- In most organizations, a formal Distribution Management organization has primary responsibility for channel management. Managing relationships and compliance are seen as the biggest issues they face.
- A wide variety of compensation techniques are used by carriers and most say they get value from those programs – although carriers report that it is more important to calculate compensation accurately than to assure compensation is effective at driving desired business. Some techniques such as incentive comp and contests may only be available to top tier or qualifying agents – but receive mixed reviews on their effectiveness. Only 25% of those offering incentive compensation programs see them as effective. “Having an incentive compensation program isn’t highly effective, but not having one would be even worse.”
- Most carriers rely on a variety of different systems to manage compensation – including Excel and find efficient calculation and distribution of compensation to be quite challenging. For many, the ability to administer a compensation program easily is the key driver as to whether the program will be offered. While they may wish to utilize a particular technique, their technologies create barriers.
- Compliance is another challenging area with many carriers in the early phase of considering additional automation. Fewer than half of carriers have automated any of the major processes – validating licenses, processing an appointment or providing self-service to distributors. Those that have automated the processes generally report them as delivering value.
Let’s play Jeopardy together! If the most frequently given answer from a panel of insurance customers is “Don’t know,” what was the question?
It was: “Which UK insurer do you think is the most innovative?”
For those who think that is an exaggeration of the common opinion that the insurance industry is not innovative at all, let me tell you that the second most frequently given answer was “None.”
As Jo Hind – Industry Head, Finance at Google – explained during the first presentation of the Digital Insurance and the Customer: Mind the Gap! event Celent organized in collaboration with Google, the pace of change is accelerating. More and more people are using digital communication means to get information about financial products, including insurance policies, and among others mobile devices are getting great traction. To pave the ground for the rest of the event, Jo left the audience with simple but relevant questions to insurers: How important is mobile to the insurance business? Are insurers optimizing and planning for the four-screen world (computers, TVs, pads, and smartphones)? How can insurers engage better with their customers? Are products offered by insurers meeting consumer expectations?
When Craig Beattie followed Jo’ s final interrogations with the Celent views on the customer, Google, and UK car insurance based on research he and Catherine Stagg-Macey published recently, we – in the audience – could not anticipate that the phlegmatic British analyst would provide the audience with such an insightful and dynamic analysis of the reasons for and consequences of the changing behaviour of insurance online shoppers. After this moment of brilliance, it was time for people to take their breath and enjoy the networking break to exchange about what had just been exposed to them by Google and Celent.
The audience had opportunities to share their thoughts during the discussion panel session which ended the whole event. Ian Morgan – Industry Leader Financial Services at Google – moderated the session, which saw Jem Eskenazi – CIO of Groupama Insurances, Ollie Holden – Solution Delivery Director at LV=, Catherine Stagg-Macey – Head of EMEA Celent insurance, and Jo Hind debate about mobile and digital insurance predictions. The audience was asked to provide its opinion on these predictions before they were discussed in more detail with the panelists.Let’s play Jeopardy again! What question related to the Celent event summarized above will result in the following answer? “Certainly.” It is: “Are insurers who were present in the audience going to view digital insurance and the customer differently from now on?”
Vertafore’s purchase of Kaplan Compliance Solutions is another step towards delivering on the ease of doing business promise to insurance distribution professionals. It is an indication of the consolidation of vendors along vertical lines as providers deliver solutions that can solve multiple problems in producer management.
Managing the insurance distribution chain involves disparate administrative functions such as configuring compensation plans, administering payment and reconciliation, registering and licensing of producers and tracking education requirements. To a producer, all of these tasks are part of a single process — maintaining and growing a critical relationship. However, in a many insurance companies, multiple departments perform separate tasks in the chain. Systems and work processes have been separated according to history and habit.
When service issues arise, agents are not interested in knowing that different people are handling different parts of the process using systems that do not “speak” to one another. They would like their commission or licensing or education inquiry to be resolved immediately with as little time investment as possible.
In the New Normal environment of a low-growth economy, it is critical to increase production within existing agents (keep them happy), necessary to expand into new channels (bring them onboard quickly and with minimal hassle), and essential to monitor performance of all sales activities (know who is doing what and take action appropriately). Celent believes there is an opportunity for insurance companies to gain market share through the execution of a strategic approach to producer lifecycle management. Carriers can gain competitive advantage in their distribution efforts if they bring together and consolidate these various processes to create an integrated approach that delivers higher quality service, more reliable information, and lower costs.
Accomplishing this goal will require process optimization and integrated automation. In order to meet these objectives, leading insurers will manage producer relationships in a more holistic manner. Vendors will continue to consolidate, form partnerships, and build solutions which facilitate these process changes.
I’m enamored of Donald Light’s recent report about the “New Normal” for insurers. (For the summary, click here.) It does a nice job showing how the lukewarm economy is impacting insurers, and should be reflected in their IT strategies. It’s a sobering picture, in many ways.
But for those of you who make a living in some part of the insurance industry, all is not lost. There are other new normal factors in play that should help to balance out the doom and gloom scenarios being driven by the economy. For example:
We’re really getting somewhere with this Internet thing. The wry tone behind that lead stems from the fact that it has clearly taken us longer to embrace the Internet than it should have. On the other hand, every insurer I talk to now reflects Web-driven customer behaviors in their strategies. This was inevitable, because people of all ages are now Web consumers. But it also produces some efficiency opportunities, like replacing paper with emails and text messages. And replacing snail mailing of forms with guided Web sessions that create clean streams of data. This is good news for insurers, and getting better.
As consumers, we’re pretty darn reachable. I just got an email from my mother-in-law (she’s a well-intentioned email forwarder, and an example of my previous point) saying that my cell phone number is about to become fair game for telemarketers. As dreadful as that sounds, it reminds me that I can now have trusted, known providers reach out to me virtually anywhere I am, 24/7. If my auto insurer calls me, it could well be that I forgot to pay my bill, and I will be grateful. But if they want to deliver a clever product pitch at the same time, I just might say yes. Good for me, good for my insurer.
Coffee brings us together, despite the calories and the cost. I probably drink too much coffee. But I totally buy into the thinking that a simple pleasure now and then is a good thing. So imagine my surprise when I pulled into an oddly orange coffee shop in Chicago and discovered that it was a front for…ING Direct? Now, I did not buy insurance from ING that day, even though the caffeine (and a biscotti) put me in a good mood. But there were lots of people there, and someone probably did. Or will because they snagged some info while they were there. The point is that new business models are emerging, in perfect sync with changes in consumer behavior. Coffee and free wi-fi are influential, and smart insurers will leverage that fact.
So next time you’re relaxing in a cyber café, have a latte, fire up your laptop, and check out Donald’s report if you can. It’s important and interesting reading. But remember that you’re part of a number of new normals, and some of them are very good for our industry.
The direct channel requires an appropriate front end: To take advantage of the growing adoption of the direct channel, insurers have to emphasize low cost, highly automated flexible processes on a scalable platform. This goal can be best achieved through the implementation of open and flexible front end systems facilitating interactions with potential customers, integrating modern communication tools for call center officers and allowing a high level of reactivity in terms of product, pricing and discount changes.
Communication with aggregators is key: With the growing adoption of online insurance, aggregators gain more importance and insurers need to make sure that communication with aggregators is optimal (for more on the importance of aggregators, read the following Celent report “The Perils of Success: Rethinking the Maturing Online Insurance Market in Europe, February 2010”). There are two alternatives that can be chosen from. The first one consists in letting online shoppers fully perform the purchasing process on aggregator’s websites. With this alternative, customers and quote data are transferred to insurers via XML files on a periodic basis either daily or weekly following a batch process agreed between the aggregator and the insurance company. The second alternative consists in directing shoppers automatically onto the insurance online platform to perform the last step of the buying process (the effective purchase of the insurance product and its payment). This alternative requires an instantaneous transmission of customer and quote data by aggregators to insurers. I consider the latter alternative to be preferable for online insurers.
Insurers need to improve integration of affinity and bank channels: Banks and affinity channels tend to deal with more complicated insurance products. They offer specific advice to customers through in-person meetings. To leverage the value generated by these types of channels, insurers need to implement relevant portals allowing management and process of sophisticated insurance products.
Use brokers and agents in specific customer segments: Brokers and agents have still an important role to play. However it is important insurers use these channels for specific segments of customers requiring particular attention, products and services. To promote a frictionless communication with brokers and agents, I recommend insurers to implement sophisticated portals with rich functionality to provide point of differentiation.
Responding to multi-channel management: The changes affecting the distribution landscape make it more difficult for insurers to apply an efficient multi-channel management strategy. I believe insurers should prioritize sophisticated portals providing a single view of the customer based on service oriented architecture (SOA) with high level of automation. In addition, as the multi-channel environment evolves, it is important insurers implement all on a scalable infrastructure.
As the insurance distribution landscape is changing fast and drastically, I expect this topic to be part of the European insurer’s top priorities in the coming years.