If you ever took a marketing class you probably remember the four “P’s — Product, Price, Promotion and Place. While attention to all of these is vital to business success (including one or two new ones added over the years), the fourth one – Place (which really is about Distribution) has been getting a lot of attention lately in the insurance industry. From traditional channels with agents and brokers to new channels like Google, Compare.com, Gobear.com, Walmart, and others, the Place where prospects and clients meet insurers is worth a fresh-eyed look and an open [fresh concept?] discussion.
Celent recently reported that many insurers are investing in their distribution capabilities as a means to spur growth and retention by adding/expanding channels and markets and optimizing existing channels. They predicted a steady market for investment in distribution management systems from 2014-2016 (Deal Trends and Projections in the Distribution Management Systems Market, September 2015). Gartner has indicated distribution management is one of their hot inquiry topics for 2016.
As I wrote in my last blog, distribution might also be the most tangible touchpoint to customers for product inquires and purchases, outside of paying bills or making the occasional policy change. Interactions with our distribution channels are key opportunities to create positive customer experiences that lead to loyalty and additional sales down the road. Because only a fraction of our customers will have a claim in any given year, few will have the opportunity to experience the true value of insurance. That places the “burden of value proof” upon insurers, to continually reinforce protective messages, supplement with preventive knowledge and reiterate the supportive comfort customers can have in knowing they are insured.
Distribution has always been the prime communicator of these messages and an extremely important part of the insurance value chain. Channels we use have evolved over the centuries, as insurance itself has evolved (See the recent report from iii, Buying Insurance: Evolving Distribution Channels, for a good history lesson). But numerous forces inside and outside of our industry have been rapidly transforming this important element of the insurance business model. As an industry we can’t afford to think about Distribution in the “usual” old ways.
Traditional channels are still vitally important, but having a broad array of distribution options is even more important in today’s marketplace. With consumers’ shopping/buying preferences and behaviors changing based on more progressive industries and companies, options and alternatives are critically important to capture and retain customers. While the digital revolution and fast emerging technologies are intensifying this change, they have not replaced traditional agent channels, despite the predicted demise of the agent channel a few years ago.
Instead, consumers are using multiple channels (traditional and non-traditional) for shopping, buying and policyholding processes. In many cases, it comes down to whichever channel is easiest or whichever channel seems to fit the moment when the individual is ready to transact. This echoes a trend within all industries. For example, research by Deloitte reported by Business Insider found that consumers shop for groceries on average across five different types of stores, no longer needing a traditional grocery store when one is not convenient. Consumers are now buying groceries at warehouse clubs and super-stores like Costco and Wal-Mart, where one-stop-shopping can save time (CBS Moneywatch). For retail suppliers, this means courting any and all potential distribution outlets.
Likewise, insurance needs to expand distribution channels beyond the traditional channel silos of direct mail, captive agent, and independent agents to a new model, an omni-channel ecosystem that seamlessly interacts with and meets customers’ ever-expanding expectations. This doesn't mean that insurers should rush out and go on a channel shopping spree. It does mean insurers must build a strategic action plan for their unique channel ecosystem using relevant channels, partners and capabilities that work cohesively together to optimize the customer relationship. The irony of this is that while insurers are doing this to make things easier for their customers, it can make things a lot more complex for insurers. Enter the growing need for effective distribution management, and systems that improve carriers’ capabilities to manage multiple channels and multiple factors. These factors include:
Compliance: Automation of key producer lifecycle processes, data capture and reporting saves time and ensures accuracy and timeliness.
Compensation: Moving from reliance on core systems and manual tracking and calculations in spreadsheets doesn’t just save time and increase accuracy, it also enables more targeted and creative programs to drive performance of your channels.
Performance: In addition to influencing producer behaviors, the right distribution management system makes available the volume and granularity of data you need to enable flexible reporting, as well as more advanced analytics like segmentation and predictive modeling. Majesco’s recent research report, A Path to Insurance Distribution Leadership: New Channels and New Data for Innovative Outcomes, provides some useful insights into how companies are using data to improve the performance of their distribution channels.
Self-Service: Portals for your producers and channel partners give them the transparency that's vital for trusted, mutually-beneficial relationships. Developing eService capabilities for customers and agents was a high priority among insurers Majesco surveyed for our recent research report, Digital Readiness in Insurance.
You can have the best insurance products, pricing and advertising to build your market presence, but if you don’t have a distribution ecosystem underpinned by a robust distribution management system to optimize and maximize these channels, your customer growth and retention potential will remain limited. If it is difficult to effectively manage or, better yet, optimize compliance, compensation and performance of your channels you could end up losing to competitors that can. Distribution management systems are no longer considered backoffice systems; they are front office enablers in today’s radically changing marketplace. That brings us back to the concept of Place. Just like long-established retailers will remodel every couple of years, the place you meet your customers can’t remain untouched without your organization and its products losing its sense of value.
Are you developing a distribution ecosystem? Do you have the right distribution management solution to optimize and maximize your established and newly developed channels to help you grow? Celent and Gartner are telling the industry that your competitors are considering and implementing modern distribution management systems. If you haven’t been considering distribution management modernization, now is the time to begin the conversation.