McKinsey: How insurance can prepare for the next distribution model

Executive summary :

The COVID-19 pandemic is profoundly affecting how people engage with one another across industries and geographies.

Insurers must rethink distribution

Physical distancing and other quarantine measures have shifted activities once considered critical to have in person to digital and remote channels.

This change will affect insurance distribution—both in the near term, as physical distancing measures continue, and in the longer term.

Indeed, society’s relationship with technology and remote interactions is continuously evolving and accelerating as we move toward the “next normal.”

Many insurance companies have likely already taken steps to address short-term or immediate impacts of COVID-19—moving employees to a remote setup and expanding online customer service channels.

Now, insurers are focused on the next set of challenges, including how to reimagine distribution in a more remote world.

An April 2020 survey of German insurance agents (conducted four weeks into lockdown) found that about half of the agents saw a more than 40% decrease in new business. And a May 2020 survey of US agents found a similar effect: almost 50% of agents cited remotely building new customer relationships as the biggest challenge during COVID-19.

Meanwhile, online insurance aggregators and direct channels are reporting similar, if not greater, volume.

To address these challenges, insurers will need to rethink their distribution model across three dimensions: customers, sales force, and enablers (such as investment in data and digital tools). Doing so will empower them to prepare for the unpredictable.

How distribution is changing

Physical sales forces and intermediaries are responsible for the majority of insurance distribution across geographies and lines of business. While the share of business conducted via these channels has been shifting during the past decade as some customers migrate online, they remain the primary channels across life, commercial, and personal lines property and casualty. But continued physical distancing is having dramatic and immediate impacts on insurance distribution.

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