Second Study Confirms that Distribution-Driven Insurers Grow at Twice the Voluntary Industry Rate

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AVON, CONNECTICUT, USA (February 10, 2004)�For the second year in a row, companies in the voluntary (worksite) business that use a distribution-driven strategy grow far faster than their peers. In fact, their results were even greater in this year’s study as compared to past years.

On average, distribution-driven insurers grew their new business annualized premium by 32.7% the year after implementing the strategy. In the second year, new business grew 56.6% and in the third, dropped back slightly to 36.9%. Again, these figures outpace both the worksite industry and peer group growth rates. As was seen last year, the changeover seems to peak the second year after implementation and probably needs “refreshing” by the fourth year.

“The distribution-driven approach seems to work for two reasons,” comments Gil Lowerre, president of Eastbridge Consulting Group. “First, the voluntary business is an immature, rapidly growing industry. Differentiators and competitive shopping behaviors are only beginning to emerge and in such cases, distribution tends to predict success better than product competitiveness or other measures. Secondly, distribution is the scarce resource in this industry.”

Distribution-driven strategies are based on the producer segmentation process. Research has demonstrated that various producer clusters want very different qualities from their carrier relationships and that companies who segment the market successfully�and then design strategies around the needs of the chosen segments�have far greater success than do companies that follow more traditional approaches.

“When entering a new line of business, the traditional approach is to design a model that, when compared to competitors, scores in the 85th percentile or better on product competitiveness, compensation, services, etc.,” adds Lowerre. “Unfortunately, that approach does not work well in the worksite business.” Certain brokers want their carrier near the top on compensation, but will tolerate mediocre marketing and enrollment support. Other brokers are the opposite.

People in each of the six major producer clusters (and many of their sub-segments) have radically different outcomes they seek from their carrier relationships and the 85th percentile pleases no one. According to Lowerre, “In worksite, the lesson is clear: you need to know your target producer and be excellent at the characteristics that matter to him or her.”

These findings are based on an internal Eastbridge study of top worksite companies. Eastbridge Consulting Group is the premier consulting firm in the area of worksite marketing.

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