Aligning Customer needs with Distribution

If you happened to stumble upon my last article Insurance Revolution. Sound important?? you may have picked up on my somewhat subtle sarcasm about considering the customer last in our decisions.? My family recently purchased me a coffee cup with the slogan, “I’m not always sarcastic, sometimes I’m sleeping.”? So, considering they are important to me…I’ll go with it.

This time I will start with the customer first.??

What do customers want from insurance???

That is a pretty broad topic so let’s explore.? Each day we interact with products that are customary, or quite simple.? We are familiar with them and therefore we can make decisions with the use of minimal information and help.? On the other hand, there are products that are unfamiliar, complex and even if we work with them quite frequently are still confusing.? Take for example the purchase of my internet service vs. doing my taxes.? Although there are a number of different bundles and options for the internet I will quickly settle in on the right service for me.? When I do my taxes, even though this is an annual occurrence I still seek the advice of a professional because my circumstances may change and the confusing array of options makes me seek advice.

Contrast this with insurance.? We have some products like Auto Insurance that act a bit more like the internet service provider.? Once I am comfortable with my limits of coverage I likely renew each year without fail unless the provider does something that I question, like increasing rates for example.? On the other hand, if I were to purchase Commercial Insurance there are more moving parts.? Consider my business may expand, payroll change, add vehicles, or enter into a new service or product line.? This takes some advice and hand-holding in order to ensure the coverages are appropriate and aligned with my expectation.

Customers want the right delivery that meets their needs.? That delivery is what we call distribution.? Whether this is through an agent, directly online, or via a call center there needs to be some order in this chaos.??

If we are going to make a breakthrough, where do we start?

First, we need to step back and critically evaluate your go-to-market strategy.? If you do not have a GTM strategy or it is “do what we have always done” then now is the best time to review.

Within the industry, we have built a number of products to help consumers and companies protect and grow their wealth.? Each of these products has two main drivers that can help you determine the proper method to take to market.??

• Product Complexity
• Margin?

Consider this:? A product that has high complexity and a high margin can and should be supported by an expert.? Likely a person who can answer questions, customize coverages, and explain the product choices.? Contrast that with a product that has low complexity and low margin.? This can and should be digitized.

The chart below depicts a simple view of the marketplace in terms of complexity, margin, and market size.? You could analyze your own offerings based on a qualitative and quantitative approach considering your own portfolio or considering the future growth opportunities facing your organization.

Product Comparision of Margin v. Complexity by LoB

There is a linear path that exists in charting these products suggesting that all lines of business fundamentally are either low complexity and low margin or high complexity and high margin.? The low complexity and low margin products on the lower-left portion of the chart are due to the broad appeal of the product and relative competition where pricing advantages must be achieved in order to take market share from each other.? On the top right, you see products where competition may be more fragmented and where pricing advantages are not the only determining factor in taking market share.

This gives you a baseline of comparison from which you can start to view your go-to-market approach.

How do you put this analysis into action?

First, plotting your own performance is key.? Second, understanding your starting point and determining the important priority for each product will help you invest in the right change for the future.? I will use two unique examples for a typical incumbent insurer with a large footprint.

A few important points to consider:

• Agents and companies who do not perfect digital selling for low-margin/low-complexity products will suffer in the future.
• The idea that agents will disappear is false.
• Incumbent companies should evolve their distribution to obtain customers digitally and seamlessly refer these customers to professional agents to upsell and cross-sell.? Insurtech companies need to consider this as well and the potential to partner with agents in the future.
• Companies that have agents need to support their agents in transitioning to more profitable products, open new market opportunities, and find new ways to compensate for the value they bring to the customer journey.
• Finally, decisions about change are guided by alignment with customer expectations first (complexity) and further supported by financial success (margin).

The road to the future will be paved by companies that understand that customers want a seamless purchasing experience for all their insurance products and are able to design a strategy that meets them where and how they expect to purchase important coverages for their families.

Written by Bill Walrath, an American-born insurance executive with more than 25 years of experience. He has spent time managing different markets across the United States bringing together agents, product teams, and underwriting to drive profitable growth. He has lived and worked with companies in California, Michigan, Illinois, Oregon, Ohio, and Texas. Working with thousands of independent agents he has a track record of growing distribution networks and leading large teams. He is currently working as an advisor in the insurance space for technology.