Like it or not, the way insurance is distributed is changing. While traditional distribution methods will always exist, carriers can't afford to be rigid when choosing how to bring products to market. Consumers now expect a wide range of choices in how they purchase products and services - even very complex products, as seen in recent surveys from Novarica and others. A growing segment of the market clearly is looking for other mechanisms to purchase insurance and access services, and there is little doubt that electronic distribution channels will continue to affect the insurance landscape.
It's clear that a multichannel environment is here. But for many carriers, what isn't clear is what channels are best for attracting new customers. For some, the risk of adding channels is more than they are ready to take on at this time. One thing is sure. Insurance soon will have to support many different channels, catering to a variety of customers using a range of tools at different points in their buying cycle. A carrier that doesn't consider its vulnerabilities and the opportunities arising from a multichannel environment stands a good chance of being surpassed by those that do.
Effectively managing distribution may include adding new channels, going direct, working with wholesalers, affinity marketing or non-traditional channels. It may mean expanding into new territories, or working to extract more new business from an existing channel, or improving retention.
What should carriers think about as they consider a multichannel future?
* Think about who your customer is today and who they will be in the future. As society continues to change, so will consumers and their preferences. Align your channels for today, but don't lock yourself out of channels you'll need in the future.
* Consider all aspects of the customer experience from buying to servicing. Consider the devices they'll want to use, how they'll research products and what advice they'll need throughout their lifecycle, and make sure the buying experience works regardless of the channel.
* Don't assume policyholders will stick with a single channel. Customers who choose to research and purchase through an agent, may want to pay their bill online and use a call center for claim questions. Cross-channel consistency becomes a challenge. Consider how to maintain the value of your brand and the experience you deliver regardless of the channel.
* Don't ignore your current channel. The needs of the agency plant is also changing. Carriers have to support tech-savvy agents as well as those uncomfortable with technology. Research shows that carriers that make it easy for agents to place business get more business. But what's easy for a tech-savvy producer may be difficult for others.
* Build flexibility into the process. A multichannel world requires flexibility. Complex hierarchies and organizational structures, multi-dimensional compensation schemes and a changing regulatory environment require technology support that can be easily and rapidly configured to respond.
* Measure. Channel optimization requires that carriers hone their data analytic skills. But data related to the channel is typically distributed across multiple systems. Redundant data is often entered to accommodate segmentation of the business these producers submitted. This leads to managing agents transactionally rather than strategically.
When it comes to supporting technologies, areas to focus on include the agent portal, including connectivity with the agency management systems, compensation systems that can handle complex plans and personalization of payments, Web-monitoring tools to hone the purchase experience, compliance and on-boarding tools to assure the channel complies with the ever changing regulatory environment, data initiatives, including data warehouses, reporting tools and sophisticated analytics.
Carriers also should stay on top of emerging technologies, including mobile, collaboration/social media tools and gamification.
In the short term, independent agents likely will remain the predominant distribution channel for most insurance products, but the shift to digital that we've seen in personal lines already extends to other lines of business. It's clear more of the customer experience likely will be delivered digitally. Leading firms are investigating how to deliver a consistent multichannel experience, whether through an agent, mobile device, live chat, call centers, videos or other collaborative capabilities.
To drive growth strategically, carriers need to manage the distribution channel strategically. To compete in the future, companies must find ways to serve a variety of segments efficiently and effectively.
INNSight is exclusive commentary from Novarica. Karlyn Carnahan is a principal at Novarica, a research and advisory firm focused on business and technology strategy for insurers.
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