BCG : The Building Blocks of Bionic Distribution in Insurance

Executive summary:

In the midst of this unprecedented crisis, insurers have the opportunity to transform and create sustained value, but they must move quickly, be bold, and focus on long-term results. In the past four downturns, 14% of companies, on average, were able to increase both their sales growth and EBIT margin despite the challenging circumstances.

Bionic distribution requires three core building blocks

To build advantage in adversity, insurers must embrace what we call bionic distribution, blending human talent with digital technologies in new ways to create fast, intuitive, and digitally enabled experiences for customers.

Bionic distribution relies on three core building blocks: creating a digitally enabled sales force, expanding the reach of distribution, and optimising distribution economics.

Customer expectations are changing quickly

After months of extraordinary lockdowns, economies have entered a very delicate phase that we call the fight phase. Businesses must determine how to bring employees back to work sites and how to interface with customers while keeping the infection rate under control. BCG expects the fight phase to last 12 to 36 months.

The COVID-19 pandemic has already changed what customers want from companies, including insurers. How customers want to engage with insurers and where they choose to spend their money has also shifted. We believe these changes will persist.

• What customers want. Customers are looking for simple, transparent products that are presented in an intuitive and straightforward way. They also want options—such as payment flexibility should they become unemployed and the ability to switch features on and off depending on usage—that reflect their current reality.
• How customers want to engage. With prolonged social distancing, digital platforms will become the new shopping malls for many product categories. Although traditional insurance agents and brokers will surely survive, they must learn how to work in an omni-channel model. Carriers must enable customers to move easily between digital and face-to-face engagements without interruption or inconvenience.
• Where customers choose to spend their money. As often occurs during a crisis, we are seeing a flight to quality. In the wake of the pandemic, customers have turned to established and trusted insurance brands or to innovative digital powerhouses (such as Tencent and Alibaba in China) with robust digital ecosystems that include insurance. Many InsurTech startups have struggled to keep momentum because lower revenues have hurt liquidity and hindered their ability to invest, in some cases raising concerns about their long-term viability.

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