Tag Archives: digital revolution

How to Bring Distribution Into Sync

We’ve been taking a look at how a confluence of forces are having an impact on insurance distribution and how insurance companies need to respond by following a 2D strategy.

In my first two blogs, we detailed the four fundamental drivers of the changes. In my first blog post, “Bringing Insurance Distribution Back Into Sync Part 1: What Happened to Insurance Distribution?”  we talked about how new expectations are being set by other industries and technology.  Last time, in “Unending Waves of Change in Digital Expectations and Distribution Issues ,” I discussed the other three of the four fundamental drivers: that new products are needed to meet new needs and risks distributed in new channels; that channel options are expanding; and that the lines are blurring between insurance and other industries.

Today, we’ll dive deeper into the components of the 2D strategy, which calls for:

  • Optimizing the front-end with a digital platform that orchestrates customer engagement across multiple channels
  • Creating an optimized back-end that effectively manages the growing array and complexity of multiple distribution channels beyond the traditional agent channel.

Optimize the Front End

The digital revolution is being powered by an array of technologies and the changing expectations of customers across all demographic groups. As customers gain market power, they are increasingly comfortable with technology, have a stronger voice and are willing to use it to make their expectations and needs known. In this new world, all technology should be viewed as customer-touching, because it directly or indirectly influences the customer experience.

As a result, many insurers are rapidly investing in digital initiatives and technologies, but too often they do so in a tactical, fragmented and reactionary approach. In today’s world, insurers must look to orchestrate the customer experience through any channel and technology that consumers choose to use. Whether they choose agents, websites, mobile apps, portals, compare sites, aggregators or retail firms, consumers want a consistent and compelling experience that gives them confidence in the insurer.

This demands a platform that enables personalization of portal and mobile solutions based on the unique customer journeys and personas defined by each insurer. To fulfill their unique and multi-channel distribution and customer experience needs, the platform must be integrated with other core insurance solutions as well as an extensive partner ecosystem that integrates content, channels and technology.

Optimize the Back End

In a fast-paced competitive market, distribution channels and effective management of those channels is increasingly critical. Designing, developing, maintaining and managing productive channel relationships is crucial to achieve sustainable competitive advantage.

Effective distribution management should cover a broad array of capabilities to drive operational effectiveness (including distribution registration and licensing); compensation plan design and configuration; compensation payments and reconciliation; and performance management reporting and analytics. Channel management and productivity are critical in contributing to overall growth and profitability. The ability to improve channel productivity, reduce sales cycles and increase cross-sell and up-sell opportunities is increasingly important for long-term success.

To stay competitive and keep distribution channels engaged, insurers are increasingly putting a priority on servicing these channels. From providing access to their production and compensation reports to providing new leads and licensing compliance and education, these all offer opportunities for channel service excellence to retain and grow the channels. Enter the growing need for effective distribution management and systems that improve carriers’ capabilities to manage multiple channels and multiple factors.

Conclusion

An insurer can have the best insurance products, pricing and advertising to build its market presence, but if it doesn’t have a distribution ecosystem underpinned by a connected, digital front-end and a robust distribution management system on the back-end to optimize and maximize these channels, its customer growth and retention potential will remain limited. If it is difficult to effectively manage or, better yet, optimize compliance, compensation and performance of distribution channels, insurers could end up losing business to competitors that can.

Customers expect and demand multiple, coordinated channel options to learn about, shop for, buy and use products and services, and insurance is no exception. Just as long-established retailers will remodel every few years, the place you meet your customers can’t remain untouched without your organization and its products losing their sense of value. Building an integrated digital distribution framework within a foundation of modern distribution management capabilities will provide new efficiencies, new opportunities and additional fuel for growth.

Keep Your Eye on the Fourth P

If you ever took a marketing class, you probably remember the four “P’s” – product, price, promotion and place. While attention to all of these is vital to business success (including one or two new ones added over the years), the fourth P, place (which really is about distribution) has been getting a lot of attention lately in the insurance industry. From traditional channels with agents and brokers to new channels like Google, Compare.com, Gobear.com, Walmart and others, the place where prospects and clients meet insurers is worth a fresh look and an open discussion.

Celent recently reported that many insurers are investing in their distribution capabilities to spur growth and retention by adding or expanding channels and markets and optimizing existing channels. Celent predicted a steady market for investment in distribution management systems from 2014-2016 (“Deal Trends and Projections in the Distribution Management Systems Market,” September 2015). Gartner has indicated distribution management is one of its hot inquiry topics for 2016.

As I wrote in my last blog, distribution might also be the most tangible touchpoint to customers for product inquiries and purchases, outside of paying bills or making the occasional policy change. Interactions with our distribution channels are key opportunities to create positive customer experiences that lead to loyalty and additional sales down the road. Because only a fraction of our customers will have a claim in any given year, few will have the opportunity to experience the true value of insurance. That places the “burden of value proof” upon insurers, to continually reinforce protective messages, supplement with preventive knowledge and reiterate the comfort customers can have in knowing they are insured.

Distribution has always been the prime communicator of these messages and an extremely important part of the insurance value chain. Channels we use have evolved over the centuries, as insurance itself has evolved. (See the recent report from III, “Buying Insurance: Evolving Distribution Channels,” for a good history lesson). But numerous forces inside and outside of our industry have been rapidly transforming this important element of the insurance business model. As an industry, we can’t afford to think about distribution in the “usual” old ways.

Traditional channels are still vitally important, but having a broad array of distribution options is even more important in today’s marketplace. With consumers’ shopping/buying preferences and behaviors changing based on more progressive industries and companies, options and alternatives are critically important to capture and retain customers. While the digital revolution and fast-emerging technologies are intensifying this change, they have not replaced traditional agent channels, despite the predicted demise of the agent channel a few years ago.

Instead, consumers are using multiple channels (traditional and non-traditional) for shopping, buying and policyholding processes. In many cases, it comes down to whichever channel is easiest or whichever channel seems to fit the moment when the individual is ready to transact. This echoes a trend within all industries. For example, research by Deloitte reported by Business Insider found that consumers shop for groceries on average across five different types of stores, no longer needing a traditional grocery store when one is not convenient. Consumers are now buying groceries at warehouse clubs and super-stores like Costco and Walmart, where one-stop-shopping can save time (CBS Moneywatch). For retail suppliers, this means courting any and all potential distribution outlets.

Likewise, insurance needs to expand distribution channels beyond the traditional channel silos of direct mail, captive agent and independent agents to a new model, an omni-channel ecosystem that seamlessly interacts with and meets customers’ ever-expanding expectations. This doesn’t mean that insurers should rush out and go on a channel shopping spree. It does mean insurers must build a strategic action plan for their unique channel ecosystem using relevant channels, partners and capabilities that work cohesively together to optimize the customer relationship. The irony of this is that while insurers are doing this to make things easier for their customers, it can make things a lot more complex for insurers. Enter the growing need for effective distribution management, and systems that improve carriers’ capabilities to manage multiple channels and multiple factors. These factors include:

Compliance: Automation of key producer lifecycle processes, data capture and reporting saves time and ensures accuracy and timeliness.

Compensation: Moving from reliance on core systems and manual tracking and calculations in spreadsheets doesn’t just save time and increase accuracy, it also enables more targeted and creative programs to drive performance of your channels.

Performance: In addition to influencing producer behaviors, the right distribution management system makes available the volume and granularity of data you need to enable flexible reporting, as well as more advanced analytics like segmentation and predictive modeling. Majesco’s recent research report, “A Path to Insurance Distribution Leadership: New Channels and New Data for Innovative Outcomes,” provides some useful insights into how companies are using data to improve the performance of their distribution channels.

Self-Service: Portals for your producers and channel partners give them the transparency that’s vital for trusted, mutually beneficial relationships. Developing e-service capabilities for customers and agents was a high priority among insurers Majesco surveyed for the recent research report, “Digital Readiness in Insurance.”

You can have the best insurance products, pricing and advertising to build your market presence, but if you don’t have a distribution ecosystem underpinned by a robust distribution management system to optimize and maximize these channels, your customer growth and retention potential will remain limited. If it is difficult to effectively optimize compliance, compensation and performance of your channels, you could end up losing to competitors that can. Distribution management systems are no longer considered back-office systems; they are front-office enablers in today’s radically changing marketplace. That brings us back to the concept of place. Just like long-established retailers will remodel every couple of years, the place you meet your customers can’t remain untouched without your organization and its products losing their feeling of value.

Are you developing a distribution ecosystem? Do you have the right distribution management solution to optimize your established and newly developed channels to help you grow? Celent and Gartner are telling the industry that your competitors are considering and implementing modern distribution management systems. If you haven’t been considering distribution management modernization, now is the time to begin the conversation.

The Coming Renaissance

Insurance has been around for a long time … dating back to ancient times. The first written insurance policy was carved into a Babylonian obelisk; the “Hammurabi Code” offered basic insurance for individuals if a personal catastrophe made it impossible to pay back a debt. Insurance continued to grow and evolve across centuries and continents. The guilds in Europe supported master craftsman with a type of group coverage to subsidize them and their families upon injury, disability or death. Deals made in London coffee houses to cover maritime risks were the beginnings of the London Market. These efforts met a universal and timeless need to stabilize individuals and the economy against risk.

The evolution of insurance often followed emerging developments such as the agricultural revolution, the industrial revolution and the information revolution. Each of these revolutions created and reshaped businesses, including insurance. Insurance evolved with each revolution to meet changing needs and to adapt to new developments or technologies that changed businesses, markets and risk. Each revolution required a re-thinking and re-alignment. It required business leaders to shed sacred notions and wake up to the possibilities of rebuilding on a new foundation while maintaining the old structure long enough to move out safely.

Erasing the notion of moderate change

Our industry is waking up and finding itself in the midst of seismic shifts. A revolution is underway: the digital revolution. This revolution is different because of the complexity, breadth and depth of converging factors and global changes. Our industry, steeped in centuries of tradition, must erase the idea that we can ease our organizations into the new era with minor adjustments.

Think of how the digital revolution is going to reinvent your business model. Insurers are moving from product-driven to customer-driven strategies; from limited distribution channels (such as agents) to an array of channels based on customer choice; from line-of-business silos to customer-centricity and customer experience for all products across all lines; from simply containing risk to actively providing personal risk management; and from siloed solutions focused on transactions to a platform portfolio that brings together real-time interaction for all products and services for customers, giving them an Amazon-like experience. Whew! It stretches our minds to consider it all at once.

The rebirth of real opportunity

These influencers of change are challenging traditional insurance models, resulting in declining customers, loyalty and premiums. Whether it is the demand for mobile channels in addition to agents; or declining life insurance or personal auto and home insurance because of demographic changes; or declining premiums for products like auto insurance because of the emergence of technologies like crash avoidance, connected cars and autonomous vehicles, these influencers of change demand we have a re-imagination and a rebirth of insurance.

The promise of the digital revolution is that we can. Traditionally damaging business factors no longer have to be met with traditional business adjustments.

Insurers must look to reinvent the business model, not unlike how Uber reinvented the taxi model. Increasingly, insurance CEOs are speaking out about the coming disruption of insurance and the need for insurance to aggressively rethink the business model.

On May 27, 2015, Generali’s CEO, Mario Greco, commented in the Financial Times that insurers will disappear unless they embrace sweeping technological change. He went on to say that the insurance sector is “on the verge of a revolution and has been lagging behind every other industry — it has been paralyzed.”

On June 30, 2015, Lloyd’s CEO, Inga Beale, stated in the Financial Times that insurers are in danger of being “uberized” as technology allows companies from other sectors to undermine insurance sectors role to manage risk.

So how do insurers move forward? First they need to keep their current business viable and growing to fund the future. This requires transformation of the existing business by leveraging a platform of integrated solutions — laying the groundwork for a renaissance of insurance.

Insurers may enhance auto or life insurance policies, processes and customer interaction. Foundational transformations can also be used to reinvent insurance such as by offering a “family or lifecycle policy” that offers a single bundle to meet the broad risk of individual or family needs instead of individual policies for each of the needs. Alternatively, insurers could offer new risk mitigation or value-added services that leverage technology from the connected home and connected auto … all creating a new customer experience and engagement model.

In recent UK consumer research published by Majesco, one in every three customers feel that insurers are failing on minimum service expectations. Even the highest customer satisfaction score in the insurance industry — 69%, reached by motor insurance providers — compares unfavorably with world-class companies such as Amazon, which scores 87% based on the UK Customer satisfaction Index for January 2015. Furthermore, more than 70% of the market indicates they want a “family” product, combining motor, home, travel and pet in a single insurance policy. Nearly 42% would buy a family product tomorrow, while 30% were unsure but did not rule out the option – highlighting that a significant majority (72%) of the market expects access to a product that is not available today.

While some insurers will dismiss the findings as not relevant to them, they should instead see a warning signal that policy bundling is growing in demand. The Internet has created a market with “no borders” because customers research online to seek out offerings and options to meet their needs. In today’s digital world, what happens in one region does not stay in one region. Rather, these new developments from products to services, new channels and new approaches to risk are rapidly rippling to other regions.

The examples are many. John Hancock’s new life product uses South Africa’s Vitality concept. Google’s Compare site was the result of a UK acquisition. Direct-to-consumer models cropped up first and most strongly in Australia and the UK. Any one of a hundred multi-national insurers can send an idea rippling across continents at the speed of an e-mail. Meeting the digital revolution with real transformation is going to require an acceptance that everything we have known about insurance was good for yesterday. The only thing we can count on is the necessity of insurance that has held true from the Hammurabi Code until today.

So as you attend industry events and read articles, blogs and reports, put the topic of business transformation into strategic perspective. Is business transformation helping you move from legacy software solutions to modern, configurable solutions that will handle the unexpected future? Are you providing a foundation to change traditional business assumptions and business models to provide an enhanced customer experience and value? Will you be the traditional retailer or an Amazon? Will you be the traditional taxi or Uber? Your answer will influence your strategic direction and relevance in an industry that is on the precipice of disruption. Will you be disrupted or be the disruptor? Majesco is focused on transformation as a path to renaissance. Are you?

Succeeding in the Digital Revolution

History has seen different technology revolutions: the industrial revolution in the late 1700s, the information and telecommunications revolution in the mid 1900s and the digital revolution of the present. Each revolution has taken advantage of the new technologies of its day, creating disruption, innovation and business transformation. Businesses have either grown or died based on how they adapted to and innovated with the new technology and responded to customers’ reactions and expectations.

Today is no different. But it is much more intense. The digital revolution is being powered by today’s hyper-connected world and the convergence of multiple influencers — maturing technologies, emerging technologies, the shared economy and demographic trends, to name just a few. And the revolution is creating experiences, products and services, new outcomes and new business and revenue models. It is generating an explosion of data from new and emerging technologies such as mobile, social media and the Internet of Things.

The combination of these factors is transforming existing businesses and creating new ones within insurance. From managing value chains to managing ecosystems, the business transformation is powered by the fusion of technology and data. At the same time, these factors and the pervasive use of technology are lowering the entry barriers for disruptors and competitors from other industries, changing the competitive landscape for insurance in profound ways.

In today’s new world, Next-Gen insurers must be digital insurers. They must reimagine themselves and embrace the full breadth and depth of the mature and emerging technologies that are changing customer engagement, transforming products and services, redefining business and revenue models and breaking down the barriers to new entrants, as discussed in SMA’s “The Next-Gen Insurer: Fueled by Innovation” research report. Insurers must embrace digitalization to reshape the way their businesses approach value creation and offer a compelling customer experience. In today’s world, insurers must move from managing value chains to managing ecosystems to power their businesses as digital companies.

Many insurers indicate that they are on the strategic journey toward becoming a digital insurer. They are making investments in digital initiatives and technologies, often in a tactical and reactionary approach that is reflected in fragmented strategies and investments in technologies. Forays into new websites, smart-phone apps, agent portals, customer portals, collaboration, connected environments and social media are a start, but these can result in an inconsistent and incomplete customer experience. More importantly, they may delay the establishment of a competitive digital business model foundation with technology embedded. The issue is that these silo-based approaches lack a strategic framework that cohesively brings together the unified digital strategy that will become the driver of market differentiation, business growth, innovation, collaboration and profitability.

A unified digital strategy recognizes that all business strategies and technologies touch the customer in some way and that a one-size-fits-all channel model is obsolete. In today’s digital world, this means making a serious commitment to provide real ease-of-doing-business based on customer expectations for every type of interaction through any channel, via any device, to win and retain customers. The strategic components of a unified digital strategy will connect the right people, processes, and technologies.

The unified digital strategy is multi-dimensional and brings together areas of business strategy to drive design and develop efficiency and consistency, while providing the foundation for unified experiences across all the customer touch points, now and in the future. Each of these business strategies reflect existing, new and emerging aspects based on the influence of demographics, behaviors and technologies. The strategies include the brand strategy, marketing communication strategy, customer relationship strategy, web strategy, mobile strategy, IoT/connected strategy, social strategy, collaboration strategy and intranet strategy.

Today’s and tomorrow’s insurance customers are looking for much more than interacting online. They are looking for choice, engagement, social alignment and more. Some insurers have begun or are well along on the digital transformation journey. But becoming a Next-Gen Insurer that will be recognized as a digital leader demands both technology and leadership dimensions that move the company forward in a coordinated and effective way.

From a technology perspective, the digital insurer business architecture framework provides a transformation road map to assess and define a path that helps guide the organizational change, leveraging a wide-array of technologies from core business solutions to emerging technologies like mobile, the Internet of Things, collaboration and analytics. In the leadership dimension, digital leaders seek capabilities that envision and drive the transformation across the organization in a coordinated, consistent manner. These digital leaders work across the traditional departments and silos of an organization to ensure that the strategies are cohesive and working toward the common vision to shape a new future brought about and inspired by technology change.

Becoming a digital insurer demands leadership from the top and leadership to drive the digital transformation. This requires a unified digital strategy fortified by existing, new and emerging technologies.

So embrace the digital world. Re-envision yourself as a digital business. See the possibilities. Define a unified digital strategy that brings the business strategies and technologies together to cohesively guide your transformation. Make it happen, because the digital future is already well upon us.