Key Developments across Insurance Channels
Insurers today leverage multiple distribution channels to reach and engage with their customers. While insurers have traditionally sold insurance products through brokers and agents—company-employed as well as independent—other distribution channels such as call centers, bancassurance, internet, and mobile have been rapidly gaining momentum.
Evolving customer preferences and intensifying competition in insurance markets have led to the emergence of multiple low-cost distribution channels. Growth in these channels has also been aided by recent technological innovations that facilitate the ability to illustrate product benefits, shorten customer response time, and simultaneously serve multiple customers. The new channels also allow advisors and customers to compare multiple products without much effort, helping them choose the product that best suits their profile. Penetration of these new channels has been the highest in mature insurance markets such as Western Europe, though emerging markets in Asia-Pacific and Latin America are fast catching up.
The new channels have provided insurers with opportunities to increase sales while keeping costs low. They have also increased customers’ convenience when buying insurance products. Direct sale of insurance policies using new online channels is relatively higher in Europe when compared to other regions, though the existing maturity of the overall online infrastructure and household internet penetration reflect differences even within Europe’s markets, such as the U.K. and Poland. While the general trend has been a declining market share for agents except in a few regions such as some Middle and East European countries, they still hold a dominant position in the industry. In certain segments of the insurance markets in the U.S., Europe, and also in Asia, agents still hold the highest market share which signifies their importance. Insurers are therefore taking care to reduce channel conflicts with agents when developing their own direct channels.
Bancassurance has also emerged as an important channel across different regions, and is now among one of the most important channels in Europe. Success of the bancassurance channel in some products and markets may have been aided by banks. Facing a challenging operating environment of their own, banks have been motivated to generate additional non-interest income by selling additional risk-based/wealth management products and services like insurance to their customers. Insurance firms are also focusing their efforts on the development of alternate channels by partnering with supermarkets and affinity groups in the form of joint-ventures or in-store sales. Insurers benefit from these relationships by being able to reach a wide potential customer base at reduced cost, and also by being able to leverage established brand names in the market. This pattern is more evident in the North American insurance markets.