How Insurance Agents Benefit from Online Distribution
The knee-jerk reaction from most insurance agents is that life insurance needs to be sold not bought. Typically, they go on and show their uncertainty by building a defensive argument against selling online.
To deny that digital will disrupt the way life insurance is sold is simply naivety at this point; while it is true that the life insurance industry has been slower to adapt to online distribution, this had been largely due to technology, internal resistance and political pressure from existing channels.
Rather than acting as a barrier to modern distribution, some successful insurance agents adapted to the reality of the modern market.
This article is not about why online distribution will become critically important to all insurance companies, you only need to look at other industries to see that, but how insurance agents will benefit from online distribution.
The Modern Insurance Market
Before discussing how agents can work with online distribution, it is important to understand the current market. In the US and Canada, approximately 50% of households acknowledge that they need more life insurance, while 30% of households have no insurance at all. I have been asked why someone would look for insurance online when agents are regularly knocking on doors — the fact is they are not effective; either they are not reaching segments of the population (think low to middle-income market) or there are people that simply don’t want to talk to an agent. You only need to look at other businesses to realize that change is inevitable — what is surprising is why it has taken so long.
It is also worth noting that features that agents like to see in a product, often don’t work in online product design. There simply isn’t one best product that suits both distribution channels. Products have evolved in the agent era of distribution to feature a wide range of options and complexities such as renewability. These don’t work for online distribution, clients need to be able to intuitively understand the product. A company selling both online and through agents would be well advised to have different products for each channel.
How Insurance Agents Can Integrate with Online Distribution
I have met many insurance agents who focus on meeting the financial needs of their customers rather than simply pushing a product. These insurance agents are very successful in the long run; however, their focus is often on higher net worth individuals. There are two primary factors that lead to this:
1. their skills and ability are better suited to these more complex cases, and
2. the economics of a commission driven business.
When an insurance company implements an online strategy, they should be able to give their insurance agents the ability to complete applications over the phone and online via a personalized URL linked to that agent. A scenario painted for me by an insurance agent working on a complex high net worth case is referred by the applicant to another family member, for example a child at university, who will likely only need small simple term insurance. The agent is now obliged to drive several hours for a commission that may not even cover the cost of the trip — here a phone call and a referral to a website would be more effective.
The personalized URL can also be useful when working with a client who does not want to work with an agent. The agent can give out the URL and be available to answer questions if needed.
The agent may not receive the full commission for cases referred to online; this will depend on the insurer’s strategy and their choices between saving costs and growing the business. However, in any case, the agent can use the online system to grow and develop their client relationships.
Furthermore, insurers offering insurance directly to consumers online should think about assigning business sourced online to agents to follow up and manage the client relationship. Obviously, it would not be practical to do this for every client, but a simple algorithm could identify the best opportunities and timing for these.
Finally, agents can benefit from the technology developed for online distribution, to get immediate decisions on coverage and therefore be paid immediately. The agent sales process may also be improved by enabling the agent to hand over the medical question section of the application to the applicant to complete. This gives the applicant the security of privacy, while the insurer benefits from the confidence and consistency of knowing exactly how the questions are asked.
Summary
I started this article with the argument of sold vs. bought. The insurance market needs both — skilled agents who provide expert advice to consumers when needed, and the ability for customers to be in control and make a self-serve purchase.
