The changing face of insurance distribution

January 12, 2021 6:00 AM

It is transitioning from selling products using the distribution partner’s relationship skills to expertise-based financial advisory skills

Since the notification of the IRDA in 2002, which paved the way for banks in India to operate as corporate agents, bancassurance has emerged as an important channel of distribution.Since the notification of the IRDA in 2002, which paved the way for banks in India to operate as corporate agents, bancassurance has emerged as an important channel of distribution.

By Amit Palta

The need for a sharper distribution strategy has never been more pressing, with digital disruption changing the business landscape across sectors and businesses. Covid-19 has only hastened this process of change in distribution models across industries. Distribution is a critical link that connects products with customers. For a consumer-focused company across industries, it is even more imperative to sharpen its strategy in the current context.

The life insurance industry is no different. The pandemic has driven insurance providers to integrate best practices of distribution, with convenience, safety, security and technology becoming the guiding mantra for interacting with a wider range of customers. When people could not come out of their homes due to the stringent lockdown, it disrupted the decades-old life insurance sales process that depended heavily on face-to-face meetings. However, most life insurance companies in India immediately shifted their selling process online, providing a seamless digital platform for customers to purchase and address their service requirements from the comfort of their homes.

Apart from focusing on building digital capabilities for various distribution channels, a paradigm shift is currently under way with respect to the way life insurance products are sold. It is transitioning from selling products using the distribution partner’s relationship skills to expertise-based financial advisory skills. Today, an agent is armed with digital enablers to understand a customer’s financial needs, evaluate their current financial situation, and accordingly provide personalised solutions. This approach also helps in applying a customer-centric lens instead of just having a product-centric approach.

Vital transformation

Celebrity agents: At the end of FY20, over 2 million distributors were working on the ground. Some of them have pivoted to leveraging the power of the social media to build a competitive advantage over their peers. They have understood that there is a massive potential for lead generation on these platforms, besides the luxury of continuous engagement. Establishing themselves as celebrity distributors, right from prospecting to lead scoring, they integrate their social media presence with an insurer’s digital platform for a better brand recall for their clients.

Building an integrated platform: Insurers deal with many distributors. Changing customer expectations and behaviour due to the rapid transformation is pushing insurers to collaborate with other players and build channels where they can engage with customers in newer ways. As multi-channel is the future, insurers have to be strategic, re-grading who they collaborate with and how they manage these partnerships. Most insurers are looking at converging all their partners onto a single platform to increase efficiency and bridge the demand-supply gap.

Agent recruitment: Hiring the right talent is half the battle won for any company. As a career option, insurance sales is losing steam amongst today’s youth as better alternatives have pushed it down the pecking order. However, the impact created by top-performing distributors cannot be neglected. Insurers are mapping out the vital attributes of successful distributors and employing artificial intelligence to hand-pick candidates who display these attributes through written or oral tests.

InsureTech on the rise: Insurgents are challenging incumbents saddled with old process and systems with digitally-enabled simpler products. Many InsureTech players are revolutionising the distribution game. For instance, InsuranceDrip, an automated mobile marketing system that sends social media posts on behalf of distributors, analyses post views and alerts them regarding the same.

Bancassurance: Since the notification of the IRDA in 2002, which paved the way for banks in India to operate as corporate agents, bancassurance has emerged as an important channel of distribution. Most insurance companies have integrated their products with a bank’s platform to provide customers a seamless journey during the purchase process. Currently, with the use of analytics and automated underwriting, insurance companies are collaborating with banks to provide customised offers, which they are integrating into bank systems to create a differentiating factor.

Future of insurance distribution

Assisted distribution: Tech-enabled chatbots, virtual assistants and digital enablers such as WhatsApp would be future sales faces, focusing on immersive experiences. Many life insurers are experimenting with augmented and virtual reality to take customers through their future, highlighting the powerful propositions offered by life insurance products.

The Internet of Things (IoT): The industry can leverage the wealth of information stored by wearable devices to provide customised insurance products. Usage of the IoT and advanced machine learning algorithms will open up new avenues to distribute products. In the future, several life insurers would partner with companies providing wearable devices.

Entry of Big Tech: The rise of e-commerce has been phenomenal and it is only expected to expand as life insurers evaluate prospects of tying up with majors such as Amazon and Flipkart. According to the World Insurance Report 2020 by Capgemini, 36% respondents said they would consider purchasing insurance from Big Tech, compared to just 17% in the 2016 report.

The writing on the wall is clear. Today’s tech-savvy customers are focused on the ease of purchasing. They are ready to take a chance with non-traditional players. It is, therefore, important for life insurers to be present on platforms preferred by their customers, and offer a convenient, safe, secure and hassle-free buying and claims process.

The author is chief distribution officer, ICICI Prudential Life Insurance Company

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