Today Conning Research & Consulting study reported in today's I&T Daily warns that life insurers' state-based distribution strategies may no longer be effective. Conning focuses on the potential impact of federal regulation, under which a portion of the life insurance industry may operate under a single regulatory entity. While many life insurers welcome such a change, some may not be prepared for its implications, the study suggests. But this is not the only challenge life insurers face from a rapidly evolving marketplace.Unlike the carriers, many agents are strongly opposed to optional federal charter (OFC) - the regulation implied within a Conning press release announcing the firm's new study, "State Differences in Life Insurance Marketing: Considerations of a Federal Level Playing Field." The agents, as exemplified by the position of the "Big I," oppose OFC because it will make it easier for carriers to sell insurance directly online, according to some industry observers. Insurers may rejoice at the rebirth of "disintermediation" but the opening of the online opportunity presents threats along with opportunities.
Just as insurers prepared for OFC will gain market share from those who are not, companies that effectively leverage online mechanism will eat the lunch of the stodgier companies that fail to invest in the necessary technology enablement.
Anyone who thinks the above argument is the "same old" should read Greg Webber's contributed piece featured in today's I&T Daily and located on the I&T blog. Though his example is a P&C product, Webber vividly paints the cultural shift, built on demographic and technological changes, that will reshape life insurance distribution faster than many companies realize.
Insurers have struggled to maintain an effective balance between the innovative and the tried and true, as witnessed by their chaotic first steps in the online world, including the first disintermediation craze (or "scare," depending on one's point of view). Both the dot com bust and the current financial crisis are likely to influence insurers to adopt a more conservative posture. However, this could be a fatal mistake in a dynamic market.
It is possible to balance prudence and forward thinking, as demonstrated by Northwestern Mutual's continuing success, as reported yesterday in I&T Daily. The Quiet Company has been quietly advancing in its use of social networking technology even as it posts excellent results and earns top ratings with a stable outlook. Sources of mine suggest that companies learning of Northwestern Mutual's innovative distribution tactics are running scared - and so they should.Just as insurers prepared for OFC will gain market share from those who are not, companies that effectively leverage online mechanism will eat the lunch of the stodgier companies who fail to invest in the necessary technology enablement.
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio