Continued slow economic growth and an unsteady recovery have led insurers to sharpen their focus on their distribution channels. Increasingly demanding customers, and changing lifestyles and buying preferences have further queered the pitch for insurers, forcing them to arrive at an optimum mix of traditional and new distribution channels to connect with customers. The changing industry landscape has spawned a whole range of distribution channels that include banks, corporate agents, insurance brokers, individual agents, direct mailing, company website, mobile, kiosks, worksite marketing, Islamic insurance (Takaful), supermarkets and other retail outlets, affinity channels and groups, insurance-linked debit/credit cards, and call centers.
Agents and brokers are typically the key players in the insurance distribution channel, with market shares of 42% and 25% respectively. However, this figure may soon be overturned, as online distribution is growing faster than any other channel. A recent survey showed that 43% of consumers who intend to acquire an insurance product in the next 12 months plan to do it online. This is not to say that face-to-face insurance sales have lost their relevance. Rather, it is important that insurers adopt a multi-channel strategy that focuses on new and alternative distribution channels, as well as new technologies that can tap into the new distribution opportunities.
Here are some technologies that will aid in online insurance distribution:
- Mobility: Many carriers across the globe are leapfrogging over their legacy infrastructure and moving straight into the mobile and wireless technology arena. In South Africa, insurers are issuing micro insurance life policies to low income customers whose premium payouts are linked with their cellular phone bills.
- Radio Frequency Identification Device (RFID): RFID chips in automobiles can serve as theft deterrents and limit payments on fraudulent claims. RFID is also useful for documenting purchase of goods covered in a home owner's policy at the time and point of sale. In the US and Thailand, RFID chips are used to track animals for purposes of the fast-growing pet insurance market.
- Global Positioning Systems (GPS) & Telematics: GPS and on-board 'black boxes' in cars and trucks allow companies to track the physical location of vehicles, the speeds at which they travel and even seatbelt usage among drivers. Telematics can be used for premium calculation for 'pay as you go' policies. Combining telematics with mobile technologies can enable remote data collection, which can be used effectively in business analytics for underwriting purposes. Telematics also helps carriers track risk patterns and behavior of automobile drivers.
- Health Informatics:The ease of sharing electronic health records enables the insurers to underwrite low value life policies without the need for costly medical examination of the customers.
Technology has a vital role in enabling the transition away from face-to-face distribution channels to a multi-channel approach. Insurers can also develop and rapidly launch new and innovative insurance products through a judicious use of emerging technologies.