OLDWICK: As the insurance industry goes through a phase of digital transformation, the advance of technology is encouraging insurers to explore and establish direct-to-consumer (DTC) distribution channels.
[the_ad id=”32940″]Results of AM Best polling at its annual conference indicates that insurers see DTC marketing as the most attractive area of opportunity in 2019, as 31% of industry respondents chose that over other possibilities such as workplace solutions, mergers and acquisitions and geographic expansion.
The Best’s Special Report, titled, “DTC: Expanding Distribution and Seeking Opportunities,” notes that other industries are increasingly leveraging DTC strategies to gain greater market traction and have raised the bar for consumer expectations when it comes to the digital experience and ease of use.
By a wide margin (40% of respondents), DTC is the most popular distribution channel under consideration for rollout and implementation, signaling that insurers are aware of consumers’ expectations and realize the potential of this channel.
In particular, insurers consider shortening the underwriting process a critical step in successfully penetrating the middle market. Life/annuity insurers have a more consumer-centric approach to distribution, so they likely will be measured against other consumer purchase experiences.
At the same time, insurers feel that improving the customer experience, and making the investment to achieve that, are the two biggest challenges to modernizing distribution and growing sales, both of which are embedded in the DTC channel. However, 72% of the respondents said they put budget dollars behind making those improvements.
Enhancing or expanding DTC capabilities likely will be costly upfront; however, efficiencies should increase as the strategy and channel mature. A company with leading DTC and digital capabilities is more likely to benefit from its investment or partnerships and become a frontrunner.
Additionally, product design remains crucial, to match some of the limitations of DTC capabilities. Some products may not be suitable for anything other than a face-to-face approach, as they may be too complex to market over a DTC platform.
AM Best notes that relatively few insurers have successfully implemented a DTC strategy. Many companies are looking to build in-house DTC capabilities to better control costs, rather than go with a third-party digital platform (e.g., insurtech).
Insurers are proceeding with caution with regard to automated underwriting, given the limited track record and m data. Additionally, insurers may be more inclined to reassess or modify their reinsurance usage if they decide to expand their use of a more automated underwriting process.
Innovation and the need for technology advancements are at the forefront for many companies, but despite the significant growth opportunities the DTC channel offers, AM Best believes that premium growth from this channel will be only moderate in the near term, as insurers continue to take a more measured approach.