Channel management for insurers: does your business have a strategy for 2023?
As we move further into 2023, insurance companies must urgently accelerate their digital transformation to deliver seamless omnichannel customer experiences. While insurers have historically depended on agents and brokers, customers today expect integrated digital engagement. This requires a renewed channel management strategy. Innovative business models that blend digital capabilities with human expertise are essential to attract and retain more customers in 2023. Key trends like optimizing channel mix, enabling digital partners, and providing on-demand services will redefine channel management this year. Insurers must optimize their distribution networks with the customer experience in mind to drive growth.
The importance of channel management for insurers
Channel management is crucial for insurers to effectively reach, acquire, and retain customers in today’s omnichannel environment. It involves managing various distribution channels like agents, brokers, aggregators, and direct digital channels to maximize reach.
Effective channel management can help insurers in several ways:
- Omnichannel distribution: This approach involves integrating the availability of online purchasing capability, ease of navigating online customer journeys, and seamless integration of sales support and advice capabilities. To implement this strategy effectively, insurers must first lay a foundation focused on the customer journey and enabled by selected technologies and organizational capabilities.
- Changing customer preferences: With the rise in penetration of the internet, there has been a gradual change in customer preferences around buying insurance products. Customers are increasingly demanding internet and mobile channel functionalities from insurers to increase their ease of doing business1.
- Leveraging technology: Not only does it enhance direct sales opportunities, but it also empowers insurers to provide superior customer service and optimize operational efficiency.
- Connecting with customers: Channel management is important for connecting with customers, supporting third-party partners, and managing vendors. Good channel management involves careful planning that helps you track how your channels contribute to your business goals. When companies manage their channels effectively, they ensure they deliver the products customers want, when they’re most in demand, while optimizing their profits and developing positive relationships with their partners.
Having a sound channel strategy is key for insurers to drive growth. It requires optimizing the channel mix, enabling partners, and providing digital capabilities customers now expect.
With the importance of effective channel management established, insurers must stay on top of key trends shaping their channel strategy and distribution mix. While omnichannel capabilities, agent relations, aggregators, and technology all play a role, the exact formula will vary by company.
By taking a strategic approach, insurers can optimize their use of different channels to acquire, engage, and retain customers in a rapidly evolving landscape.
The trends discussed next highlight how channel management is being redefined in areas from integrating digital capabilities to partnering with insurtechs. As insurers shape their channel strategy for the future, keeping the customer experience at the core will be vital to success.
1. Omnichannel distribution is the way forward
A mixed channel approach that combines digitally-enabled tools with traditional intermediary models to deliver defined products and services to the customer, is table stakes for insurers. The lack of efficient and widespread distribution networks in developing economies has forced insurance companies to leverage Internet channels to sell their products and attract millennial customers. In today’s omnichannel world, channel management should be viewed holistically and through multiple touchpoints: from agents to customers. With technology-led disruption and new market entrants such as insurtechs, the traditional insurance model will continue to change. The following aspects are crucial for an optimum omnichannel strategy:
- Analyze all distribution channels across customer segments in the different business product lines to gauge how they run operationally
- Decision-makers must have the analytics on hand to improve sales conversion
- Create a strategy for social media lead generation, using both paid and organic social media strategies
2. Agents are not going anywhere
The role of the neighborhood-friendly agent is still important. In many markets, consumers conduct research online but still prefer to directly approach agents or insurance companies to buy the policy. Yet, the role, capabilities, and skill sets of the agent need to evolve. Insurance organizations will be driven to enable agents with digital tools to generate leads and referrals for better conversions in new business. Agents can no longer be charged with only selling products. Companies must plan for the agent’s role to shift to cross-selling, advisory and relation-management skills. For this change to work effectively, agents must be equipped with digital and social media tools and be trained on how best to use these tools. What does success look like?
- Ensure there is real behavior change in the field, and agents are following through on their training.
- Identify and eliminate barriers to agent performance.
- Enhance and upskill relationship-building and cross-selling skills for agents, so that every point of contact with a policyholder has the potential to upsize revenue.
3. The role of the aggregators
Much like shopping sites that allow consumers to compare prices, insurance aggregators enable policyholders to compare the prices and features of products on the internet. Aggregator models vary: the simplest — the traditional model — allows the consumer to compare multiple products offered by different insurance companies, on the Internet. In the insurer-controlled aggregator model, the insurance company offers the policyholder quotes from other companies — often insurers that offer non-competing products — along with their own products. Each aggregator model has its strengths and weaknesses, and regardless of geography and consumer preference, are pivotal to the channel mix in some form. Yet, insurers risk eroding their profitability when competing with aggregators. Here’s why: companies might undermine their top-margin products and erode brand value in a bid to compete with competitors on an aggregator’s platform. How should insurers accommodate and plan for aggregators in the channel mix?
- Create a separate strategy for the aggregators’ channel but view it as a vital part of the distribution mix.
- Do not compete purely on price on the aggregator platforms. Insurers can offer clever promotions to policyholders to attract them to their products.
4. Leverage SaaS-based solutions
As new platforms emerge, insurers grapple with significant technology investments necessary to streamline processes and unify the customer experience across distribution channels. SaaS-based solutions offer hope to deal with the entangling complexity that can arise when any company moves from legacy systems to a new way of doing business. SaaS solutions offer many benefits, such as better collaboration with agents and brokers, and provide them with a robust platform for better customer relationship management. However, choosing the right SaaS provider is as important as the actual technology.
- Choose a partner with adequate knowledge of the insurance business, as it has its specific requirements.
- Evaluate the right approach for you with the help of a partner. Is the best approach a hybrid approach where you retain a part of your IT infrastructure or is a better-fit one where you fully adopt a SaaS solution?
The industry’s churn and digital transformation will continue for many years. Insurtech is growing every year and is one of the most disruptive forces the industry has seen. Where the ball will eventually land and how deep and lasting the impact of insurtechs will be is yet to be seen. But some of the writing is on the wall and non-negotiable. Regardless of where you are in your channel management maturity, you should continuously review your strategy and implement a plan to help not only your organization but your people develop and transform, just as fast as the industry itself is changing.
You should be objectively tracking all the industry-standard metrics in sales performance from the various channels, including productivity, persistency, retention, cross-sell, and up-sell. At Proudfoot, we help insurers navigate the constantly evolving landscape and implement solutions at speed while engaging your people in the journey. Find out more about our insurance offers here.