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March 31, 2015

Digital Devices: Insurance Agents of Tomorrow

Posted by Mohan Babu (View Profile | View All Posts) at 7:11 AM

The insurance industry globally is undergoing a major transformation. Pervasive technologies, growing millennial consumer base, fierce competition and increased regulatory interventions are changing the very fundamentals of the insurance business. As customers become more selective and competitors more agile, it is imperative for insurers to continuously innovate their product portfolio and distribution mix to stay ahead of the competition.

Today's customers play an active role across the insurance policy lifecycle, starting from product development to claims disbursement. The product-centric business model, is slowly but surely making way for a customer-centric one. In this evolving marketplace, one in which customers are calling all the shots, distribution function is going through a significant transformation.

With widespread availability of advanced technological propositions and an emerging connected customer segment, insurers have started exploring ways to develop newer direct distribution channels. The market is abuzz with several direct-to-consumer distribution strategies leveraging mobile, web, and smart digital devices. Insurance companies are also effectively using cloud, social media, Internet of Things (IoT) and analytics solutions to develop an integrated technological platform to meet (and exceed) customer demands and expectations across the policy lifecycle.

Apart from assisting customers in comparing and buying the most suitable insurance products, direct channels also provide insurers with opportunities to increase sales, while keeping a check on costs. The last few years have seen consistent uptick in the direct channel sales, especially in the personal auto and home insurance space. While agents still maintain a dominant position in most of the insurance markets, their share in overall sales is on the decline.

The shift towards digital is however not limited to personal home or auto insurance; commercial line carriers are also targeting small and medium enterprises to offer several products using direct channels. Not wanting to be left behind, life insurers are also exploring ways to grow the direct channel sales, though currently it's centered more on term life products. Recent investments by leading life insurers however suggest that direct channel sales will go beyond simpler term policies.

Consumer data lies at the core of this distribution revolution and therefore, a single customer view is critical in setting up an effective direct channel strategy. In addition, the digital transformation journey requires a holistic technology solution encompassing enterprise content management, ability to process cross-channels leveraging the web, mobile and social technologies, a wide range of analytics, metrics and predictive modeling solutions.

While the move towards digital is inevitable for the insurers, a well-defined strategy and approach is necessary to succeed in this virtual marketplace. To steer ahead, insurers need to rethink their traditional product portfolio, marketing approach, legacy technology and the operating model. Insurers need to strategically address the insurance value chain and realign their business model to gain competitive edge. The digital framework must address four key strategies around product, distribution, sales and marketing and operations. All of these must come together in order to create a robust digital sales structure.

With technological advancements creating newer opportunities almost every day, insurers cannot afford to ignore the changing wave of business environment and shall take proactive and decisive steps towards embracing them to stay relevant in the marketplace. While insurers should acknowledge and adopt the shifting priorities towards digital, it is important to realize that all product lines may not be best marketed or sold through the digital medium. Agencies and other channels will continue to play an important role and will co-exist alongside digital channels. Therefore, it is important for insurers to carefully chart out the priorities for direct channels and develop an integrated multi-channel ecosystem to provide flexible, seamless customer experience that allows them to compete and grow in this dynamic market.

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