Digital distribution and channels: Protecting and enhancing value to market through optimizing agent effectiveness

Insurance distribution, across lines of business and geographical boundaries, has historically been dominated by physical sales organizations and intermediaries. Over the last decade, consumer expectations and new market entrants and competition have driven distribution online, but the majority of business is still conducted via “traditional” methods.

Reactive acceleration toward digital

The current global pandemic and the need to socially distance have accelerated the move toward digital distribution. COVID-19 is not only changing how insurers sell, but what they sell. The products and protection sought by customers is changing, along with their lives, and insurers are providing new and innovative protections. A very common example is usage-based auto policies, addressing the reduction in driving patterns for remote workers.

Since COVID-19, insurance agents and brokers have been expanding their digital sales and service capabilities in order to overcome the difficulties of not being able to meet customers in person. Agents and brokers are looking for carriers to support them in shifting their businesses to a more digital focus. So much so that effective support from and greater collaboration with carriers can further improve those relationships and become a competitive preference.

The pandemic hasn’t truly introduced new needs and/or challenges, as the market was leaning decidedly toward digital innovation before (operationally, as well as with products/offerings). What it has done is made the drivers for change more universal. No longer are the challenges with certain consumer demographics, but rather, with everyone. The gap between digital leaders and digital laggards is widening. Most insurers have weathered the initial storm and have stabilized their current business, so they are now looking to maintain and grow.

Near-term distribution changes to support both customers and agents

Digital has always been a delicate – if not thorny – dialogue between carriers and agents. Many agents view digital channels and tools that create direct-to-consumer engagement as a threat. While that sentiment will continue, digital has or will become the only acceptable channel for some relationships and transactions. Holdouts are coming to the realization that digital tools are the new normal.

To reduce agent abrasion in the necessary shift to digital, carriers should focus on areas that don’t threaten or unduly compromise the agent-customer relationship. Instead, perhaps focus on areas that free agents from administrative burdens and allow them to focus on providing advice and generating new business. Recent agent surveying indicates that many agents would consider a lower commission to shift servicing responsibility to the carriers, therefore allowing them to focus on growth.