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How Carriers Adapt to New Insurance Distribution Channels

In the wake of the COVID-19 pandemic, nearly every industry had to adapt their operations to find innovative and effective ways to reach their customers, and insurance is no different. While digital tools have become the key to success for nearly all insurers, they have become even more critical for effective distribution.

Distribution channels in insurance — essentially the method(s) in which products and services are delivered to users, ultimately keeping them engaged with an organization — have become increasingly diverse yet difficult to optimize. According to the Capgemini World Insurance Report 2021, 60% of insurers said that COVID was affecting their acquisition efforts, and 40% were struggling with retention. What this report also found, though, was that the key to improving distribution channels was to find a way to deliver personalized and convenient service.

The State of Insurance Distribution Channels Today

Insurance carriers know that while having high quality products is essential, they’re only as good as the number of customers they reach. This is why distribution channels are so important for an organization’s success – they ensure that the right products reach customers in the most direct and cost-efficient manner.

It’s important to know that there are two distinct kinds of distribution channels in insurance, both direct and indirect channels.

  • Direct channels: Direct distribution channels, also referred to as self-directed channels, are how insurers sell insurance products directly to a consumer without an intermediary. This puts the carrier in complete control of how the product is marketed to and ultimately reaches the end user. While this is the lesson common form of distribution, websites, digital apps, and social media are examples of direct distribution channels in insurance.
  • Indirect channels: Indirect channels are any distribution channel in which there is an intermediary between a carrier and the customer. This is much more common, and insurance brokers, reinsurance brokers, financial organizations, independent financial advisers, managing general agents, retail organizations, broker networks, and aggregators are examples of indirect channels in insurance.

So, while the overarching structure of distribution channels in insurance hasn’t changed, distribution processes themselves are certainly in a state of flux. And because things in insurance are constantly changing — think mergers and acquisitions, expanding into new markets, etc. — insurers need a distribution management system that ensures that nothing falls through the cracks. And, they need solutions that allow their products to be sold and utilized with as little friction as possible.

Pain Points Around Distribution Channels

One of the largest pain points surrounding distribution channels in insurance has to do with mergers and acquisitions. It is increasingly common to see large organizations acquire smaller agencies where they then cause their newly acquired asset to change where and how they do business. This forces carriers to find ways to implement and unify these distribution channel and channel management systems, without disrupting operations and ensuring customers are still cared for.

Secondarily, a lot of direct carriers are getting into the independent agent space, empowered by increasingly accessible digital channels. Several of these large operations are offering direct-to-consumer options, which by default changes the distribution channel. While this means growing business, it means working with agents across many different systems that don’t always interact seamlessly. The issue has always been that carriers have no single system that speaks to all disparate systems, causing workflows to get disrupted due to program incompatibility.

Insurance Distribution Channel Technology

There is good news — the crux of the most common pain points for insurers when it comes to distribution can largely be solved with digital solutions. As digital solutions take the place of manual operations, producers can better optimize their time and insurers can manage channels more efficiently and effectively.

In that same Capgemini World Insurance Report referenced above, more than half of the agents and brokers surveyed said they needed “digital collaboration and engagement tools — such as screen-sharing platforms and digital document-signing tools — to assist customers effectively. Similarly, more than half of agents and brokers said customer convenience improved when they could visually explain product offerings via digital illustrations and single-screen product comparison tools.”

Some tools that carriers are deploying that producers find useful include:

  • Digital CRM tools with a 360-degree view of customers
  • Chatbots for resolving queries at scale
  • Self-service tools for agents
  • Marketing automation tools to create hyper-personalized promotions
  • Automated data capture tools

How Carriers Can Succeed With Distribution Channels

To be successful across all distribution channels, insurers need to be flexible and have systems in place that allow for agility in day-to-day operations. When looking for solutions that allow for seamless operation, carriers should keep the following in mind:

  1. Take care of the sales force: Producers deserve a system that helps them do their jobs as effectively and as easily as possible. Look for self-service tools, automated solutions, and task management tools that help them stay engaged.
  2. Determine the target customers: Personalization is the name of the game, so having a focused target customer will help deliver the best user experience possible.
  3. Determine the right mix of channels: An omnichannel solution is likely a forgone conclusion, but that doesn’t mean carriers need to implement every single option. Find the ones that work the best for the current operation and that support future growth.

Data, like with most functions in insurance, is the key to an efficient and effective distribution channel. Data fuels sales, marketing, product innovation, regulatory compliance, and ultimately automation and personalized service. This means that having a digital distribution channel management system that centralizes all data is essential for carriers to effectively reach and consistently delight customers. Think of it this way — distribution management is the core of core systems and is essential for creating a unified data source. With distribution management, all systems can operate with a single source of truth that works with all other systems. Once carriers are operating with a unified data source, the opportunities for digital innovation are seemingly endless.

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Prasad Boppana
Prasad Boppana leads the Distribution Management practice at Duck Creek as part of his responsibilities with our emerging portfolio of products. Prior to this, Prasad was CEO of Outline Systems, which was acquired by Duck Creek in October of 2018. Prasad has extensive experience in commercializing software products, building and managing global teams, and driving business results. He sees tremendous opportunities for the insurance sector and is passionate about helping insurance companies with their digital transformation initiatives.