4 November 2019

How Insurance Distribution Is Changing in a Digital World

Today’s P&C insurers find themselves in the center of a rapid and thorough transformation.

First, new technologies open up new avenues and methods for distribution. Second, customers who have become familiar with digital distribution in other sectors, like retail, increasingly demand the same flexibility, performance and personalization they experience in those venues.

As technology transforms distribution, P&C carriers face new questions. What does it mean to transform distribution? Where do existing successful distribution methods fit into a digital future? What do customers want, and how can P&Cs provide it? Here’s what insurance professionals should know about the changing state of distribution.

What Does It Mean to Transform Distribution?

Businesses sell goods and services; consumers purchase them. In recent decades, technology has changed how both parties participate in these transactions.

For insurers, technology has also facilitated the rise of competition from unprecedented quarters. For instance, companies like Amazon and Tesla are now participating in the insurance business in addition to offering consumer goods and motor vehicles, respectively.

In response to competition from insurtechs and other companies, P&C carriers have largely accepted that they are already participating in digital transformation, says Dennis Barnes, CEO of RGAX.

Still, many insurance companies have been slow to start the digital transformation process, says Ariel Russo, vertical product marketing manager at OutSystems. A backlog in app development and the need to access data stored in legacy systems are among insurers’ challenges.

According to an insurance industry report, The State of Application Development 2019, 79 percent of insurance companies currently have backlogs in app development. They have a plan for digital distribution via app, but they don’t have the app itself ready for customer use.

Insurance companies reported a number of problems related to app development backlogs, including the challenges of finding qualified developers. Insurance customers, however, don’t see the challenges: They see only that insurance companies are continuing to use outdated, frustrating methods of doing business.

Where Do Today’s Insurance Distribution Methods Fit In?

Digital transformation doesn’t mean replacing every business process with a shiny new tech tool. Yet simply swapping analog tools with their digital counterparts won’t maximize the benefits of a technology upgrade, either.

“To fully transform into a digital organization, insurance providers need to digitalize every aspect of their existing business and rebuild the existing channels with the help of new technology,” says Ashish Nair at Cogitate.

Few, if any, insurance processes remain untouched by technological change. For insurance companies, the question isn’t whether to invest in digital upgrades to distribution methods, but which technologies to choose and which areas of distribution to apply them.

“Digital investments are typically focused on improving portal capabilities, implementing content management systems, and improving workflows,” says Mitch Wein, senior vice president of Research and Consulting at Novarica.

Portal upgrades make it easier for insurance companies to reach agents, brokers and customers, gather data and target audiences with personalized messages. Content management systems also enhance distribution by allowing insurers to provide consistent, fresh and personalized communications.

Start the process by examining current methods of distribution. Then, look for tools that can improve your most promising distribution channels or align struggling channels with successful peers.

A New Digital Life for Agents and Brokers

Agents and brokers still play a key role in insurance distribution. Just like customers, however, agents and brokers can become frustrated if an insurance carrier’s digital portals don’t make it easy to conduct business with the carrier.

According to the J.D. Power 2019 U.S. Independent Insurance Agent Satisfaction Survey, the more satisfied agents are with an insurer, the more likely they are to place business with that insurer.

However, overall agent satisfaction with P&C carriers is currently low, measuring only 735 on a 1,000 point scale. For commercial lines, the score is 720 of 1,000.

Digital tools that make agents’ and brokers’ business easier improve the chances of generating new business and keeping repeat customers. They can also improve customer relationships while building trust between agents, brokers and P&C carriers. When these digital tools help agents manage customer and insurance relationships, they also become a source of data about what works in agent distribution and what doesn’t, says Eugene Lee at Hearsay.

How Can P&C Carriers Adapt to Changing Customer Demands?

Insurance companies and tech companies tend to agree on one key element: New technologies can and should be used to improve the customer’s experience.

“Customers today expect service and attention where and when they want it,” says Jonathan Yundt, senior presales architect at Hitachi Solutions America. They also expect that service to be tailored to their needs and preferences in the moment.

To understand this customer expectation of on-demand, tailored service, look at the transaction from the customer’s point of view. Customers have become accustomed to reaching for their cell phones whenever they find themselves in need of a product or service. Insurance companies that don’t provide the seamless digital experience customers expect when they reach for their device stand to lose those customers to competitors that have mastered this aspect of digital distribution.

One key aspect of customer personalization is an omnichannel approach. By creating an integrated, seamless experience across all channels of communication, insurance companies improve efficiency and distribution while also meeting digital-savvy consumers’ expectations, says Sarah Jane Stone at Liferay.

Currently, insurance companies have room to improve when it comes to connecting with digitally-focused customers. For instance, a 2019 CapGemini report found that Millennials contact their insurers 2.5 times more often through social networks and twice as often via mobile than older customers. However, Millennials also logged lower satisfaction with insurance companies than older clients.

This suggests that the current generation has higher expectations about digital channels and the quality of service they provide, says Stone.

In other words, it’s not enough merely to invest in digital distribution channels. In order for those channels to offer maximum benefit, they must be focused on meeting customers’ demands.

“For any insurance-focused, digital transformation initiative, it is key to place the customer journey at the heart of any development,” add Nicholas Boyle and fellow researchers at law firm DLA Piper. By so doing, insurance companies can ensure they’re choosing and implementing technologies that improve their ability to stay connected to customers at every stage of contact.

Digital transformation of distribution is already here, and no insurance company can afford to change merely for change’s sake. Instead, providers should focus on integrating existing distribution successes and reaching customers on the channels they prefer.

Images by: Vasin Leenanuruksa/©123RF.com, Antonio Guillem/©123RF.com, goodluz/©123RF.com

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