Life was simpler when most insurance purchases were delivered through a Retail channel. Insurance agents–not brokers, bankers, affinity groups, or workplace kiosks–were the sole source of information and advice will for potential insurance buyers. If you wanted insurance, you called an agent. The agent was the driving force behind selling and delivering the product.
But let’s resist the temptation to refer to the past as the “good old days.” I believe those days perpetually start tomorrow.
The direct model is now thriving. Inspired (!) to buy insurance by postcards, TV, radio, and print, consumers access their carriers over the telephone, or via the mail or Web. To differentiate this from the Retail model, I call it the D-tail model. It is based on the premise that if you reach out to enough consumers in a low-cost manner, some proportion will be motivated to buy. The traditional agent’s role may be limited or nonexistent, because buyers are channeled into a new business process that is handled by back office staff.
Take the Web interactions one step further and you get E-tail. In its purest form, E-Tail business is highly automated, channeled through a Web interaction, and replaces both the agent as advice giver and the “push” activities used to get consumers thinking about insurance. E-tail buyers are self-directed, and typically want to make purchases with limited or no human intervention. Some carriers, even for complex products like life insurance, are supporting a true STP model via their E-tail channel.
It is tempting to look at these three delivery models and say that one or the other is the future of our industry. In fact, all three models have a purpose. In some markets, notably the UK, they are all mature.
Retail, D-tail, and E-tail exist because each serves a distinctly different need today. But I believe that all three needs will persist into the future, and will continue to morph with consumer attitudes and technology. That is why carriers must support all three models in combination. Ideally, using a common tool set that brings a sense of cohesiveness and flexibility, while driving down costs considerably from where they are today. Carriers that let themselves become one-trick ponies in terms of sales and delivery are at risk of becoming obsolete.
I saw some consumer data recently which suggested that insurers have weathered the financial crisis better than banks and capital markets firms. Not in terms of finances—although that may be true in many cases—but in terms of consumer opinions.
As an industry, before this period of uncertainty we were viewed on par with used car dealers and cell phone companies. Now we are viewed, well, about the same. But at least we didn’t lose ground, or the trust of our customers. Thank the regulators, or maybe a culture of conservatism, for keeping us mostly out of trouble.
Of course the battle for consumer mindshare is never ending. That’s why the current crop of TV commercials being aired by insurers concerns me. Some national companies are positioning themselves as feeling their customers’ pain. Call me a cynic, but I have trouble imagining a set of consumers who get a warm, fuzzy feeling as they think about their insurers. As a consumer myself, I don’t care whether my insurers feel my pain. I just want good service, good value, and integrity. Besides, recession kvetching is already out of fashion.
Other insurers are making hard price comparisons. Their claims are in close parallel: They all talk about how much their customers saved when they switched. Assuming the stats are true (and I do), the obvious conclusion is that switching carriers can make sense, no matter which carrier you start with and which one you end up with. Do we really want to encourage consumers to constantly spreadsheet their providers? Is all that churn good for the industry?
I’d prefer to see insurers focusing on attracting and retaining customers for longer relationships. That means understanding the risks, pricing accordingly, and delivering great service. And by eliminating switching costs, carriers ought to be able to reward customer longevity, and still improve their margins.
My wife and I had our first baby one month ago. The excitement and awe are slowly giving way to pragmatic concerns. Like, what’s the downside of using a pacifier? Is it really necessary for Baby Weber to live in organic cotton clothing? Isn’t it time to start a college funding plan? And where are we going to buy the extra life insurance that we ought to have?
While random thoughts on pacifiers and baby clothing are now—somewhat incredibly—interesting to me, the issues most relevant to this audience are the latter two. And my perspective on them in Week 4 of my newborn’s life is that insurers are strangely absent in helping me to think about financial products.
While the insurers sit idly by, my wife and I have received direct mail offers from photographers, clothing stores, umbilical cord blood banks, and even a local private school. (He’s a month old, and I’m supposed to enroll him in private school already!?) Babies R Us emails me weekly specials. I’ve put myself on some of these mailing lists, so I’m not mad. I appreciate the attention, for once.
I’m thinking insurers must be able to access the same databases as everyone else, in which my name now has a checkbox in the NEW PARENT columns. But if they do, they aren’t working those databases very well.
Come to think of it, I didn’t even get any insurance material in the baby welcome kit from the hospital where he was born. Formula and diapers yes, insurance no. The story on life events marketing in insurance is age-old, but at least in my home town no one seems to be acting on it.
The good news is that many carriers appear to be building out infrastructure in a way that supports life events marketing. For example, needs analysis solutions are getting very good at teasing out the customer’s story. Web-based self service is generating tons of data that can be mined for relevance. “Practice management” tools are integrating the workflows and data across front and back offices. Now if someone aim those tools at the thousands of birth announcements appearing in newspapers every day, I might get the offers for financial products that every new parent needs.
So, here is something you can do in the comfort of your very own home.
The next time you are watching TV for a couple of hours, watch the commercials. Don’t leave the room, or channel flip, or check your email—just watch the commercials.
And as you’re watching, keep track of the number of commercials that feature a person who is physically unattractive, or not very bright, or doing something ridiculous, or often all three. Oddly enough, this person is usually in cast in the role of an actual or prospective buyer of the good or service the commercial is advertising.
I’ll bet a shiny new quarter that you’ll be surprised at the number of times you spot this character. Not in a majority of commercials by any means, but in a noticeable portion.
I’m not a big expert on advertising, but I do remember from business school that the general idea is to get people to try, buy, and continue to use whatever is being promoted.
So why would a commercial show a buyer/user of its product in such an unflattering light? I don’t know. Strikes me as quite weird. Maybe it is a triumph of the need of the people making the commercial (and the people who are sponsoring the commercial) to demonstrate that they are much more cool than the poor schlubs who actually might buy the thing begin advertised. (See my earlier post, “The Meaning of Cool.”)
I would be happy to say that these kinds of commercials are never, ever run by insurance companies. There are certainly many counter-examples: the commercials run by State Farm, or Allstate, or Liberty Mutual, and others.
But, it pains me to say, there are a few insurers whose commercials do view their policyholders and prospects as rather unattractive folks.
Two words to the insurers running those commercials: please stop.