Is P&C Distribution Actually Digitizing?

Today, the discussions around insurance distribution channels are in perpetual motion – everyone has an opinion as to where it’s going. But where is it today? What has changed? What hasn’t? And where are the investment dollars going? These are great questions, and most insurance professionals are interested in the answers. With that in mind, SMA conducted research about today’s distribution trends – and the findings are presented in P&C Insurance Distribution: Responding to a Rapidly Changing Ecosystem. Understanding where the current industry trends stand is important so that insurers can benchmark their organizations’ progress relative to competitors and the industry at large. The data is interesting, of course, but several important questions do arise that insurers need to consider and answer. In other words – get under the covers! When asked about digital strategies, 46% of responders indicate they are working on a digital strategy – but it isn’t in place yet. Given that rather significant percentage, one has to wonder if the spending around agent/broker portals (83% indicate it is #1) is for tactical reasons or strategic reasons. One could quickly conjecture that, either way, portals solve a business problem. So, there is value. That’s true … and it’s not. If the portal investment is not aligned with a corporate digital strategy, then the investment could be for naught because it does not support the overall corporate direction and might be throw-away dollars and effort. Perhaps the portal only holds value for a certain group – for example, agents and brokers – but misses the mark for customers. Does that mean that insurers should do nothing until a digital strategy is nailed down? That would not be practical either. The point is that when advancing digital capabilities in a tactical fashion, flexibility must be a core project goal. The technology choices for platform and installation (cloud vs. on-premises) must be capable of responding to strategic choices as they are made and not be unidirectional. A second critical question arising from the digital distribution spending research data relates to the amount of focus insurers are placing on internal processes. Survey results indicate that less than half (46%) are spending on internal operations to meet digital distribution goals. The question that arises is: Are insurers focusing on other technologies because their internal processes are already aligned to digital distribution transactions and outcomes? Or do insurers continue to believe that the corporate external-facing capabilities are most important – and internal processes can continue as they always have? Digital transactions expose internal processes that are holdovers from a manual, paper-based world. Billing is a perfect example of this. If a portal allows a customer to submit payment via a credit card but then advises the customer it will take three to five days to post (as the payment goes through standard internal, manual-posting processes) there is a serious disconnect from today’s digital world and what that customer expects to happen. As insurers assess and advance various digital distribution strategies, it is imperative that internal processes be re-engineered from the outside in so that interactions flow logically from the perspective of the agent/broker and consumer. This is not easy, but it is a critical element for success. See also: How Digital Platform Smooths Operations   In addition to technology spending trends, P&C Insurance Distribution: Responding to a Rapidly Changing Ecosystem explores the changing relationship between insurers and agents/brokers due to changing distribution demands. The report also provides insights into the role of startup insurtech distributors that are responding to changes in the marketplace and making inroads. There are many points that insurers must consider as they move forward with distribution channel decisions. Every insurer is going to be on a different discovery path. As that journey moves forward, it is critical to look under the covers of those decisions. Customers, agents/brokers and employees all have a stake in outcomes. The points of view and levels of involvement will be different – but they must all be considered.