Why More Don't Go Direct-to-Consumer

According to McKinsey, the goal in establishing a sound digital strategy is to simply meet customers’ expectations. What sounds straightforward and easy to a digitally advanced industry, such as retail, is a major undertaking for property and casualty insurers, particularly those that sell exclusively through independent or captive agent forces. As insurers prepare to go direct-to-consumer, they face a unique set of challenges, including the question of where to start. First, You Have to Know What the Customer Wants Creating a direct-to-consumer strategy that meets customers’ expectations requires P&C insurers to first understand who the customer is. For them, it’s a task similar to putting together a jigsaw puzzle. Each piece is part of an array of distributed and disparate systems, and there is no easy way to gain a single view of the customer without painstakingly assembling the picture piece by piece. Samantha Chow, senior analyst at market research firm Aite Group, in an interview with Informationweek said that insurers have data they can’t make heads or tails of because of data integration problems and lack of data governance. Many of the processes that incumbent insurers use to run their business still operate on legacy technology. Chow says that some top-tier carriers are running as many as 27 aging policy administration systems to support their products. To make matters worse, data across these informational silos is often inconsistent. See also: 9 Elements for Customer Portals   It seems that insurers have the wrong type of data, as well. According to Mark Breading, partner at Strategy Meets Action, insurers are limited by a customer view that delivers only “an awareness of the current and former products owned by the customer, the performance of those products, information related to product needs of the customer and perhaps some relationship information like the agent involved.” In direct-to-consumer distribution, insurers need to expand their data sets, tracking consumer activity across products and channels as well as gathering information from third-party sources to gain a broader understanding of the customer, their lifestyles, purchasing preferences and buying behavior. A single view of the customer is essential to respond to their complete coverage needs in real time and is a primary component of D2C engagement. Setting up the Online Storefront Amazon set up shop in 1994 as an online book and music seller, but rapidly evolved into an international retailer of just about everything. The fact that Amazon’s sales last year topped $135 billion underscores the effectiveness of the strategy: Make it easy for customers to find and buy the things they want, when they want them. As customers enter Amazon’s site, searching for products is fast and simple. They can easily compare pricing and then select the items that meet their needs. In many cases, purchasing is accomplished in a single click. When insurers try to recreate this type of environment in insurance, they run up against some impressive obstacles. For one thing, rapidly quoting, binding and issuing products that our housed in separate silos requires a central point of access. Only a handful of insurers have this today. Then there is product diversity. Consumers expect insurers to meet their coverage needs, but what happens when they can’t? The Amazon experience would dictate that the insurer offer products from other carriers to augment their own selection, similar to Amazon’s army of third-party sellers. “It’s an idea whose time has come,” said Eric Gewirtzman, CEO, BOLT. “Insurers who position themselves to meet more of the needs of their customers, even if it means offering products from other carriers, will be recognized as customer-first organizations.” Customers Still Need Agent Support Our research of top carriers indicates that 77% are seeing demand for D2C engagement, but providing online access to products and services also means setting up agent support for digital channels. A customer with a leading D2C insurer recently needed to obtain insurance for one of her vehicles in another state. Her daughter was registering the vehicle where she was attending college, but, given the significant cost advantages, the customer wanted to keep the teen-aged driver’s coverage bundled with the original policy. Unique situations like these often require support from an agent licensed in the specific state. In this example, much of the transaction was started online. Because all information was available to the agent, digital paved the way for a faster and more efficient response to the customer. Committing to a D2C strategy means providing agent support to field questions and issues from direct channels. For insurers that work exclusively through independent or captive agents, that means setting up or gaining access to licensed resources to support D2C channels and ensuring they have streamlined access to information customers enter online. Despite Challenges, Now Is the Time to Move Looking into insurer’s thoughts on the future, John Cusano of Accenture remarked on the company’s research with 563 insurance executives. “In our survey, we found that 87% of insurance respondents agree that we have entered an era of technology advancement that is no longer marked by linear progression, but by an exponential rate of change,” Cusano says. “What’s more, 86% say that their organization must innovate at an increasingly rapid pace just to keep a competitive edge.” See also: Why Customer Experience Is Key   Part of that innovation is advancing toward an omni-channel strategy that includes direct-to-consumer capabilities. Eric Gewirtzman of BOLT, in an interview with McKinsey, said, “Insurance customers are already moving between various channels.” Now insurers need a strategy that fulfills the customer’s demands for direct-to-consumer purchasing. Disruption from outside forces and continuously evolving consumer expectations is forcing the industry out of its protective shell and onto the cusp of change. Despite the challenges, the insurers who realize the greatest wins in the changing environment will be the ones who begin now to evolve into highly competitive digital institutions of the future.