Direct Sales, Agent Model Might Converge In P&C Distribution Future

It is not clear, however, that the future of p&c distribution is going to be an "either/or" scenario.

It is true that the traditional agent-based insurers are losing ground to the direct players. So far, web channels have provided a tremendous boost to the direct insurers, delivering greater reach and efficiency than the traditional phone and direct-mail models.

As technology has become ubiquitous, however, and web access is taken for granted–especially among consumers coming of age for buying insurance–the old (and generally artificial) barriers between the direct and agent models will become obsolete.

However, we believe that new collaboration and interactive technologies will help, rather than hinder, traditional agent-based distribution strategies.

At the same time, newer and more direct strategies for selling all but the most commoditized products will become more high-touch, with human involvement and guidance at multiple points of the interface with the consumer.

Mobile devices such as the iPad, iPhone and Android provide a glimpse of this interactive future. Later iterations of these devices will almost certainly allow for real-time videoconferencing, just as Skype and other technologies permit videoconferencing via personal computers.

So the question then becomes, in what "channel" does an interactive video chat with an agent belong?

While it may be easier to call than to visit the agent's office, the video call accomplishes much the same purpose.

For relatively simple product transactions such as automobile insurance, the video call may fill the bill, while for more complex products a scheduled conference via a 60-inch television screen may be as suitable as an in-person visit.

Interactive and collaborative technologies are also re-shaping the direct market and pushing it toward greater involvement–not only in customers' purchasing decisions, but in their retention, loyalty and ongoing interactions with the insurance carrier.

Technologically-advanced carriers are already rolling out customer solutions in areas such as bill paying and claims handling. With basic activities automated, the consultative role of call center workers can expand. In effect, they become "agents" whom the customer may never meet (at least not in person). This, in turn, will allow for more complex products to be sold via the direct channel.

We believe that all insurers–whether they concentrate on the agent or the direct model–should be reviewing the needed architecture to deal not with today's environment, but with the likely environment three-to-five years down the road. In particular, insurers that want to be tomorrow's winners need to be addressing certain key elements, including:

o Multi-Access Strategy:

Insurers need to develop a perspective on how they will sell and service customers across the various channels and what customer experience they are trying to deliver through these.

It will be critical to understand the underlying economics of this strategy, as they are likely to vary by channel and customer segment.

o Non-Traditional Marketing/Branding:

Insurers have become skilled and experienced marketers, surpassing many consumer industries in advertising spending. Branding and marketing will need to be managed in the new media outlets such as web and social media, in addition to television, print and radio.

Branding and management of the customer experience will become more, not less important with the proliferation of social media (which is linked closely to mobility, as well.) Insurers need to adapt technologies that enable lead generation and referrals from social media sites.

o Analytics:

Personalized technologies will bring enhanced opportunity to collect and leverage richer information about customers. Enhanced analytics capabilities will be needed to establish and maintain a competitive advantage.

Predictive analytics, for example, can already "steer" insurers toward customers with appropriate risk/credit profiles, and will eventually include indicators of potential profitability and retention. The uptake of analytics by chief marketing officers will no doubt accelerate.

o Mass customization:

Insurers will need a common web/digital architecture, but will also need the ability to provide a customized web experience.

Agents, for example, can benefit from a "mass" website that connects to their own customized site that incorporates branding elements, but can deliver specific products or experiences the agents want to emphasize–such as life insurance or deposit products.

It seems clear that insurers will have to develop new rules for how they attract, motivate and compensate their agents. How, for instance, will Internet traffic be routed to "customized" agent websites?

Many new cross-selling opportunities will appear, as well. With the right technology at place, it will not be difficult to convene different product experts to talk with one client at the same time.

It may be too early to place bets on the winners and losers in the future of insurance distribution. But imagine for a minute the impact the large agent-based carriers can have if they can bring all the knowledge and experience of their vast agent networks right into the living room of any customer or prospect.

It is a safe bet that insurers with a comprehensive strategy and a realistic view of where technology is going–rather than where it has been–will have the inside track in terms of market share, customer loyalty and brand value.

John Cusano is Managing Director of Accenture's U.S. Client Service Group. He can be reached at john.m.cusano@accenture.com.

Ravi Malhotra is a Senior Executive in Accenture's North American Financial Services Strategy Practice. He can be reached at ravi.malhotra@accenture.com.