There's No Need to Separate Direct and Agent Insurance Sales

In the past, insurers with an agency model — grappling with the growing threat of direct to consumer insurers and fear of alienating their influential agent base — either acquired or built separately branded online insurance sites. By doing so, insurers further highlighted a clear line in the sand drawn for each customer segment.

Typically, customers targeted for the direct channel were young and price-sensitive, the products offered were simple and came with a no-frills approach to customer service. And today, insurance sold directly online by an agent-based insurer still has an agent assigned to the policy. This has led to costly and complex commissioning systems, multiple and separate front- and back-end systems, and a continued battle for the customer.

So much has changed since these strategies were deemed sensible. Customers, for their part, have come to expect an integrated experience regardless of their entry into the company. Further, technology has evolved to give insurers the tools to improve response and the overall customer experience.

In the new age of cloud, analytics, mobile and social (technologies that can be grouped under the acronym CAMS), this dual identity that insurers were forced to adopt in the past may no longer be needed. Ultimately, customers will buy at the touch point that they trust, and in this evolving mobile, social, and data-driven world, it may be the agent or it may not. Insurers who have recognized and organized around these points have seen measurable growth over the past five years.

Kathy Hutson, IBM

A recent study by IBM's Institute for Business Value entitled "Winning Strategies" found that leaders in the insurance industry — those who have grown at least 5% faster than the market over the past five years, excel in four strategic areas:

• They plan for the customer of the future
• They integrate interactions across all channels, including digital ones
• They offer broad insurance services
• They have invested in flexible structures

[Learn 4 Ways Insurers Beat Disruption from the IBM research]

It is no longer a sound business strategy to just keep pace or respond when asked.

Customers value companies that anticipate their needs and are able to respond quickly, changing course as desired. Adding on more pressure is the increasingly complex way in which customers now shop for just about everything, purchasing decisions becoming more nuanced and individually centered. The required investment it takes to meet service, sales and marketing requirements to attract and retain today's customers, requires a new way of doing business.

Insurers need to provide personalized services quickly while at the same time cost effectively and allowing for scale. They need new ways to collaborate with all of their channels and understand customers as individuals. Cloud computing has allowed companies of any size to respond to this new environment. It has also lowered the barriers to entry for entrepreneurs who are inventing new business models and has the potential to eliminate any perceived economies of scale in the industry.

Analytics for better customer insight is a key area for cloud computing, as it allows both traditional and new entrants to the industry to create personalized "ominchannel" experiences for each customer. Another key advantage, it does so without splitting the company into costly multiple entities and alienating the agent base.

Mobile technology has become one of the primary ways we live our lives. Yet insurance companies still seem under prepared to use it effectively for any part of the value chain. Typically, companies start with a consumer app, based on the premise that every one else is doing it, without taking into account the insight, information and feedback from their users.

Many insurers have launched apps without a clear benefit analysis, and are then forced to pull the app, re-launch or even regroup, making it difficult to identify the true benefits of mobile technology for the company. Recognizing the benefits of mobile to agents has also been slow to move in the industry. If insurers execute on the right long-term mobile strategy, it can lead to transformational services and products that can attract and retain customers.

[Inside UnitedHealthcare's New Mobile App]

Social allows companies to extend the customer service value proposition and increase customer engagement, giving agents the tools to meet the customer where they want to be met. As mobile and social continue to converge, they create limitless ways to increase customer engagement, from disaster preparedness and response to payments, marketing, sales and location based services.

In this new environment where cloud, analytics, mobile and social give companies the tools to create an optimal omnichannel experience. Having separately branded companies may not be a viable strategy going forward.

About the author: Kathy Hutson is Global Insurance Front Office Segment Leader for IBM Global Insurance, specializing in technology solutions that help insurers develop compelling customer experiences and winning distribution strategies. She has more than 14 years of experience in the Financial Services Industry working with insurance companies globally, including roles at Citigroup, the New York State Insurance Department, and McKinsey & Company.