Distribution Channel – Exploring the Growing Hybrid Segment

In the past, most insurance buyers worked exclusively with agents to determine and address their insurance needs. The agent was the primary source of information, education, advice and other services. Some buyers, especially for P&C and life insurance purchases, still value the professional advice they receive from the agent and the face-to-face interaction for the same. But a growing number of people- especially Gen Y-tend to look out for more choices when it comes to the fulfillment of their insurance needs, turning to the internet, call centers, social media and/or as they deem fit. The growing use of the internet has contributed to this phenomenon, and a recent study showed that 43 percent of consumers plan to purchase insurance through online channels—through an insurer’s website or an online aggregator.

The many distribution channels have created the "hybrid" customer who moves between channels in the course of the purchasing journey. Hybrid customers tend to seek the "best of both worlds"– the ease of dealing with direct channels for gathering information and the quality of face-to-face advice when purchasing insurance policies.

The manner in which hybrid customers switch channels along the purchasing process is highly complex and varies significantly, depending on the segment and product. Also, these customers not only switch from online to offline channels, but also from one offline channel to another (e.g. from agent to broker), further increasing usage-pattern complexity. So how can insurers cope with this new type of customer?

Insurers looking to tap the hybrid customer segment must take certain calibrated steps. First, they should map how their own customers migrate between channels, especially across the different lines of business. This will help them estimate the number of hybrid customers they have and how the numbers compare with those of their peer firms.

The next step is to identify the needs and decision drivers of the hybrid customers in the purchasing process and perform a gap analysis of their own offering. Using this information, the insurer will be able to create a specific value proposition for hybrid customers and build a plan to deliver the offerings. These actions should then be divided into tactical and strategic levers. Tactical levers – such as improving the online presence, upgrading information material, increasing service levels at the call centre and introducing quoting features on the website – are generally "quick wins"that can be implemented immediately. Strategic levers, in turn, require insurers to investigate the long-term implications of the hybrid customer behavior in relation to their distribution strategy and business model. Such an effort entails answering questions about customer ownership, organizational structures by product line, and necessary access points for customers.

Hybrid customers make a sizeable market segment. With proper analysis and planning, any insurer will be able to tap into this segment with great success.

About the Author

Abdul Kader is a Business Analyst in the Insurance Consulting Group at Wipro Limited. He has 6+ years of experience in IT & Business Consulting and has worked with leading Healthcare and P&C Insurance clients in the US. His primary area of focus is P&C Sales & Service.

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