Insurance Distribution Channels and the Role of the Insurance Agent

Fran Majidi January 4, 2023
Insurance Distribution Channels

Building relationships with clients remotely has been challenging for agents who have mainly conducted business in-person until the COVID pandemic began. Sales have fallen off for these insurance brokers because people are buying insurance from websites, social media platforms and through e-commerce. Insurance companies are already adapting to this shift and buying insurance leads from various vendors.

According to the 2017 Global Distribution and Marketing Consumer Study, more than half of digitally active insurance consumers have bought insurance online because they prefer self-service to working with an insurance agent.

Licensed insurance agents have traditionally been the sole distribution channel for selling and servicing insurance, but now that chatbots are giving insurance advice and apps are servicing basic customer needs, where does that leave insurance agents?

Digital Distribution Channels and Insurance Brokers

Doing business remotely is not a new thing, but since the COVID-19 pandemic began, digital distribution models have become the preferred method of buying insurance for many consumers. The new normal has impacted many industries, but in the insurance space, it's greatly complicated the role of the insurance agent.

There is good news: While some insurance companies like the direct distribution method, which cuts out the middleman and his or her commission, there's still a need for agents, especially at a time when people are facing overwhelming challenges with finances and their health. The human touch from an insurance agent, albeit from afar, is still vital. And, the more complex the product, the more need there is for a knowledgeable person to advise the consumer.

Agents and brokers who work with top-notch lead vendors like SmartFinancial are a step ahead by taking advantage of online insurance distribution channels and services.

Is the Face-to-Face Distribution Channel Dead?

Good news for the insurance agent who likes to shake hands: face-to-face distribution channels are not dead. Post-vaccine, insurance agents will continue benefiting from traditional ways of meeting customers, especially in the areas of life insurance and health insurance. However, these interactions need to be technology assisted, to ensure efficiency with leads and higher conversions.

Data should also be organized and mined differently, with analytics suggesting which clients to prioritize, which are most profitable and which are at risk of dropping off. This new cognitive technology will increase the agent's knowledge and skills, making for a more efficient follow-up process and higher customer retention.

For simpler products, like car insurance, customers will continue to demand a higher level of autonomy.

For simpler products, like car insurance, customers will continue to demand a higher level of autonomy even when the pandemic is over. Customers already want self-service and digital access with user-friendly navigation. Agents need to improve upon solutions for offline processes like obtaining signatures. Insurers need to provide agents with the right tools for remote applications, submission forms and onboarding of new clients.

Clients expect digitization of transactions and the flexibility to use a mix of channels to communicate with the agent.

How Does the Digital Experience Help an Insurance Agent?

Life insurance agents have seen an increase in insurance policy sales, and many have relied on the marketing strategies of insurance technology companies that sell quality leads. P&C agents invest in leads and make with policy renewals. A good lead vendor is able to find your target customers using the right filters. There should be little user experience necessary with a straightforward dashboard for the insurance agent to modify details and information. Insurance companies buy digital leads directly, and insurance agents, both captive agents and independent brokers, should follow the lead to sell as many insurance plans as possible.

A lead vendor should require little user experience and offer a straightforward dashboard for the insurance agent to modify details and information.

Digital Distribution and Offline Processes

There are instances where offline processes cannot be avoided, like medical underwriting, which is often required for life insurance. Customers do not want to be inconvenienced and they fear getting infected with COVID-19. Insurance agents need to consider alternative methods of gathering relevant information and making the process less stressful for the customer. Or, they must increase the volume of a certain segment of customers who don't need extensive offline processes. Luckily, there is telemedicine, and agents need to find ways to gather this data without breaching customer privacy and security.

Returning to Scale

As insurance companies begin to return to scale when the economy bounces back, they will continue to push simple insurance products, like car insurance and renters insurance, which can be sold online with minimal or no contact with an agent.

It's important for agents to hone in on which insurance products may be too complex for digital sales because those products will be their bread and butter. Simplifying products for remote sales may be an advantage for insurers, but agents will still have leverage selling traditional products, which are too complex to sell digitally.

Remote Distribution Channels: Remote Insurance Agents

Even before the pandemic, insurers began growing their remote distribution forces. Not only does having a remote crew allow insurers to serve more customers, insurance carriers benefit from a lower commission cost per sale and a broader reach, with each insurance agent selling their insurance products to a specific demographic. Health insurance is one such product that needs to be serviced on a state-by-state basis so remote distribution channels without the overhead of branch offices works well.

Having a hand in many territories is always a good strategy for insurance companies. That's why insurers build remote teams of remote agents to satisfy the many needs one customer alone may have. One agent may not be specialized enough in all areas. Groups of agents, however, can work together to fill in the gaps for one another when it comes to various products and requirements to sell more insurance policies than they could sell alone.

Using split-commissions, this sort of collaboration can be very effective in retaining customers and giving them the best customer care possible. Showing that your brand offers expertise in each product is a very strong selling point.

Partnerships: Expanding Distribution Channels

During the pandemic, it was challenging for an insurance company to maintain volume in sales, and shifting insurance marketing budgets was the solution. Expanding relationships with affinity groups and with insurance technology companies was the antidote.

Whereas insurance agents have seen a decline in sales since the pandemic began, insurance technology companies have seen the greatest harvest yet. For many agents we work with at Solution, the solution has been to place their marketing budget in technology-driven lead generation. Some agents are finding there's no better way to do it. 

We are here to help whenever you're ready!