Life insurance distribution at a crossroads – EY research paper
Article Synopsis :
Shifting demographics and technologies are requiring life insurers to re-think products, channels, and the role of agents.
Younger buyers want to point and click, not talk to an agent
In “Life insurance distribution at a crossroads: Introducing the agent of the future“, EY provides a historical overview of the industry as a way to elucidate current market conditions, and outlines three primary areas where life insurers must drive change:
- Better insights into customer needs
- Simpler and stronger product portfolios
- Recalibrated agent relationships
Expectations of insurance buyers are now shaped by a wide range of companies outside of insurance, such as Amazon and Apple. Given this new reality, at least as it relates to distribution, the report suggests the questions at the heart of every insurer are:
- Who owns customer relationships and is responsible for keeping up with them over time?
- What is the role of different channels in serving different market segments?
- What is the role of agents and how will they be incentivized and compensated?
Target customers, distribution channels, and appropriate products are the three major areas insurers must address. To this end the report offers the following discussions:
Understanding what customers want: Traditionally the industry started with products, now it must start with customers.
Developing products customers might buy: Aside from customer education about the value of life insurance, product portfolios need fixing, especially in the middle market.
Introducing the agent of the future: Given the pending retirement wave of life insurance agents, there will be too few agents to serve especially the middle market. Higher agent productivity is required.
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Digital Insurer's Comments
In the past, the number of ‘feet on the street’ drove success in life insurance sales. The more agents a company had, the more face-to-face meetings those agents had with potential customers, the more policies were sold. Simple model.But agents are retiring and customers are changing. Roughly half of US agents are set to retire within the next five years. And the middle market (consumers with incomes of $75,000 and assets of no more than $150,000), by far the fastest growing segment of the market, is increasingly digital. The door yesterday’s agent used to knock on is today, by and large, for the middle market buyer, a mobile device.
The good news is digital tools and methods can replace agents in reaching potential customers; the bad news is insurers aren’t great – yet – at digital tools. The ‘agency’ needs to be re-imagined, re-skilled, as traditional practices are a misfit in a new world of empowered customers. What’s the sense hiring and training people to knock on doors no longer there?
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About the Author
Hugh Terry
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Hugh Terry
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