In the first part of our four-part overview of thecurrent state of the insurance industry, we focused on whatcustomers want, which is to feel cared for and part of the process.However, that is not the only changing element of the insuranceindustry and certainly not the only one that impacts the bottomline of an insurance company.

In addition to the impact of customer demands, the distributionmodel a company selects dictates how business is conducted and howcustomers interact with the organization. Today, insurancecompanies are faced with a few options for distribution models:traditional legacy with infield representatives; on-demand modelsthat go directly to consumers; or a hybrid of these two models. Sohow do you determine which model is right for you?

There is no simple answer, as each option provides benefits anddrawbacks:

• Legacy: Many traditional insurancecompanies operate under this model. There is a corporate office,but local agents for the company interact with customers each day.This model is beneficial for local service and for acting as anintermediary when a claim is filed. Overall, the customer serviceelement of legacy distribution is beneficial for the long termconnection with customers. At the same time, legacy distributiondoes not provide customers with the on-demand care capabilitiesthey are looking for, such as apps or online portals that enablecustomers to control their own experience. It can also cause siloedpockets of information about customers and can reduce cross-sharingof best practices.

• Direct to customer: In direct contrast tolegacy distribution, direct-to-customer options focus exclusivelyon letting customers control the experience. Customers can godirectly online and determine the level of protection they wouldlike, refine their price parameters, and dictate the entire processbased on their needs. While this is great because it satisfies thegrowing number of people, particularly younger consumers, who wantto control their experience, it takes away an opportunity toprovide exceptional customer service. With this model, the customerno longer has a dedicated customer care representative that focuseson getting the best product or who can navigate the claimsprocess.

• Hybrid model:  Intuitively,this model combines the first two options. With hybrid models, forexample, customers can dictate their own level of protection butthen also have a representative to help navigate the process shoulda claim be filed or have coverage questions. This process helpsbridge the gap between the two models, but also requires morecomplexity than either of them. To move toward a hybrid model, bothother models will require implementation of new capabilities. To bespecific, direct to customer models will require dedicatedrepresentatives to manage accounts while legacy models will have toimplement digital offerings and determine how to assignrepresentatives and the required integration between the legacyagency management.

It doesn't matter which path is taken, but insuranceorganizations must better understand what their customers want andwhat their providers demand so they can continue to adapt to meetthose needs. Regardless of distribution model, customers arecontinuously requesting on-demand services including mobile appsand portals that allow them real-time access to their information.Without these offerings, companies risk losing customers and agentsto competitors that understand these demands.

This is the second in a series of articles from Jon Mayoof NIIT Technologiesabout how to utilize data in the insurance industry to decreasecustomer churn, increase revenues, and lower cost. In comingarticles, he will analyze how data is impacting business models,how to upgrade data warehouses to be more effective, and how tofully leverage data efficiently to drive businessoutcomes.