Distribution Channels and Growth: Finding the Logical Mix
Insurance Experts' Forum, November 26, 2012
The bigger strains of the recession may be behind us, but insurers are still experiencing no shortage of pressure for organic growth. As they play catch up, insurers have a lot to focus on in terms of business development efforts. And a big piece of this focus is being placed squarely on the channel as insurers try to improve and optimize their distribution and compensation efforts.
At the strategic level, this involves kind of a plan-your-work and work-your-plan approach that ties back to corporate performance objectives. But at the tactical level, it involves the use of advanced, cost effective technologies and processes that can help improve sales, optimize quotas, and better manage the complexities of compensation.
During a recent web seminar hosted by INN and sponsored by Varicent, an IBM company, Karlyn Carnahan, principal with research and consulting firm Novarica, agreed that a number-one driver for insurers is growth, telling attendees that there are only a few ways carriers can get there—one is with acquisition. The rest of that focus must be on products, marketing, and critically, the distribution channel.
“Growing is the dominant priority for most carriers today, followed by operational effectiveness and competitive parity,” she said, “you need to be at least as good as the competition in order to keep the business or to drive new revenues.”
It’s a logical mix, right? You can’t expect well-priced, well-placed products to sell themselves. So once you’ve established a price that properly aligns with the risk you are insuring, marketing and branding rely on a network that can take that product to market.
Once we’ve agreed on this logical path, what are the options? Some insurers expand sales models to include direct-to-consumer, but the bulk of insurers today (at least in P&C and life) still rely heavily on the distribution network to get the job done.
If you focus on your distribution network, you have to consider a multitude of issues, some of which include the myriad technologies that enable agents to easily place business, monitor their performance, and of course, ensure the most competitive compensation.
Carnahan reminded attendees of the millions of transactions, thousands of producers and multiple complex compensation plans that currently comprise the insurance enterprise. “These plans might vary by line of business, by products, by type of transaction, new or renewal, by state. There may be overrides involved, specialized programs,” she said. “So simply managing the scale of the number of transactions is a challenge for some carriers.”
In the fairness of reporting, this web seminar had two other seasoned speakers: Amit Bhalla, director North American technical sales at Varicent, an IBM company, and Craig Bedell, worldwide insurance industry executive for IBM's Business Analytics Group. The web seminar also had an agenda: not just to remind attendees that there are challenges in growing their businesses, but to educate them on the benefits of employing the right processes and technology systems (analytics, compensation software, and distribution management and sales performance management solutions).
To this end, Carnahan was succinct, telling attendees that in light of the fact that the data related to the distribution channels is typically distributed across many different systems (policy admin, CRM and claims systems, as well as a variety of different places), linking that information is key. “If you can’t link the information, you end up managing your agents based on transactions rather than managing your agents strategically.”
Pat Speer is an editorial consultant for Insurance Networking News.
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