Carriers see plenty of upside in the digital distribution of insurance but also daunting challenges, according to a new Celent report, Insurance Carrier Mindsets on Distribution.
Celent administered a survey of senior leaders in February 2022 to explore insurance company views on trends in digital distribution. Celent then hosted a roundtable discussion of a subset of these leaders during its annual Innovation and Insight Week in March. The survey and the discussion revealed insights into the challenges and opportunities insurers face as they distribute their products digitally.
The survey and roundtable discussion focused on two emerging distribution paradigms – embedded insurance and digital insurance exchanges – as well as the trend of traditional independent agents becoming more digital. In addition, carriers shared their views on the hurdles they must overcome to be successful in digital channels.
Most P&C carriers believe embedded insurance will account for between 6% and 10% of total premiums by 2027. Life insurers were less optimistic about this paradigm, largely because of regulations and privacy concerns. In any case, the road to embedded insurance is not an easy one.
“Carriers recognize that the path to embedded insurance requires new mindsets, processes, and digital capabilities across the entire policy lifecycle,” said Karen Monks, senior analyst for Celent, who published the research along with colleagues Rob Norris and Karlyn Carnahan.
Despite the intrigue of digital distribution, carriers remain bullish on independent agents, so long as agents are able to make improvements necessitated by the digital expectations of insurance buyers. In particular, carriers highlighted the need for agents to offer better digital experiences in quoting and policy management, and then to ensure that coverages change as client needs evolve.
Carriers are intrigued by the potential of insurance exchanges, which are open marketplaces where agents can business with multiple insurers, even without agency appointments. Carriers see exchanges as a tool to reach new customers and different market segments. However, most carriers expect market share of exchanges to reach only 5% of total premiums. Some carriers expressed concerns about having an extra level of intermediation between themselves and their agents and customers.
The survey results and roundtable discussion revealed that digital marketing is the biggest obstacle to success in digital distribution. “Carriers are finding that the long term value of customers is not coming close to the cost of acquiring them,” said Rob Norris, senior analyst for Celent. “The economics are challenging for anyone, but especially for carriers that are early in their adaptation to digital marketing.”
The report concludes with Celent’s recommendations on how to improve the odds of success in digital distribution, based on themes that emerged from the discussion.
For more information, visit www.celent.com.
