phoenix formed a distribution company, Saybrus Partners Inc., as part of a series of actions to strengthen its market position and strategy. Saybrus provides dedicated consultation services to partner companies, as well as support for Phoenix's product line within its own distribution channels. And, in late September 2010, the insurer formed a strategic alliance with The AltiSure Group, a Thousand Oaks, Calif.-based annuity and life insurance design and distribution company, which will combine their expertise in developing innovative annuity and life insurance products.
"There's a growing acceptance of multiple channels," says Philip Polkinghorn, senior executive VP, business development for The Phoenix. But getting the right balance and leveraging the strengths of each channel is important. He says there are three keys to a successful distribution strategy: communication, product differentiation and working with wholesale distribution outlets that offer unique service marketing.
In 2008, insurers focused on channel integration, using multi-channel systems to do so, Gartner's Harris-Ferrante says. However, 2009's economy slapped their wrists, and insurers viewed these systems as nice-to-haves, not must-haves. "Insurers were left with conversations around leveraging what they currently had, and what they can't live without," she says. "We took a hiatus, yet the world around us continued to revolve at light speed. Now we're trying to catch up with these more obvious, to-the-exterior investments where channel integration is a foundation and architectural strategy.
Harris-Ferrante says investment in these systems will start to pick up in 2011. "As we focus on going direct, doing online self-service, doing straight-through processing, using portals with agents-all of these things are getting back to the old-fashioned strategy of focusing on a single channel, which is a great short-term strategy. But every dollar spent has to be reusable when ready to go to channel No. 2. Don't recreate the wheel each time. If we're not taking that second thought process-reuse with different channels as needed-we're making duplicate investments that will not lead us toward the end goal."
