As global business dynamics change and competition stiffens, insurers are under pressure to rethink their distribution models to offer uninterrupted service, superior and personalized customer experience (CX), and maximum service value.
The frequency and severity of natural catastrophes are on the rise, with resultant global insured losses estimated at $82 billion in 2020, a $25-billion year-over-year spike. What’s more, today’s unpredictable risk landscape is prompting individuals and businesses to reassess gaps and expand coverage. For example, COVID-19 alone led to a 30% global increase in consumer demand, according to a Capgemini survey.
The way policyholders shop for coverage is changing, too. Many begin with independent online research and influence from social media before purchase follow-through via digital channels. Prolonged pandemic lockdowns and social distancing accelerated today’s seemingly universal adoption of virtual engagement.
In response, insurers are innovating offerings, business models, and even capabilities to distribute more effectively. Meanwhile, new competitors from product manufacturers to BigTechs are capturing prospect mindshare through compelling and original engagement channels.
The CARE equation – Convenience, Advice, and Reach
The insurance industry has long focused on improving efficiency and distribution at scale. And now, emerging technologies − from artificial intelligence to augmented and virtual realities − are available to enhance distribution channel value.
As customers seek a new policy or coverage expansion, odds are they will turn to channels that offer the most convenience, personalized advice, and reach (or accessibility): we call it the CARE equation.
Convenience means quick access to relevant information around the clock. Depending on a policy’s perceived complexity, customers seek different levels of advice about terms, conditions, and coverage to confidently select the best-fit product. Personalized advice can help firms foster customer loyalty, cross-sell efficiently, and ultimately boost profits. And reach is just as important. While a channel may offer convenience and personalized advice, it demonstrates its actual value when targeted customer segments use it to research and purchase.
CARE trends from the World Insurance Report 2021
• More than half of the small- and medium business representatives interviewed as part of Capgemini and Efma’s 2021 World Insurance Report said their experience interacting with agents and brokers had been convenient. However, more than 60% also found digital channels to be handy. The takeaway? Digital channels are gaining ground with commercial customers because S/M businesses relied on digital channels during the pandemic to sustain operational continuity.
• Some survey responses challenged hypotheses that consumers shopping for simple products require little advice. For example, 28% of survey participants said they count on extensive professional advice when choosing auto insurance. In contrast, only 4% of insurers thought auto-insurance customers required comprehensive professional guidance. More millennials seek advice than their Gen-X and older counterparts because they are new to buying insurance and are less aware and knowledgeable about coverage.
• For 80% of insurance customers, agents and brokers were the go-to channels for personalized advice thanks to human-touch engagement and years of experience. Lesson learned? Agents and brokers continue to retain customers’ trust as the best channel for tailored guidance. For personal and commercial products, agents and brokers are customers’ most trusted resources for general research and purchase needs. Around one-third of millennials say they would purchase from agents and brokers.
• More than 30% of customers say they are beginning to trust digital channels for their research and purchase requirements. Interestingly, 64% of small and medium commercial firms also use digital channels to research coverage options.
• Customers use more than one channel to research and purchase. The ROPO effect (research online/purchase offline) may affect insurance, as it affects retailers.
Each distribution channel has distinctive customer CARE advantages. But can a channel provide superior CX by being a star in one capability and lackluster in others? Policyholders want it all, so it’s time for insurers to offer CARE across all channels.
How can insurers boost value delivered via channels?
Future-focused insurers are poised to actively deploy technology solutions that enrich their engagement channels, create WOW-factor impact, and deliver stellar customer CARE.
A roadmap to the future
Direct channels (call centers and branch offices) can provide convenience and individualized advice because they can be remotely accessed and have a human interface. Yet, restricted working hours and long wait times can limit accessibility.
• 70% of insurance executives who participated in World Insurance Report polling said they interact with customers via direct channels, and 68% invest in channel capability enhancements. However, only 46% said direct channels were effective in sales.
It may be a wake-up call for some insurers, but firms can no longer delay boosting their direct channels with high-performance digital tools if they hope to prioritize consultative selling over typical customer support.
Digital channels have convenience in their DNA, but can they help to drive and close sales?
• More than 80% of customer interaction with insurance firms is digital – via a website or mobile app − and 87% of insurers say they will invest in digital enhancements.
• Only 32% of insurers say digital channels are effective sales closers because they cannot offer personalized advice.
When it comes to customer convenience, digital channels are the hands-down winners over direct channels and bancassurance. Therefore, a significant opportunity exists for insurers to convert digital traffic into a loyal customer base by enabling virtual hyper-personalized risk guidance.
Bancassurance can deliver access to a large customer base but isn’t very effective for personalized advice and convenience.
• 57% of insurers said that a partner bank distributes their offerings, and around 60% say they plan to invest in enhancing their bancassurance channel capabilities. However, only 39% of insurers thought bancassurance is an effective sales channel.
• Banks require tailored training and collaborative tools from insurers to boost their sales power. Still, fewer than half of the insurers polled said they provided collaborative tools to their bancassurance channels to ensure coordination with underwriting functions.
Insurers of the future will actively build a competitive edge with technology. Open architecture will tie distribution channels together by enabling firms to connect with ecosystem partners and redefine their operating models seamlessly.
Digi-intermediation can help fill in distribution gaps, enhance CX, and maximize delivered value
A well-designed Digi-intermediation strategy will digitally empower agents and brokers, widely opening doors to new digital intermediaries. Digi-intermediation prepares for a seamless environment where human channels are digitally empowered, and sophisticated on-demand digital features humanize virtual channels. Digi-intermediation will enable insurers to offer personalized cross-channel CARE during an era in which customers expect virtual engagement.
For example, Massachusetts-based Hanover Insurance launched the digital platform Insurago so that independent agents can flexibly answer policyholder questions and offer advice at any time during the buying process.
Moving to a phygital engagement model requires a mix of physical presence and digital engagement to win and retain customers. Highly innovative new-age platforms that offer a variety of business models are bridging gaps in insurance distribution digitization. Moreover, insurers can augment their distribution ecosystem through partnerships with everyday business providers and embed insurance products into their offerings.
Aggregators, Marketplaces, and Digital MGAs are innovative new-age distribution platforms that can bridge digitization gaps and enable new business models by embedding insurance in consumers’ daily lives. They foster distribution networks with complementary industries to embed insurance into partners’ offerings, creating avenues to expand product reach.
In 2020, Chubb launched a robust collaborative ecosystem platform, Chubb Studio, to simplify and streamline product distribution − globally. The platform enables Chubb’s partners in retail, banking, air travel, e-commerce, and other industries to embed digital insurance options into their own product/service offerings. So far, Chubb has forged more than 150 distribution partnerships worldwide.
With an eye on the future, leading insurers are now fast-tracking digitization efforts for agents and brokers by supporting direct channels with modern digital infrastructure. Digi-intermediation will enable firms to offer personalized cross-channel CARE within a seamless environment. Direct (human) channels will be digitally empowered, and sophisticated on-demand digital features will humanize virtual channels.
