Auto Insurers Boost AlternativeDistribution Channels
More insurers are using alternative distribution channels, attempting to raise the odds of winning new customers, according to a recent report by Chicago-based Cochran, Caronia Securities, LLC.
The report–"Distribution: The Next Battleground"–found that the market share of non-traditional distribution channels in the auto insurance market increased from 10 percent in 1997 to 17 percent in 1999.
Among the non-traditional channels drawing the attention of personal auto insurers is the affinity marketing strategy, where products are marketed to a defined group of consumers with similar characteristics. (An example would be a collection of insureds that all shop at Sears.) Using this approach, the report asserts, insurers can achieve higher response rates than with mass direct marketing plans, and can price and underwrite groups with defined characteristics.
Another strategy that has gained wider acceptance throughout the 1990s is the direct response channel. Primarily, this was driven by companies with national brand name recognition that implemented direct marketing. The report notes that traditional insurers are becoming less concerned with channel conflict and are quickly developing their own direct marketing initiatives such as Internet sales and service capabilities.
Use of the reseller distribution channel, a model typically found in the software market, is also expanding throughout the insurance industry as a number of firms are aligning their operations with non-traditional partners and moving into alternative markets, the report also said. A typical reseller structure is designed to have a third party sell a manufacturer's product for a fee, commission or percentage of the cost.
Although still in an early phase, the worksite marketing channel is another alternative distribution model showing promise for insurers. This model lets insurers sell voluntary insurance products to consumers at their place of employment, and allows carriers to reach and service employee benefit markets and gain access to untapped buyers of financial service products.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 6, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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