A move towards selling insurance online has changed the insurance distribution landscape, largely in favour of the big insurers. So how can small companies with limited budgets use the opportunities created by digital technology to their advantage, and ensure they remain successful in an evolving market?
Many insurance customers who previously turned to an agency or brokerage for advice now choose to investigate and assess their insurance options online. Today’s internet user has far greater access to products and offers, with the ability to immediately engage with insurers Australia-wide.
For the large insurance companies this has created an effective new distribution channel, albeit one that is becoming increasingly saturated. However, for smaller companies like agencies and especially brokerages, the trend towards digital direct sales threatens important parts of their traditional revenue, and highlights the need to reassess their customer value model going forward.
So should this trend simply be considered a threat to smaller companies? Yes and no. There are certainly some traditional functions previously performed by smaller companies that technology can now perform faster and cheaper, case in point being basic price comparison by advisors and brokers. The growing trend towards digital direct sales by the large insurers is also taking revenue away from intermediaries, and history tells us that a shrinking revenue pool means some players must exit one way or another. Those who want to remain must do things differently in the future.
However, digital technologies have also created new opportunities for those companies progressive and agile enough to make the required changes to their business.
For underwriting agencies who focus on niche insurance solutions or emerging risks digital technology has created fantastic new distribution possibilities. Real-time quote and bind capability is today more affordable, and with an effective API layer this creates a number of distribution options.
Direct integration and white labelling opens the door to affiliates and associations, web portals and apps provides automated B2B distribution through agents or intermediaries. Direct sales through web or mobile is almost just the icing on the cake. The cost of implementing these distribution channels can even largely be recovered by efficiencies gained through the associated process automation.
For intermediaries, more complex commercial risk solutions are difficult to commoditise and are likely to remain serviced by brokers and risk advisors for the foreseeable future. While advice has always been an integral part of the associated sales process, there is a growing segment of savvy SME and commercial middle market customers who expect to have more involvement in the risk assessment and product comparison process, and who often initiate the engagement online, for example by using indicative quoting tools. For advisors and intermediaries who embrace the digital technologies that support this process, growing this part of their book may be a way to drive growth, or at least to offset revenue lost in other areas of the business.
Rather than treat digital technology as a threat, companies in the insurance industry must adopt its use in the areas where traditional approaches are at a disadvantage. They must identify the aspects of their traditional role which are still relevant to customers and adjust their value proposition and approach to marketing, distribution and service accordingly.
It’s not a question of digital technology replacing the need for niche solutions, customer services or advice. However, those companies who successfully adapt to the changes in customer mentality and expectations imposed by digital technologies will in the future replace those who don’t.
About Aptiture Digital
We are digital agency with over 10 years experience helping insurers convert online audiences into new insurance customers. Learn more about our solutions for selling insurance online and find out how you can add instant quoting and full quote and bind capability to your company website.