Coming to Terms with Insurance Aggregators – Accenture Report
Article Synopsis :
Insurance aggregators have grown as a result of the rising number of tech-savvy consumers who look for value, experience and self-service capabilities online. How can insurers join forces with aggregators while protecting their interests and preserving brand value?
The Accenture report – “Coming to Terms with Insurance Aggregators: Global lessons for carriers” – explores the aggregator landscape and continued expansion of the aggregator model including new entries from retailers, technology vendors and Internet giants (e.g., Google). Most insurers claim no benefit from aggregator arrangements but the fact is the model has managed to:
- Level the playing field by injecting service simplicity and transparency.
- Push the direct channel to change its pricing structure, frequency of customer contact, and quote volumes amongst other features.
- Change customer behaviours and expectations.
- Increase the incidence of fraud.
- Commoditize insurance products even more.
The aggregator model has been quite successful in the UK capturing 60 to 70% of new business premiums in the private automobile insurance market. But aggregators have not managed to capture an appreciable market share in other countries. The extent of penetration depends on a number of factors such as customer habits and culture, marketing expenditures by insurers, insurer participation in the model, mismatch in the digital sophistication of insurers and aggregators, regulatory constraints, and distribution cost pressures.
Limitations notwithstanding, Accenture feels the aggregator model has the potential to change the economics around how insurers distribute products. Specifically:
- Aggregators will continue evolving with new products and services expanding into new markets ripe for disruption.
- Aggregators will disrupt current industry economics of carriers, customers and producers.
- Aggregator business models will evolve and the focus will be on new markets, new business lines, expanding value propositions beyond price comparisons to service level expansions including financial advice, price auctions, renewal subscriptions, etc.
The evolution will also witness new forms of competition from retailers, technology vendors and online giants.
Insurance industry collaborations with aggregators have always yielded mixed results. Rather than dismiss aggregators out of hand Accenture suggests strategies for dealing with aggregators, including digital optimization and closer integration with aggregator sites and the development of tailored aggregator value propositions. Not all carriers are equipped to succeed with aggregator arrangements. Unique operational capabilities must exist, including:
- System simplicity and flexibility – to deliver differentiated customer propositions on the fly.
- Tight market segmentation supported by sophisticated analytics with products tailored for individual customer needs.
- Compelling digital propositions with an emphasis on user experience and real-time performance of the channel.
- Lean and agile operations with low-cost configurable platforms.
Insurers must learn how to leverage aggregators as Accenture believes aggregators will continue growing in terms of the products they offer and the markets they serve, catering to digital customers who prefer self-service options, transparency, ease of access and convenience.
Digital Insurer's CommentsAggregators aren’t going anywhere. If anything they’ll grow more powerful over the next two to three years as they deliver an inherently digital product to digital insurance consumers, filling a gap left by many legacy carriers who cling to old methods of marketing and distribution.
Price comparison is just the beginning. Over time aggregators will deliver the full spectrum of services handled by traditional insurance agents. Hence it’s insurance agencies – not necessarily carriers – who face the brunt of the threat. Many carriers shun aggregators as an unnecessary evil. Better to explore options with this channel as it represents the agency of tomorrow.
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