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The Future of Insurance is Distribution

In the business of insurance, channel distributions are high on the list of the most critical insurance functions. Channels are the delivery mechanisms, which consolidate functions, requirements, communications, and delivery correctly and completely.

These are critical factors, some of which are expanding. Until recently, the majority of these decisions rested on longstanding methods and systems within longstanding insurance organizations. However, there are new developments that offer new opportunities – and risks.

Two channels have been enough, until …

For the last 30-plus years, up to 2014, or so, there were two, distinct channels in the P&C insurance community: Direct versus Broker.  The former is a single operation, which manages a single insurance channel, used by in-house agents.  The latter deals with multiple insurers and broker distributors. Until recently, each channel has managed its own benefits and challenges. But this is changing.

On Dec. 3, 2018, Alicja Grzadkowska published a discussion in Insurance Business Canada, noting that:

As the war of the direct channel versus the broker channel rages on, particularly in personal lines, some insurers are making a strong stand on one side of the battlefield, though it’s hard for anyone to ignore that change is coming to the distribution of insurance.

Some changes are understood

Recently, direct writers had a closed community, which allows the same methods for the internal products and services.

For brokers, there are multiple coverages which require alternative methods and systems. This looks to be more difficult for the brokers.  However, Paul Jackson, chief marketing and distribution officer at Gore Mutual Insurance Company, put this into specifics:

We actually don’t think that it’s within our DNA to launch a direct channel. What we do think is that there is significant change that needs to happen within the broker channel so that it continues to be relevant and grows its relevance.

The point is that each group will develop methods to complete functions for supporting changes.

So what’s the problem?

In the past, personal lines (and some small commercial lines) were pretty straightforward.  Yes, there were some tweaks that needed to be managed, but by and large, there weren’t massive changes.

This is changing.  We are seeing new approaches from both direct writers and brokers.  Some of these have not appeared on previous covers, according to Jackson:

We want to transform the bricks and mortar space, the office of the broker, so that it’s not an office – it’s now a retail experience.  Imagine an Apple store where you have merchandise that’s beautifully placed, you have screens where people can interact and they can explore solutions and do it in a very gamified way, or have a cappuccino at a nice coffee bar.

Similar approaches are underway with direct writers.  While it is not as open as others, Jackson put a quote, which covers both environments:

We recognize that our future is in broker distribution, but not the broker distribution we have today.

How does this fit in?

There are new products and processes emerging with the need for new program sets.  For example, autonomous vehicles are forcing changes to target ‘owners’ who have little or no control in the personal vehicle.

If the previous times are not far off, we will likely see emerging solutions just in time.  But there could be other challenges who might not work with Brokers, while Directs cover them with ease.

If you see some processes such as these, please let me know.

Your thoughts?