Much has changed since the days of door-to-door salesmen or cold calls via landline telephones as a method of insurance distribution. Today’s consumers can sign up for policies on their mobiles with just a few clicks. However, there are many facets of insurance distribution which are evolving. Which evolving trends do insurers need to pay attention to?
Recent work by Cloud Insurance defined insurance distribution as the process by which an insurers distributed its products to consumers. This can be done through a variety of channels as regulated by the EU under the insurance distribution directive (IDD). These channels include insurance intermediaries, such as agents and brokers, and insurance companies that sell directly to consumers. Ancillary insurance intermediaries, such as travel agencies or airlines, could also distribute insurance by offering it as a value-add service to their primary offer.
Cloud Insurance said that how insurance is distributed has a direct effect on its availability and affordability, and hence the competitive advantage it gives insurers. The company outlined the trends that are here to stay, and knowing these, how insurers can prepare for the future.
The key driving forces
Cloud Insurance pointed to a 2021 report by PwC that outlined the three key driving forces shaping insurance distribution. Firstly, relationships with intermediaries have changed. Many relationships with intermediaries within the insurance industry are based on decades of trust, however this can lead to inertia with traditional insurance providers. New players entering the market have encouraged intermediaries to shift the focus from honouring traditional relationships to forming new ones.
Secondly, the changing customer demands of the digital generation have affected every type of insurance model. The younger generation that have become accustomed to fast and personalised services form other digitised industries are demanding the same of their insurance providers.
Lastly, many insurers have ramped up their efforts and investment in scaling their direct distribution platforms. Insurers who offer online services have a competitive advantage, however many traditional insurers face challenges making this transition.
The pandemic effect
As with many other trends, the pandemic exacerbated these pre-existing forces. For example, Cloud Insurance pointed to a report by Mckinsey & Company which identified three ways insurance distribution has been accelerated by the pandemic: a shift to digital tools, a rise in self-service and customer centricity, and the shift to online processes.
One of the most obvious ways in which the pandemic affected the industry was the sudden urgent need to shift to digital channels. Cloud Insurance said this now means digital is no longer just a channel that is preferred, it is now a necessity.
As insurers adapted to digital channel distributions, they also had to shift to self-service models that deliver a better customer experience. In order to execute self-service models while maintaining security and minimising insurance fraud, insurers had to deploy technologies such as blockchain and artificial intelligence.
In some cases, insurers adopted technologies in healthcare insurance such as integration IoT and virtual reality, which helped them include telehealth as part of their processes. In other case, insurers had to examine how they use external data and adjust fluidless thresholds to expand the number of customers who have forgo a physical medical exam so they don’t lose potential clients.
The benefits of digital insurance distribution
The story of Cloud Insurance’s clients, Maiden Life & General (MLG), illustrates how InsurTech and cloud computing solutions can help insurers reap the beenfits of digital insurance distribution.
Despite strong consumer interest in MLG’s model and products, Cloud Insurance said it was struggling to find the IT resources to build the necessary functionality for their current distribution partners.
After considering MLG’s needs, Cloud Insurance created an end-to-end customer journey platform for the MLG team to handle the administration of their policies and premium collection. The platform has since become a key strategic component of its solutions. By being able to plug the platform integrated with white labelling capabilities, MLG’s distribution partners could now offer a diver catalogue of insurance products as well as tailor its online offers to meet the specific needs of each distribution partner.
Daniel Deckers, MLG Managing Director, said, “Many times when we wanted to launch an insurance programme with a new partner, we experienced long delays. Some programmes weren’t even going live due to a lack of IT resources.
“It’s connected to the type of distribution partners we’re working with – they’re usually not core insurance distributors and have some other key business, such as finance or banking. Thus, their IT department treats insurance as a second priority, so resources are scarce, and there is always something more important.”
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