Even before venture capitalists started funneling resources into insurtech, insurers were aware that channel development and effective distribution management was one of the keys to driving growth. Pipelines or channels have a way of either facilitating sales or impeding progress. They were governed by the same rules a decade ago that still apply today, with the exception of some new and innovative digital differences. More routes into the organization and faster journeys from quoting through policy issue have always made for better business.
An examination of the significant venture capital invested in new insurtech startups leads many to believe that the world of insurance is on the verge of a revolution. And the most logical place for disruption is in distribution. This is evident in the changes taking place with how and why people buy insurance, largely now influenced by digital technologies and ease of doing business via the internet.
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As further evidence for the viability of channel development, insurtech investors have gravitated toward distribution and distribution-related activities. Investors may see a quick ROI. They may perceive a low-risk investment. They must also see an opportunity for increased flow into the sales pipeline.
In Majesco’s new report, Succeeding in a Multi-Channel World: Channel Efficiency, Optimization and Speed to Value, we trace recent insurtech developments and match them to parallel market changes. Rapid changes in customer behaviors, technology-driven capabilities and market boundaries are putting pressure on the insurance industry to adapt, and a key pressure point is distribution.
Beyond optimizing and aligning digital front-end with core distribution management back-end and enhanced data and analytics to create operational efficiencies that accommodate all chosen channels, insurers must implement an approach to designing, developing, solidifying and protecting valuable distribution relationships, including agent and broker relationships. Further, they must be able to manage those day-to-day relationships with modern, innovative technologies and processes.
In other words, channels aren’t something that insurers should build and then consider “built.” They are in need of constant change and optimization because much channel growth will happen in areas where relationships are just as crucial as digital preparedness.
Majesco dispels some common business thinking surrounding channel expansion. For example, direct online sales are still reasonably slim in the marketplace compared with agent-led closings. Yet, a high volume of agent-led closings were started through online research, quoting and information-gathering. This kind of customer journey must be supported by a flexible channel structure that will allow for a start/pause/switch/close sales process flow. If it isn’t enough that the customer is clamoring for omni-channel service, agents themselves (once wary of digital preparedness) are also interested. Agents are waking up to the realization that they stand to benefit by gains in both end-customer service and agency service.
While insurance companies and agent/brokers continue to dominate the customers’ research, buying and service experience, lines are blurring across all lines of business within distribution. There is strong interest among forward-thinking insurers in working with new, alternative sources and channels. These channels will work as new revenue streams, culling growth from additional markets and new products.
A great example of this would be SafetyNet, a new product/channel coming out of CUNA Mutual Group’s innovation lab. SafetyNet customers pay a small monthly fee to receive a lump-sum payout in the event of a job loss or disability. The distribution channel is entirely digital, the market is entirely new (targeting individual low/middle income workers with low savings) and the product was built to fit.
Viewing distribution through ROI glasses
In this new and ever-changing business landscape, insurers must rethink distribution-related strategy and execution; namely to one that requires a digital, multi-channel focus—from back to front office, and from an internally focused business model to one that considers the ecosystem across the entire distribution network.
Insurers need to integrate and align the right technologies, data and systems to improve existing channel development as well as to approach new channels and partnerships that leverage the insurer’s ability to properly service all stakeholders. We look at this as growing the channel ecosystem. Randomly adding channels, however, cannot work without an understanding of how that particular channel contributes to greenfield growth or additional revenue. It is best to use speed to value as a criterion for launch, with standard ROI opportunity as a gauge for prioritization. Long-term investment is no longer a viable standard. All channels are subject to frequent adaptation, expansion or closing — based on the ever-changing requirements of customers.
“Show me the product!”
Customers don’t think in terms of “channels.” They don’t care how a purchase happens. They just want the process of finding and purchasing to be seamless, consistent, intuitive and painless. If an insurer can become adept at being everywhere customers may want them to be — a true omni-channel environment — then they are likely to keep churn to a minimum while optimizing growth. For many insurers, this also means upgrading agent capabilities as well as data analytics. The goal is for the face of the organization, whether online or in-person or by phone, to show a consistent understanding of the customer and a predictive knowledge regarding their needs. Just as Amazon can use algorithms to auto-populate related products, insurance channels can use AI and robo-advisers to anticipate customer appetites for new products or supplemental services.
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As the channels blur, the “brand view” must be prepared to lead customers to their intended destinations. For example, the customer may wish to initiate an application on an insurer’s smartphone app, or begin on a comparison site. The customer may want to later make changes to the application using a laptop or tablet. At some point, the customer may have questions and wish to enlist a chatbot or human agent. Finally, the customer may wish to complete the app with a smartphone or in an agent office. To accomplish this fluidity, an insurer needs access to policyholder data in real time, with a complete alignment in customer, channel partner and back-office core systems.
To bring this all back to where we began, an analysis of the JOURNEY and FLOW is the key to distribution growth. We see clearly where insurtech investment is headed. We see uniformly that customer behaviors are dictating an omni-channel approach. We understand the need to improve agent service while building digital direct channels. All of this leads us to one conclusion — succeeding in a multi-channel world is a matter of smart investment.
For further evidence on the importance of distribution strategies, be sure to read Majesco’s white paper, Succeeding in a Multi-Channel World: Channel Efficiency, Optimization and Speed to Value.