Insurers Selling Exclusively Through Independent or Captive Agents Need to Augment Their Channel Strategy with D2C

November 01, 2017
By Kathleen Garlasco

Nov blog #1 image-785315-edited.pngIt was Ellen Carney, insurance industry influencer and principle analyst at Forrester, who said that insurers are suffering from “shiny object syndrome  <> .

“When that affliction is in full bloom, insurers get lured in by the stuff like artificial intelligence (AI), blockchain, and even genomics at the expense of masterful execution of digital insurance basics,” said Carney.[i]

Without those basics, such as digital channels of engagement, insurers whose distribution models consist primarily of independent or captive agent workforces are falling behind the forward momentum, standing at the starting line with no idea of where to go next and no way to reach the horizon of future technological advancements.

Why More Insurers Aren’t Rising to Meet the D2C Challenge

Forrester holds a dim view for insurers who lag behind the digital revolution. They predict that by 2020 the market will be divided between digital predators and digital prey.[ii]

McKinsey has shown that digital predators, those who have escalated to top-tier digital D2C channels, already outcompete the prey by generating two times the revenue,[iii] so what is holding back insurers selling through independent and captive agents from augmenting their existing product delivery with direct-to-consumer distribution?

For the most part, it isn’t an unwillingness to evolve. We see three main impediments that insurers are navigating:

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Think of your last online transaction. Whether it was purchasing an item through an e-retailer, researching a new car, or checking account balances with your bank, these transactions delivered a customer-first experience.

Retail leaders are the kings of the digital realm, allowing shoppers to quickly search for an item, view similar recommended products and make a purchase by clicking the mouse.

It’s a similar experience with most banks. Customers login, view a list of accounts and select the one they want to see in more detail.

Local car dealers make the chore of car buying just as easy by displaying the vehicles on the lot, providing lists of features, and allowing consumers to compare models and pricing from the comfort of their own home.

Insurers have started forays into direct-to-consumer territory, but delivering customer-first experiences like these is not easy, particularly when an insurer has relied exclusively on independent or captive agent channels to create customer connections and sell insurance products. They lack the front-end necessary to establish an engaging web presence, and internal IT resources are inexperienced in the art of e-commerce web development.

Even in the case of insurers who have generated an online presence, piping back-end systems to the digital front end to create an interactive storefront is costly and time consuming. It’s a difficult task to accomplish in the short amount of time insurers have to get D2C up and running.

A consumer study conducted by Accenture  <> revealed that nearly 70% of respondents indicated a preference for online channels when shopping for coverage.[iv] Nearly three-quarters of the most digitally active group in the study is open to doing business with alternative providers as long as they can interact through online channels.[v]

In an industry of digital prey, predators capable of providing the types of online experiences consumers are seeking will be taking market share, leaving most insurers little time to augment their independent or captive agent force with D2C channels of engagement.

Powering the Digital Front-End

Mark Breading, partner at Strategy Meets Action, expects the insurance industry to look very different in ten years than it does today,[vi] but he also has concerns about incumbent insurers and their ability to evolve.

According to Breading, insurers are limited by a customer view that delivers only, “an awareness of the current and former products owned by the customer, the performance of those products, information related to product needs of the customer, and perhaps some relationship information like the agent involved.”[vii]

Breading explains that insurers need an ultimate 360-degree view, where every employee and system has the information necessary to engage in informed interactions with the customer in real time.[viii] This is easier said than done for incumbent insurers as much of their processes still operate on siloed legacy systems.

Consider the previously mentioned example where a consumer is viewing multiple bank accounts from a single screen. Insurers can’t provide a cross-policy view to agents or consumers because information for each policy resides in a separate system. It takes a powerful digital engine to unite these siloed and disparate legacy operations and bring them into the 21st-century digital economy.

A similar scenario unfolds when comparing insurance engagement to an online retail transaction. From the retailer’s website, consumers can compare products, instantly receive pricing and make a purchase.

Delivering this real-time, interactive insurance purchasing experience requires a digital engine that automates the quote-to-issue lifecycle, but insurers who have exclusively sold their products through independents or captives may only have a basic web presence. Integrating siloed systems to unite products and deliver a top-notch storefront is generally beyond the expertise of most internal IT teams whose primary job is focused on maintaining legacy systems.

Establishing D2C Call Center Support

The worldwide-web is an ever-expanding universe, providing insurers with the opportunity to reach more customers and grow market share. Unlike the retail sector where a store in Minnesota can easily share its wares across state lines through online channels and a single call center, the sale of insurance requires agents licensed in the state where the coverage is being purchased.

With D2C channels of engagement, the quote-to-issue lifecycle is automated, allowing consumers to digitally quote and purchase multiple products in a single transaction, but what happens when there is a question or concern?

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Recently, a customer of a major insurer was securing boat coverage online, but wanted to inquire about raising policy limits. For insurers with a consumer-facing call center, this isn’t an issue, but insurers selling exclusively through independent or captive agents lack the licensed internal support staff to handle inquiries from D2C channels.

Implementing multiple channels of customer engagement is important for business growth. McKinsey discovered that insurers generating a consistently positive cross-channel experience realize two to four times more growth in new business and about 30 percent higher profitability.[ix]

Making the Move to D2C Engagement

Breading’s earlier statement about the rapidly evolving state of the industry is based on the proliferation of InsurTech companies entering the insurance space. According to SMA’s recently released research report, InsurTech and Personal Lines: Examples, Use Cases, and Implications  <>, only 35% of startups are insurers moving in to disrupt the market. The remaining entities are producing solutions aimed at helping insurers to navigate the evolving industry.[x]

Breading also notes that InsurTech partnerships now number in the hundreds.[xi] This forward-thinking approach of competitive incumbents raises the bar on digital discovery.

The time to consider devising a digital strategy has come and gone. The time to act is now as partnership opportunities increase, and digital predators, working with InsurTech providers to establish everything from the web front end to the digital engine, call center support and beyond, rise to the top.

A Top-Ten insurer, partnered with an InsurTech to extend their existing D2C channels and improve the efficiency of the customer experience. Despite increasing their advertising budget, the insurer reduced its expense ratio[xii] and increased conversions 4% in a single quarter.[xiii]

Establishing a direct-to-consumer channel positions insurers to realize results like these and to meet consumers’ needs for channel choice.

If you’re an insurer distributing products through independent or captive agents, what’s deterring you from growing market share by adding D2C channels of engagement?

Kathleen GarlascoKathleen Garlasco | Senior Vice President of Enterprise Marketing at BOLT 

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[i] Ellen Carney. “How Should Insurers Unleash Their Digital Businesses? By Mastering the Digital Basics.” Forrester, Aug. 15, 2017. Web.

[ii] “Digital Transformation for the Industry: Unleash Your Next-Generation Financial Services Business.” Cisco, 2017. Web.

[iii] Tanguy Catlin, Somesh Khanna, Johannes-Tobias Lorenz and Sandra Sancier-Sultan. “Making Digital Strategy a Reality in Insurance.” McKinsey & Company, Sept. 2016. Web.

[iv]“Voice of the Customer: Identifying Disruptive Opportunities in Insurance Distribution.” Accenture, 2017. Web.

[v] “Voice of the Customer: Identifying Disruptive Opportunities in Insurance Distribution.” Accenture, 2017. Web.

[vi] Mark Breading. “InsurTech and Personal Lines: Threat or Opportunity?” ALM Media, Inc. Property Casualty 360, Oct. 13, 2017. Web.

[vii] SMA’s Mark Breading on the Ultimate 360⁰ Insurance Experience. Perf. Mark Breading. Vimeo. EIS Group Ltd, 2015. Web. <SMA’s Mark Breading on the Ultimate 360⁰ Insurance Experience>.

[viii] SMA’s Mark Breading on the Ultimate 360⁰ Insurance Experience. Perf. Mark Breading. Vimeo. EIS Group Ltd, 2015. Web. <SMA’s Mark Breading on the Ultimate 360⁰ Insurance Experience>.

[ix] Tanguy Catlin, Ewan Duncan, Harald Fanderl and Johannes-Tobias Lorenz. “The Growth Engine: Superior Customer Experience in Insurance.” McKinsey & Company, April 2016. Web.

[x] Mark Breading. “InsurTech and Personal Lines: Threat or Opportunity?” ALM Media, Inc. Property Casualty 360, Oct. 13, 2017. Web.

[xi] Mark Breading. “InsurTech and Personal Lines: Threat or Opportunity?” ALM Media, Inc. Property Casualty 360, Oct. 13, 2017. Web.

[xii] Progressive. “2017 Second Quarter Report.” (2017: 52). Web.

[xiii] Progressive. “2017 Second Quarter Report.” (2017: 52). Web.

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