Insurance Distribution Channels and the Role of the Agent

Fran Majidi
November 23, 2020
Insurance Distribution Channels

While the pandemic rages, building relationships with clients remotely has been challenging for agents who have mainly conducted business in-person until now. Sales have fallen off. People are buying insurance from websites, social media platforms and through e-commerce. According to the 2017 Global Distribution and Marketing Consumer Study, more than half of digitally active consumers have bought insurance online because they prefer self-service.

Licensed insurance agents have traditionally been the sole distribution channel for selling and servicing insurance, but now that chatbots are giving insurance advice and apps are servicing basic customer needs, where does that leave insurance agents?

Digital Distribution Channels

Doing business remotely is not a new thing, but since the COVID-19 pandemic began, digital distribution models have become the preferred method of buying insurance for many consumers. The new normal has impacted many industries, but in the insurance space, it’s greatly complicated the role of the insurance agent.

There is good news: While some insurers like the direct distribution method, which cuts out the middleman and his or her commission, there’s still a need for agents, especially at a time when people are facing overwhelming challenges with finances and their health. The human touch, albeit from afar, is still vital. And, the more complex the product, the more need there is for a knowledgeable person to advise the consumer.

Is the Face-to-Face Distribution Channel Dead?

No, this distribution channel is not dead. After we have a vaccine for the coronavirus, insurance agents will continue benefiting from traditional ways of meeting customers, especially in the areas of life and health insurance. However, these interactions need to be technology assisted, to ensure more efficiency with leads and higher conversions.

Data should also be organized and mined differently, with analytics suggesting which clients to prioritize, which are most profitable and which are at risk of dropping off. This new cognitive technology will increase the agent’s knowledge and skills, making for a more efficient follow-up process and higher customer retention.

For simpler products, like car insurance, customers will continue to demand a higher level of autonomy even when the pandemic is over. Customers already want self-service and digital access with user-friendly navigation. Agents need to improve upon solutions for offline processes like obtaining signatures. Insurers need to provide agents with the right tools for remote applications, submission forms and onboarding of new clients.

Clients expect digitization of transactions and the flexibility to use a mix of channels to communicate with the agent.

Digital Distribution and Offline Processes

There are instances where offline processes cannot be avoided, like medical underwriting, which is often required for life insurance. Customers do not want to be inconvenienced and they fear getting infected with COVID-19. Insurance agents need to consider alternative methods of gathering relevant information and making the process less stressful for the customer. Or, they must increase the volume of a certain segment of customers who don’t need extensive offline processes. Luckily, there is telemedicine, and agents need to find ways to gather this data without breaching customer privacy and security.

Returning to Scale

As insurance companies begin to return to scale when the economy bounces back, they will continue to push simple insurance products, like car insurance and renters insurance, which can be sold online with minimal or no contact with an agent.

It’s important for agents to hone in on which insurance products may be too complex for digital sales because those products will be their bread and butter. Simplifying products for remote sales may be an advantage for insurers, but agents will still have leverage selling traditional products, which are too complex to sell digitally.

Remote Distribution Channels

Even before the pandemic, insurers began growing their remote distribution forces. Not only does having a remote crew allow insurers to serve more customers, insurers benefit from a lower commission cost per sale and a broader reach, with agents serving specific regions.

Having a hand in many territories is always a good strategy in insurance sales. I see insurers building remote teams of remote agents to satisfy the many needs one customer alone may have. One agent may not be specialized enough in all areas. Groups of agents, however, can work together to fill in the gaps for one another when it comes to various products.

Using split-commissions, this sort of collaboration can be very effective in retaining customers and giving them the best customer care possible. Showing that your brand offers expertise in each product is a very strong selling point.

Expanding Distribution Partnerships

During the crisis, it’s been challenging to maintain volume in sales, and shifting insurance marketing budgets has been the solution. Expanding affinity relationships with insurance technology companies has been the antidote to the lost volume due to social distancing.

Whereas insurance agents have seen a decline in sales since the pandemic began, insurtech companies have seen the greatest harvest yet. For many agents I work with, the solution has been to place their marketing budget in technology-driven lead generation. Some agents are finding there’s no better way to do it, pandemic or no pandemic.