Spring is almost here. It is natural for insurers to focus on growth. In the past, the growth cycle was fueled by new products, an expansion of agencies or reaching new geographies. Today’s growth fuel flows in the opposite direction – from consumer demand, through the product channels and into product development. The technological wave that has fostered channel development is improving insurer response time and promoting growth – if insurers are willing to think transformationally. (For a good definition of transformational thinking vs. legacy thinking, see my first blog.)

As insurers consider their distribution channels, they need to employ transformational thinking and leave legacy thinking behind. Those who want to compete well know that growth in revenues, profits and market share is dependent on their ability to provide consumer-relevant products sold on the buyer’s terms through their preferred methods. Today’s consumers are savvy, finicky and time-pressed. They will be seeking new channels and making on-the-spot decisions. Insurance channels will need to be focused on high-level service and constant availability. To improve their competitive edge, some insurers may need to add new channels to their lineup.

Challenges in Insurance Distribution

Insurers find opportunities by meeting their challenges with transformational thinking. The first challenge insurers have is managing a growing number of insurance channels. Here is an overview of currently available distribution channels.

Traditional distribution channels include:

  • Agents (Corporate and Individual)
  • Brokers
  • Bancassurance via banks and other financial institutions
  • Retail channels such as supermarkets and other retail stores, often selling micro-insurance to reach under-served and low-income clients
  • Direct mail
  • Kiosks
  • Call centers
  • Newer direct-to-consumer channels include:
  • eCommerce, Telesales
  • Direct marketing/e-mail
  • Mobile devices (tablets, smart phones)

As new technologies are introduced, and as consumers become more informed and more demanding, new channels will continue to emerge.
The second challenge is determining how to maximize the effectiveness of each channel in order to achieve growth in revenues, profits and market share, and minimize channel conflict.

The third challenge is how insurers can shift from the historic product-centric approach, where the insurer decides which products and services go to which channel, to being customer-centric where the consumers dictate what, where, when and how they wish to purchase insurance.


Transformational Thinking

Insurers need to shift towards transformation thinking and leverage new, disruptive technologies to transform their distribution methods.  The initial steps to this are as follows:

Reject these ideas:

First, reject the notion that an insurer can compete by utilizing only traditional distribution channels. Also, reject any legacy ideas such as, “Adding distribution channels is something the organization considers every three years or so.” Antiquated business schedules that rely on past business practices or ‘feelings’ about what has worked in the past need to be erased from consideration. Today’s insurer should be using technology to turn itself into a fact-based enterprise. Legacy product and service attributes can no longer drive channel development. Even when an idea is new, if it is not based on consumer demand, it is a risk.

Accept these ideas:

Insurers need to let a new process drive channel, product and marketing strategies. Accepting this kind of process will grow the organization’s competitive value. They can begin with these steps:

  • Complete a market and client segmentation exercise.
  • Determine for each market and client segment, what, when, where and how consumers wish to purchase insurance.
  • Understand the attributes of each product and service to be mapped to a specific market and client segment.
  • Determine the optimum distribution channel for each offering.
  • Create a multi-channel distribution strategy.

Ask these questions:

Which products and services require consultative selling (which translates to the need for an agent or broker)? Which require selling via mobile devices connected to the Internet (meaning the company must have self-purchase or self-service capabilities)? Which require some interaction (i.e. call centers)? The industry is moving toward customer-centricity, personalization and the ‘segment of one’ concept. Transformational thinking is focusing on the customer’s needs, which will then lead to products and services being created that are relevant, differentiating and personalized.

Lead with these ideas:

Below are some of the technology steps that company leaders can take to move toward a transformed distribution enterprise.

Analytics and Big Data

Leverage Analytics and Big Data to align distribution channels to the target market and client segment. Use predictive modeling to profile each channel’s potential profit margin and operational costs. Employ data acquisition tools to capture, store and analyze data on geopolitical risks, environmental, legislative and regulatory changes, economic shifts, demographic shifts, social changes, and emerging markets. Couple these with customers’ experience from claims, billing and customer services. Then, add dynamic visualization tools, including geospatial tools to define target markets and segments, and fine-tune risks, including channel conflicts.

Social Media

Capture data from social media using new technologies, or utilize a third party that specializes in gathering social data.


Leverage tablets, smart phones and other ‘always connected’ devices that can be utilized by agents and brokers to sell products that are relevant to the customer’s needs. Provide applications (illustration, quoting, underwriting, contact management, and so on) that can improve the agents and brokers interactions with a prospect or customer.


Leverage Platform as a Service (PaaS), Software as a Service (SaaS), and on-demand computing and analytics to create systems that provide consistently positive experience to agents and brokers, and to the customers.  Cloud services provided by third parties can deliver a positive customer experience.

Opening new channels is one of the most exciting endeavors that insurers can undertake. Understanding how and why channel transformation should occur is a good next step toward reaching new markets. 

About the Author
Sam Medina is a global business transformation executive at TCS, who specializes in advising insurance and healthcare executives on transformational thinking and leadership.

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