Article Synopsis :
This report from Boston Consulting Group and Morgan Stanley Research examines the future of life insurance distribution and the role of agencies – and therefore agents – within it. The researchers spoke to more than 50 interviews with senior insurance executives.
The future is uncertain
The sustainability of agency distribution is just one of the many challenges facing insurers.
Agencies in developed markets often focus on traditional products, using old infrastructure that has been starved of investment. In emerging markets, the channel is more vibrant, but the sales culture does not offer the insurers long term benefits.
Many fear that agencies have a future unless sales processes become more efficient and better meet the expectations of customers. For a sustainable future, this paper suggests a hybrid model that uses technology to underpin human interactions to improve client and agent experience. This multi-channel, multi-solution ecosystem, will concentrate on satisfying customers’ needs.
Harder, better, faster, stronger – but digital
In order to achieve this, the cost per sale must reduce and value to customers be increased. At the same time, agents must become more productive if they are to increase their incomes.
Opportunities exist, says the paper, and outlines a four-part framework based on modelling that indicates a traditional German insurer could more than double shareholder value, while a typical US life insurer might increase operating margins by around 75%.
To achieve this, insurers must take the best elements of those who have been successful in digitalising their businesses, particularly those based in China.
Productivity in the agency channel has increased considerably in China, despite the growth in the number of agents in recent years. This may be attributed to the shift to a completely digital, data and analytics-enabled end-to-end experience delivering meaningful productivity gains.
Act fast, act now
It won’t be easy, but digitalisation must begin if the agency channel is not to become disintermediated by digitalised insurers going direct, new entrants with a complete digital solution, or tech platforms like Google and Amazon taking over the distribution of insurance products.
There is no best time to begin such transformation, but bot beginning will only make the project more difficult to execute as competitors make progress.
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Digital Insurer's CommentsThe agency model is broken. Even if it was more efficient, the need for change has made agents suspicious of insurers’ motivations for going digital.
It’s understandable. All third parties fear being disintermediated. However, insurers and agencies must focus on the digital project if they are to generate value for themselves and their investors.
It’s not all bad news. We’re not talking about simply surviving in the future. This paper suggests there are considerable opportunities to generate large amounts of value for the insurers who get it right.
But those getting it right will be making those decision today – if they haven’t already.
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