How to solve the insurtech distribution problem

Direct-to-consumer (D2C) insurtechs sit at the forefront of the global insurance industry’s digital transformation. They’ve received widespread attention for attempting to cut out insurance agents as middlemen.

As insurtechs have matured, however, they’ve also revealed a major flaw: the D2C distribution model itself.

The D2C model deprives customers of the professional guidance and human connection that agents provide. But when insurtechs and agents combine their abilities, they can strengthen customer relationships and fuel growth.

Here’s a closer look at the D2C model’s distribution problem and the partnership-focused solution.

Customers need coverage insight

In tracking the rapid growth of insurtechs, one thing is clear: D2C insurtechs excel at helping customers quickly find insurance policies.

Speed might suffice for people with straightforward needs. But insurance matters aren’t usually straightforward — even if consumers don’t realize that. Most of the time, insurance customers don’t know what they don’t know. The D2C distribution model can’t offer the guidance necessary to help these customers find the coverage that best meets their needs.

A licensed insurance professional can answer consumer’s pressing questions about insurance. But the D2C distribution model cuts out agents by design. And without agents on hand, D2C insurtechs have a limited ability to provide critical insights.

A D2C insurtech using AI-powered chatbots, for example, can give customers basic information about a policy or coverage type. However, it will fall short when attempting to address more complex questions.

Blog content might seem like a potential workaround to this problem, being a longer-form way to communicate with customers. But blog posts can only offer general guidance — and if that guidance comes from single-carrier insurtechs, it’s often biased.

The takeaway: Without agents as partners, D2C insurtechs aren’t able to offer customers the professional and customized insights required to meet their coverage needs.

The need for human connection

Between slick website designs and clean user experiences, D2C insurtechs often focus on streamlining the do-it-yourself policy purchasing process. But no matter how impressive their user experience (UX), digital D2C distribution will struggle to replicate the human touch that only agents can provide.

When customers work with agents, they’re able to have conversations that build trust and forge a personal bond. That dynamic doesn’t exist with the all-digital D2C distribution model. Without the ability to connect with an agent, customers could be held back from finding the coverage they need. And when it comes time to renew, there’s no relationship keeping them from switching to the newest, shiniest industry disruptor.

In the insurance industry, human touch is indispensable. Personal connection is the gateway to meeting each customer’s coverage needs. So how can D2C insurtechs deliver this to their customers? By partnering with licensed industry professionals.

Tech-powered agents will deliver

The D2C insurtech model has clear shortcomings. As Deloitte’s 2022 industry outlook warns, agents shouldn’t be ignored because they deliver value in a way that current tech simply can’t replace. But they also need major tech upgrades to meet the needs and expectations of today’s customers.

Insurtechs should take note: Agent partnerships can be their secret weapon.

Many agencies still rely on paper and filing cabinets to do their jobs. Insurtechs can use their advanced tech to support and enhance agent capabilities and free more time for agents to spend with customers. When equipped with the right tech tools, agents can deliver personalized communications to customers and prospects at scale. And because they’re delivering a tech-enhanced user experience, agents can help each customer quickly find the right policy.

Which tools should insurtechs provide agents with? To maximize their value delivery, agents need:

• A highly customizable policy management system;
• Robust CRM software;
• Digital marketing support; and
• Powerful IT infrastructure.

These kinds of tech allow agents to streamline their workflows and limit friction. When insurtechs provide the back-end support, tech-enabled agents can focus more on the part of their job that matters most: building and strengthening customer relationships.

More powerful together

Some industry observers have cast D2C insurtechs as the future of insurance — and agents as the industry’s past. That forecast doesn’t make for a great working relationship. But here’s the truth: insurtechs and agents need each other.

Insurtechs can help attract customers with speed, but only agents can offer the professional guidance and human touch needed to keep those customers around.

The brightest future for insurance is one where insurtechs and agents partner to optimize each customer’s coverage. When both parties work together, they can stay competitive in a changing industry landscape.

Deb Franklin is the co-CEO of PEAK6 InsurTech, the insurance operations and technology subsidiary of PEAK6. The information contained in this page is provided for general informational purposes only and may not be applicable to all situations. We Insure makes no guarantees of results from the use of this information.

This article is published with the author’s permission and may not be reproduced. Any opinions expressed here are the author’s own.