The study, “Digital Distribution in Insurance: A Quiet Revolution,” examines expansions in big data, sales, marketing and distribution strategies in multiple countries. Kurt Karl, chief economist with Swiss Re, said that while the number of policies sold online is still small, it represents a significant shift in consumer behavior.
“A quiet revolution is underway,” Karl said. “The statistics on e-commerce insurance mask the profound impact new technologies are having on the distribution process.”
According to the study, the internet is now considered a trusted, go-to source for insurance information, with price comparison tools and social media recommendations playing a large role in a consumer’s end decision. As such, “simpler” insurance products like automobile insurance are growing in sales—particularly in more developed economies.
However, the sales do not signal the end of the traditional insurance agent. Consumers still report valuing the face-to-face interaction and expert advice provided by an insurance producer, particularly when considering tricky products like commercial and life insurance.
“For traditional intermediaries, many of whom fear being squeezed out by direct sales, digital distribution need not lead to channel conflict,” the Swiss Re study said. “The challenge for intermediaries and insurers is therefore to adapt their business models to meet the varying needs and preferences of customers, while at the same time keeping the costs of integrating and maintaining multiple distribution channels under control.”
That may mean hosting quote generators or rate comparison tools directly on agency websites. At Solace Insurance in Florida, agency owner Bob Childress adopted a quote generator as one of the first in a series of technological developments designed to cater to new customer preferences.
Childress says that while changes like these involve a financial investment as well as an investment of time, they are absolutely critical in order to remain relevant.
“A lot of people do not like change. Automation can be fairly taxing,” he said. “It’s a stress point, but usually after 90 days, it’s like any new type of relationship and you start to feel okay with where you’re at.”
“Once they’re locked in, it’s pretty easy to stay there.”
Currently, intermediaries like agents and brokers account for more than 60% of insurance contracts sold, according to a 2010 study from the IBM Institute for Business Value.
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The advent of technology in the insurance space has long been feared as a major disturber of the traditional agent/broker model. However, a new study from Swiss Re concludes that while technological advancements mean agents and brokers will need to adjust their business models, it will not send them lining up at the unemployment office.