Direct to Customer Model – Changing Insurers’ Business Ways
In this digital era, customers make informed decisions and enhance their buying experience through research, reviews and ease of use. This change in the way customers think and operate is impacting the insurance industry and its distribution models. Increased competition and changes in customer behavior & preferences have made the development of newer distribution channels, a requisite.
How has Direct to Customer (D2C) model evolve?
In order to improve the operational efficiencies through technological advancements, the number of insurers using D2C model has increased. By doing so, insurers are augmenting the traditional intermediary channels by leveraging new channels (telemarketing, digital advertising, social media etc.) to directly communicate with the customers and sell suitable and relevant insurance products.
Though the insurance industry is backed by legal and regulatory considerations, companies have slowly started transitioning from the traditional model to D2C model this has become a game changer in the industry.
What do customers really need?
In today’s marketplace, customers need convenience, speed and comfort. And to meet these expectations, adaptation of technologies that provide better insights is the best approach. A recent survey by PWC on digital innovation in P&C insurance states that 71% of the customers carry out digital research before making their buying decision. 67% of the customers opted to go for reduced premium through sensor-based data that is attached to their car or home, and 50% of the customers are willing to provide their personal and lifestyle information to enable insurers in advocating justifiable options. Technology facilitates D2C strategy through applications and analytical tools that engage the customers in a better and user-friendly manner.
Which industries have adopted the D2C model?
Retail, manufacturing, travel services, etc., are some business verticals that have already transitioned to customer centric model. Small business owners are also using online platforms to research available insurance options, price comparison between products and customized coverage based on their insurance needs. Having influenced by tech giants like Apple, Google and online shopping industries such as Amazon, eBay, etc., the customers are more inclined towards opting for direct channels for insurance that involve less risk exposure and/or can be processed straight through. This instigates insurers to invest in direct channels for small commercial segment and personal lines insurance.
Listed below are some of the insurance companies/startups who have adopted D2C model and are varied in their degree of adoption.
- Personal lines insurers like Geico, Progressive, Cuvva, Quote me happy.com, etc., include D2C strategy as part of their product offerings.
- Lemonade offers instantaneous cover with zero paperwork for home and renters insurance at affordable rates.
- Metromile uses the pay-per-mile concept, paying only for the miles you travel, which is widely popular among low-mileage drivers.
- Root provides car insurance primarily based on how you drive. This earns more savings for good drivers.
- Policy Genius, a composite insurer and an online insurance sale company, provides personalized quotes for life, renters, long term disability and pet insurance, along with a price comparison feature.
- DirectAsia, a leading insurance provider in Singapore, implemented direct distribution model to cater to customer segments who are interested in instant insurance covers, under one stop platform. The platform includes online quotes, policies and servicing till claim pay outs. They mainly deal with vehicle and travel insurance and have served more than 75000 customers with claims of 17000.
- Plymouth Rock, a property and casualty insurer implemented Direct to Consumer strategy to address a change in market.
- Allstate acquired Esurance to get into direct market strategy, similar to AmFam with the acquisition of HomeSite.
How do direct channels help insurers to transform their customer journey?
With the rise of advanced technology and opportunities for digitization of insurance processes, insurers have started focusing on direct online channels which not only help insurers maximize their sales, but also provide a range of personalized services through online platform
- Personalized advice: The leading insurers provide personalized services through advice-driven approach where the customers can live chat with a bot to understand their insurance needs and thus make a right product decision.
- Buying journey: The insight-driven model helps the customer to know about their peers and their buying patterns to decide on certain coverage needs.
- Customized products: The current insurance trends in D2C model do not force the customer to buy an insurance product as a package with all the base lined coverages. Instead, the system allows the customer to choose the coverage he/she wants based on his/her insurance needs and thus allows the customer to purchase his/her own customized product.
- Online quote and underwriting: The D2C model provides opportunities for the insurers to go for online underwriting that enables rule-based underwriting engine to assess the risks and provides online quotes. The underwriting decision is based on the submitted data. Though this approach cannot be used for complex risks, it yields better digital user experience for simple insurance needs that involve minimal risk.
- Alerts and reminders: The payment due reminders and any inspection alerts directly reaches the customer instantaneously.
- Cross & up sell opportunities: Based on integrations with social media platforms, the needs of the customer are tracked and relevant products or covers can be pitched for any upsell or cross sell opportunities.
- Online claim filing: The First Notice of Loss (FNOL) process and basic claim validation can be handled online for an improved customer experience and faster claim processing.
- Policy enquiry: Relevant updates on policy and other information at any time or place is just a click away through chatbots that are available 24/7 online. .
Direct to Customer model helps insurance companies generate revenue by engaging the customers in the right way, to use data collected from various sources as insights and provide seamless customer experience as opposed to the insurance selling through traditional distribution channels. Do you think the D2C model has a positive impact on the future of insurance industry?
PWC Survey Reference: https://www.pwc.nl/nl/assets/documents/pwc-insurance-2020-the-digital-prize.pdf