At the beginning of this year, Deloitte released its predictions for the insurance industry. Topping the list of priorities was the need to “expand digital distribution and virtual service to cut costs and gain competitive advantages.”[i]
For insurers who have relied exclusively on independent or captive agent workforces, the way forward is unclear. How do they establish a digitally-based direct-to-consumer presence when many haven’t yet stepped onto the digital stage?
The Current State of Digital Readiness in Insurance
According to Aite Group, only 20% of auto insurers and 7% of homeowners carriers are currently selling products online,[ii] despite the growing number of consumers that are choosing to use these channels.
“Many insurers are tied to core policy admin systems that originated in the last century,” said Rick Huckstep, industry influencer and thought leader at . “They remain constrained by the legacy of a pre-internet, analogue way of working.”
These systems, built with a 20-year life expectancy,[iii] were entering their twilight years before the current digital revolution, so it’s no surprise that they account for up to 80% of insurer costs.[iv] Even more troubling, according to Huckstep, they represent a significant impediment to establishing a digitally-based direct-to-consumer strategy.
For insurers who have focused exclusively on external agent channels for distribution, the situation is more severe. While they usually have a basic one-dimensional web presence, many of these insurers haven’t begun to think about how they are going to establish an attractive online storefront let alone how to tie legacy systems into the web front end.
Implementing a Direct-to-Consumer Strategy
In our recent research, 73% of insurers reported consumer demand for D2C channels of engagement, but only 23% were satisfied with the results of their digital efforts. To be effective, a comprehensive digital strategy needs to tie together all of the key elements related to the customer experience.
For insurers relying exclusively on independent or captive agent forces to sell their products, the three principles below provide a starting point to add D2C channels of engagement into the mix.
Focus on Customer-Centricity
When Amazon came on the scene in 1994 selling books and records, they already had a vision of becoming an international seller of almost everything. Since then, the retailer has evolved into the premier online merchant, setting the standard for customer engagement in the digital world.
Looking closely at Amazon’s example, insurers can learn a lot about developing a D2C strategy. First, even if it seems beyond imagination in the beginning, plan for the end result.
Setting up an online storefront may seem like your biggest challenge today, but where are the technology trends going? Robotics and artificial intelligence are already improving workflows, and blockchain is waiting on the horizon.
Incorporating the digital basics that are available now into your distribution strategy provides a base to integrate future advancements as the market changes.
Next, make it interactive. Amazon does more than sell everything under the sun. They interact with shoppers, offering product recommendations that make it easy for consumers to find what they want at a price they are willing to pay.
Insurers can do the same, gearing their web-storefront to provide product recommendations, alert consumers to gaps in coverage and advise on deductibles and policy limits.
The message here is simple: think of everything a target customer needs, and then create the most efficient and customer-friendly way to deliver it.
Plan for Better Data Handling and Access
When it comes to data, insures have a lot of it, but according to Aite Group, they aren’t making good use of it.[v]
Currently, insurers use a complicated mix of lead generation techniques, including purchasing leads from outside vendors. As leads come in, data is filed in its own repository according to coverage type, causing product siloes and often resulting in data inaccuracies across systems.
As a result, insurers lack a single view of the consumer where every employee and system has the information necessary to engage in informed interactions with the customer in real time. calls this the , and it’s essential to an effective D2C strategy, because customers expect to interact with lightning-fast efficiency.
Imagine you sign into your online banking site, but instead of being provided a single account overview, you’re required to login separately to see each account. This is the type of engagement insurance systems are set up to provide today, and the experience that many customers receive when purchasing coverage online.
They enter the site, input their personal information and are provided a quote for a single type of coverage. To inquire about other policies they may need, the customer is required to go through the application process again. If they need to make an inquiry with an agent, they have to provide the same information once again.
Direct-to-consumer distribution requires the web front end to be connected to back-end systems in a way that unites product siloes and delivers a 360-degree view of the customer and related products.
Establishing a Customer-Facing Call Center
In the non-digital world, consumers and business owners look to agents and brokers for guidance on obtaining the appropriate coverage. In the digital realm, the best D2C platforms use consumer-entered data, as well as information from third-party sources, to speed the application process, minimize errors, identify coverage gaps and recommend options.
So, what happens when a consumer needs to speak to someone? Even with direct-to-consumer engagement, insurers will need a customer-facing call center to answer questions and help with routine policy inquiries.
over 32,000 consumers to get their thoughts on the insurance industry. When it comes to getting advice and answers to questions, as many as 86% of these respondents are open to receiving automated support, but up to 62% still prefer to receive guidance from an actual person when they have a question or need advice.
Insurers who rely exclusively on independents or captives will need to establish a separate customer-facing call center to support D2C channels of engagement. That call center will also need a cross-channel view, to pick up the customer transaction right where they left off during their online interaction.
Planning ahead could net big advantages as an increase in customer loyalty when insurers provide multiple channels of engagement.[vi] Consumers also report higher levels of trust with omni-channel insurers.[vii] They feel that the company will work to resolve any issues, an important aspect of a happy customer-insurer relationship.
The Importance of Partnerships
Rick Huckstep, Mark Breading and other industry influencers agree: When adding D2C channels of engagement, InsurTech partnerships are the way to go.
Breading feels that the industry will be greatly transformed in ten years, barely recognizable from what it is today, and a large part of the change will come from InsurTech innovation, particularly where distribution is concerned.[viii]
“ is a hot area for InsurTechs in personal lines and is already having an important impact,” said Breading. “InsurTech has been a major trigger for new insurer strategies and will be an important part of the transformation of insurance over the next 5-10 years.”
According to Huckstep, InsurTech platforms that build on the significant investment already made in legacy IT put insurers in the “fast lane” toward D2C distribution and outperform attempts at overhauling or moving to new policy admin systems.[ix]
At the end of the day, speed to market is what it’s all about. Accenture’s study revealed that as many as 51% of consumers are purchasing coverage online, but according to Aite Group, less than one-quarter of insurers are selling direct to consumer through digital channels. That means a small number of insurers are reaping all of the rewards of digital distribution, while others, particularly carriers that sell exclusively through independent or captive agent forces, lose revenue and market share.
I’d like to hear from carriers with independent or captive agent forces. Are you feeling the push from consumers to offer D2C channels of engagement, and what approaches are you taking to ensure that you have a presence in the new digital insurance economy?
Eric Gewirtzman | CEO at BOLT
[i] “Insurance Outlook 2017.” Deloitte, 2017. < https://www2.deloitte.com/us/en/pages/financial-services/articles/insurance-industry-outlook.html>.
[ii] Jay Sarzen. “Disruption in P&C Insurance Distribution.” Aite, Feb. 25, 2016. “Web.”
[iii] Rick Huckstep. “Digital Transformation Is the Strategic Imperative No Insurer Can Ignore.” The Digital Insurer, Aug. 15, 2017. Web.
[iv] Rick Huckstep. “Digital Transformation Is the Strategic Imperative No Insurer Can Ignore.” The Digital Insurer, Aug. 15, 2017. Web.
[v] Lyle Adriano. “Insurance Industry Has Lots of Data—Just Doesn’t Know What to Do with It.” Key Media. Business Insurance America, Aug. 23, 2017. Web.
[vi] Henrik Naujoks, Tanja Brettel, Harshveer Singh, Darci Darnell and Andrew Schwedel. “Customer Behavior and Loyalty in Insurance: Global Edition 2017. Bain, Sept. 14, 2017. Web.
[vii] Henrik Naujoks, Tanja Brettel, Harshveer Singh, Darci Darnell and Andrew Schwedel. “Customer Behavior and Loyalty in Insurance: Global Edition 2017. Bain, Sept. 14, 2017. Web.
[viii] Mark Breading. “InsurTech and Personal Lines: Threat or Opportunity?” ALM Media, Inc. Property Casualty 360, Oct. 13, 2017. Web.
[ix] Rick Huckstep. “Digital Transformation Is the Strategic Imperative No Insurer Can Ignore.” The Digital Insurer, Aug. 15, 2017. Web.