Impact of COVID-19 on retail insurance distribution
Agents need to identify their unique value propositions to compete as customers take their business online.
COVID-19 is fundamentally reshaping retail insurance distribution. With customers demanding greater choice and ease of use, and carriers and brokerages across the spectrum converging on omnichannel distribution, large structural changes in retail insurance distribution were afoot long before COVID-19.
However, many of those trends, now accelerating at an unprecedented pace, are imminently reshaping the insurance distribution landscape. New-age retail distribution models such as comparative marketplaces, call center/virtual brokerages, and carriers/MGA’s going direct are rising at the expense of the traditional brokerages that have historically relied on in-person consultation and are unable to offer choice and ease of use that customers now demand.
As more and more customers begin their insurance journey remotely and mostly online, traditional brokerages who are unable to adapt to the new reality will likely see an unprecedented loss of market share. Many of the 30,000+ traditional brokerages that employ 800,000+ licensed professionals across the insurance distribution value chain will have to quickly adapt to the changing landscape in insurance distribution or face a severe decline.
COVID-19 is having an irreversible impact on every aspect of the traditional retail brokerage, but more prominently on the value of a having storefront, the retail agent’s role in a customer’s insurance-buying journey, and the retail agent’s value propositions to the carrier and the customer.
Brokerages that relied primarily on storefronts and in-person consultations for new business production faced an immediate slowdown with social distancing in effect. Now with COVID-19 accelerating the customer’s transition from in-person to online, traditional brokerages who do not have the technology to support a digital customer journey could lose market share permanently.
Simply supporting customers’ digital journey, however, may not be enough. As customers move online, they expect the insurance purchase and management journey to evolve in manners similar to other financial products such as banking and investment — with more control, better ease of use and greater choice and transparency. This could mean significant adjustments to the retail agency’s workflow, requiring substantial capital investment and a cutting-edge technology solution.
The value retail agents need to bring to the table for both carriers and customers aren’t the same as they used to be. With the rapid advancement of technology, carriers no longer need to rely on agents for risk selection and pricing. Customers want a risk advisor with access to a larger array of products that can meet their unique needs, not a mere price quoter or someone with limited product selection. Whether it’s focusing on more complex insurance products, transitioning from captive to an independent model, or vertical-specific risk management expertise, agents need to identify and double down on their unique value propositions that can’t be easily replaced by technology.
Major changes in retail insurance distribution were materializing long before COVID-19, but those changes are now more immediate, forceful, and, in many cases, lasting. To be on the winning side, retail insurance agents will have to transform themselves by leveraging technology to augment their unique value propositions in the insurance distribution value chain.
Rashik Adhikari (rashik.adhikari@coveredbysage.com) is the founder/CEO of Covered by SAGE. Covered by SAGE is a modern, tech-enabled P&C insurance brokerage that provides better economics, experience and service to its agent partners and their customers. Adhikari founded Covered by SAGE while at Harvard Business School. Prior to Harvard Business School, Rashik was an investor at Soros Fund Management, where he invested in companies across the insurance value chain. Prior to Soros, Rashik was a mergers and acquisitions banker at Citigroup. The opinions expressed here are the author’s own.
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