Provider, employer, and partner of choice
Take a minute to think of the companies you enjoy doing business with. It goes beyond value. It’s more about personalization and ease of doing business. It’s about no-hassle resolutions when things go awry and being proactive to your needs.
We gravitate to companies that make life easy for us. Carriers have long focused their business transformation efforts on being the provider of choice. That unilateral approach falls short in today’s marketplace. Carriers also need to aspire to be the employer and partner of choice. Many carriers learned the hard way with the “great resignation” and “quiet quitting” that they also need to provide employees with an efficient and rewarding work environment.
Like policyholders, distributors have a choice of who to do business with too. They want to partner with carriers who provide tools and insights to improve their business and simplify experiences for them and their customers. It’s ironic that distributors – the group that is most influential in steering business the carrier’s way – are often near the bottom of the carriers’ improvement agenda.
Evolving intermediary business model
Despite the significant shift to direct-to-consumer channels, which have commoditized personal and small commercial lines, the insurance intermediary model is here to stay. There will always be a need for professional advisors who can help policyholders understand their exposures and assist them in selecting the appropriate products.
According to the U.S. Bureau of Labor Statistics, employment of insurance sales agents is projected to grow 6% from 2021 to 2031. About 52,000 openings for insurance sales agents are projected each year, on average, over the decade.* A subset of these openings can be attributed to an aging workforce, where studies estimate that up to 50% of agency employees are over the age of 55.
M&A activity will also continue to impact intermediaries, particularly with acquisitions of midsize distributors by large distributors. The economics of combining back-office operations plus expansion into new geographies make such acquisitions difficult to pass by. M&A will likely result in a large number of small distributors, mostly in rural communities, and a small number of very large distributors with significant resources and technical prowess.
The key implications for carriers:
- Gen X and millennials, with little relevant experience and very different expectations, will be relied on to replace an aging distributor workforce.
- Distributors will place greater emphasis on specialization by industry, customer size, and other dimensions to better focus their efforts.
- Larger distributors will wield even greater influence and expect carriers to match their investment in differentiating technology.
- Smaller distributors, who lack their own dedicated technology, marketing, and operations support, can be engaged partners that inform new policyholder and agent innovation.
Ultimately, insurers will need to reassess one-size-fits-all distribution management models. Leading carriers will allow for differentiated experiences for top performers (all agency partners are precious but not necessarily equal) and adopt flexible technologies that allow for changes brought about by the evolving role of distributors.
Distribution management is unique – treat it that way
Carrier distribution management is a complicated endeavor. Even more routine functions, such as distributor application, onboarding, hierarchy maintenance, and compliance management, require sophisticated approaches to connect disparate technologies. Allowing for differentiated experiences and new capabilities introduces an entirely new set of challenges.
Traditional, off-the-shelf solutions work well when prescriptive approaches are all that’s called for. The downfall is that since they’re designed to standardize, they can’t differentiate or adapt to change without significant customizations that increase technical debt. Although it has been difficult to purchase differentiated and personalized experiences off the shelf, things have evolved beyond yesterday’s buy vs. build decision. Today’s low-code, integrated platforms accelerate application development; deliver dynamic, personalized experiences; and allow carriers and distributors to respond quickly to market and regulatory change.
Four ways carriers can use those capabilities to win with their distribution partners:
- Personalize: Show distributors that you know them by providing a dynamic experience tailored for an individual, not just a role. All partners can feel like they have what they need, the way they want it, by embedding this focus into every interaction.
- Anticipate: Eliminate surprises and disruption by delivering information or initiating activity earlier in the process. Agents value when their carrier partners keep them from wasting time or creating an awkward situation with their clients.
- Simplify: Reduce complexity and eliminate hurdles while placing new business or servicing a policy. When the product and compensation are equivalent, agents do more business with the carriers that make it easier for them and their clients.
- Engage: Move beyond one-way communication of policy activity to exchanging valuable insights with your partners. Arming a distributor with the implications of an event in a context that matters (retention, cross-sell, etc.) allows them to nurture relationships with their customers.
In the end, distributors have a choice of where to do business. The message to carriers is clear: Be sure to build a brand that simplifies the decision through insightful and effortless technology. Carriers who are the most responsive to change and align to new requirements will win with distributors.
* Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Insurance Sales Agents, 2022.