Growing revenue 24% in five years with a direct-to-consumer digital strategy isn’t a bad deal, but it’s one that a lot of insurers don’t seem to be seizing with gusto.
Maybe they’re afraid of alienating a well-established agency force, or maybe it’s the challenge of overhauling aging systems to the meet the new digital beat, but insurers are treading lightly in the direct-to-consumer digital arena and leaving money on the table in the process.
What will it mean for insurers who take the plunge into direct-to-consumer distribution? Follow along as we outline the benefits.
Digital Makes the World Go Around—Even in Insurance
McKinsey evaluated 44 insurers from around the world to determine their digital maturity and found that top scorers were earning revenue at 1.5 times the rate of those on the lower end of the scale. In fact, based on five-year compound annual growth rates (CAGR), revenue and shareholder returns were 11 and 5 percentage points higher respectively for these top digital performers.[i]
What, you may ask, was the tipping point for this level of phenomenal outcomes? Focused on providing a customer-centric experience, leading industry performers not only offered direct-to-consumer distribution, they generated one-third more sales through these channels than their lagging counterparts.[ii]
If that isn’t proof enough that customers want to purchase direct, consider the following statistics:
- 74% of individuals shopping for insurance prefer to utilize online channels.[iii]
- The competitive landscape of the market is drastically shifting to favor direct-to-consumer digital carriers, with all of the top five insurers offering D2C distribution across at least one coverage line.[iv]
- In a Willis Towers Watson study, 73% of insurance executives surveyed see digital distribution replacing up to 100% of intermediaries within the next 10 years.[v] While this sounds drastic, it’s proof that even insurance veterans see the direct winds of change approaching.
Raising Efficiency, Reducing Costs
If revenue and growth aren’t enough to get your attention, then let’s talk operational efficiency and cost-reduction for a moment. Your CFO will thank you, as 42% put a top priority on optimizing costs.[vi] Currently, 32% of CFOs use outsourcing and offshoring to reduce the high price of transaction tasks,[vii] but digital, direct-to-consumer distribution achieves the same goal while keeping processes in house.
To achieve the always open, 24/7 shop of direct-to-consumer distribution, insurers rely on process automation, witnessing tremendous benefits:
- Reduction in data entry costs up to 70%[viii]
- Double-digit error rate reduction[ix]
- 50% increase in efficiency[x]
In addition, direct-to-consumer operations leave a trail. Forget paper. This, audit trail is 100% digitally recorded,[xi] meaning no lost forms, records, or post-its to worry about.
Look to the Bottom Line
Direct-to-consumer distribution advantageously favors the bottom line, growing revenues, reducing costs and cornering market share:
- 14% improvement in net premiums
- 12% growth in customer satisfaction
- 5% greater market share
- 24% revenue improvement over five years
- 30% to 50% reduction in operational costs through automation[xii]
[i] Catlin, Tanguy, Ido Segev and Holger Wilms. The Hallmarks of Digital Leadership in P&C Insurance. August 2016, MicKinsey & Company. Web.
[ii] Catlin, Tanguy, Ido Segev and Holger Wilms. The Hallmarks of Digital Leadership in P&C Insurance. August 2016, MicKinsey & Company. Web.
[iii] Dobrian, Joseph. "2016 U.S. Insurance Shopping Study: Insurers Lean on Online Presence to Grow Premiums." J.D. Power Cars. J.D. Power, 01 May 2016. Web.
[iv] Pei, Alyssa and Michael Freilich. The Next Wave of Digital Innovation. [PowerPoint Presentation]. Dig-In the Digital Future of Insurance, 11 May, 2017.
[v] New Horizons: How Diverse Growth Strategies Can Advance Digitalisation in the Insurance Industry. Willis Towers Watson, 2017. Web.
[vi] Global Insurance CFO Survey Providing Insight to Support Growth. EY, 2017. Web
[vii] Global Insurance CFO Survey Providing Insight to Support Growth. EY, 2017. Web
[viii] Global Insurance CFO Survey Providing Insight to Support Growth. EY, 2017. Web
[ix] Global Insurance CFO Survey Providing Insight to Support Growth. EY, 2017. Web
[x] Global Insurance CFO Survey Providing Insight to Support Growth. EY, 2017. Web
[xi] Global Insurance CFO Survey Providing Insight to Support Growth. EY, 2017. Web
[xii] Tanguy Catlin, Somesh Khanna, Johannes-Tobiaz Lorenz and Sandra Sancier-Sultan. “Making Digital Strategy a reality in Insurance.” McKinsey & Company, September 2016. Web.