November 19, 2020
P&C Distribution: What’s Old Is New
There are eight different models or options for insurers to consider -- but it's fair to ask if these distribution models are really new.
There is a great deal of activity afoot in the P&C distribution space. New models are being explored. Old models are being upgraded for the digital era. In a recent SMA research report, I identified eight different models or options for insurers to consider. However, even though I positioned this as a revolution and an explosion of new activity, it is fair to ask if these distribution models are really new. About 3,000 years ago, it was probably King Solomon of Israel who said, “There is nothing new under the sun.” But the thought still holds true: The ideas remain the same; they just get reinvented and modernized.
This is very much the case in insurance distribution. Let me explain.
The new models to consider include: establishing digital brands, new affinity relationships, bundling insurance with the underlying product, digital marketplaces, worksite marketing for P&C, selling through new ecosystem partners and insurtech distributors. Although these certainly provide some interesting and important options for insurers seeking to expand distribution, it is not wholly accurate to say that they are new. In fact, (and now I’m dating myself) I distinctly remember being part of an industry research study in 1995 identifying scenarios for the future of insurance where we discussed options like bundling, affinity, worksite and selling through non-traditional partners in other industries. So, the logical question becomes – what’s different? Why are these types of options becoming popular and part of the strategy picture for many insurers?
There are some fundamental reasons why this whole range of channel options are important now.
- The digital connected world: The world is undergoing a rapid digital transformation, which drives customers’ expectations. Every other industry is reaching customers via digital and mobile channels and technology have advanced to the point where it is relatively easy to do so.
- The API revolution: Connecting with new partners is significantly easier than in the past due to APIs being built into virtually every software solution. The ability to “plug and play” to connect to new partners for information exchange and transactions enables more dynamic partnering.
- New competitive pressures: Insurers are seeking new ways to reach specific customer segments. As more insurers expand their channel options, they exert pressure on those that stick purely to traditional channels.
Thus far in the blog, I have not said the words agent or broker. But it would be a grave error to think that all the new channels will dominate and leave human intermediaries with a dwindling market share. In fact, agents, brokers, MGAs and other traditional distribution partners are leveraging advanced technologies. Insurers are providing many digital options for intermediaries to conduct business with them. And tech companies are providing innovative solutions for the agent/broker market. In addition, these traditional distribution players are also leveraging some of the other channel options to create hybrid models. Some are creating their own digital brands. Others are expanding their distribution through new affinity relationships, partnering with or acquiring insurtechs or connecting to customers through non-traditional partners.
See also: P&C Distribution: Blending Models
All the participants in the insurance distribution area enjoy many options. Thus, it comes down to selecting the channel mix that best aligns to business strategies and customer segments. The most important consideration is finding the right blend of the old and new. And it is evident that labeling some of the channels as old is a misnomer, given the innovation that is occurring across all the channel options.
In addition to the new SMA Research report, you can find more insights on P&C distribution in our Digital Distribution Virtual Experience on Dec. 16. This event is part of our Insights to Solutions Series.