Distribution Matters features conversations with Breathe Life customers, partners, and the industry at large on life insurance distribution challenges and opportunities.
This article features Lauren McCallum, Member Relations & Sales Director-Niche Markets & Specialty Accounts at LL Global-LIMRA & LOMA. She has over 2 decades of experience in the insurance industry and has seen how insurers are embracing direct digital experiences. Here are some of her thoughts and insights.
Q: How did direct go from being a niche option to a viable and necessary method of distribution?
Direct digital experiences started pivoting into insurance about eight years ago when Costco partnered with insurers to offer Costco customers the opportunity to buy insurance online through their Costco account. At the time, consumers thought purchasing insurance online from a trusted retail source such as Costco was ‘cool and unique.’
Fast forward to today and direct is no longer a niche distribution channel. The growth of direct as a distribution channel evolved in the insurance area just as it did in businesses such as Expedia, Amazon, and even those self- serve checkout lines in the grocery store. The online experience of companies like these have changed the buying experience.
What dramatically changed the public perception about online experiences was the pandemic. When in-person sales situations could not happen, insurers turned to online sales. What we saw was an amazing. There was a 17% rise in life insurance sales during the pandemic, the highest rate ever. Most of the new policies sold during the pandemic were term and whole life policies coming from the direct digital channels. We will have to wait and see whether this huge increase in sales will be with us long term or whether it is just a blip on the horizon.
What we do know is that the life insurance market is huge. There are thousands of underinsured people in the United States and around the world. There is plenty of room for growth, that is for sure. Add to that the fact that the younger generations are keen to use the Internet and want to go direct as opposed to the traditional audience for life insurance and annuity products.
Q: This leads us to omnichannel distribution. What exactly is omnichannel distribution?
Omnichannel distribution has been around for years. Briefly, omnichannel refers to meeting the consumer where they want to be met. Like direct, omnichannel was not one of the top things on insurers minds in the past. Insurers knew they needed digital. Omnichannel distribution was just another thing to think about. It was not a priority.
From my perspective, omnichannel distribution requires a fluidity of channels. The opportunity to offer sales in multiple channels is often considered to be omnichannel; however, a true omnichannel experience is where the customer can seamlessly move from one channel to another without interrupting their online experience. The process may start online, but the journey is not 100% online.
Gen Xers want a mixture of online and in person. For generation X and millennials, everything needs to be quick. You know ‘boom boom boom.’ We find that millennials will often stop an online process to seek advice. Even though they want to buy everything quickly, they also realize they may need help.
What we see happening now is an evolution of direct. Going direct has turned out to be more difficult than simply turning on the digital switch, as many thought it might be.
Q: What challenges are insurers facing in supporting agents during the process of establishing direct channels?
Setting up a direct channel requires insurers to look at their overall business strategy and determine what is the best way to support their customers. It could be that supporting their external advisors is the appropriate answer. Alternatively, it could be that straight direct is the right move.
The big issue facing insurers is that you cannot just put somebody on the phone and have them start selling life insurance. To successfully market life insurance requires educating the consumer and necessitates using a combination of technologies such as online applications, chat capabilities, and other factors. Much of this experience is a process requiring real time assessment of what is working and what is not working. Insurers need help in adapting the newly emerging technologies to this dynamic situation.
When I started in this business, I specialized in niche and specialty insurer accounts. I collaborated with companies going direct at the initial stages of this process. What really impressed me was how insurers navigates this innovative technology and grew over the years.
In 2015, we added direct as one of our top distribution channels. It is funny because at first many insurers did not want to share information about their direct experiences with us. I want to preface my comments about the direct experience by saying that at LIMRA, we have a direct to consumer link to our member companies. We are in the position to collaborate with our members who provide content for our conferences and participate in our research, which is really the crux of what we do.
One thing we discovered during the early phases of the roll out was how agents viewed direct. They saw it as competition. A couple of big insurers said, and even discussed it in our committee meetings, that they failed initially to understand the agent viewpoint. When they discovered the agent concern, they temporarily stopped their direct rollout.
For direct and digital to be beneficial for agents, insurers realized that they needed to improve their communications around sales messages, applications, quoting policies, and delivering those policies. They needed to include the agent in the process.
What agents learned along the way is that the online process could be a great lead generator. The initial feelings of traditional companies about the need to go direct made insurers realize that they had to get a little more traditional in their omnichannel distribution. They had to find a way to support their agents digitally. It is so cool to see how distribution has changed over the years. and how both sides on the continuum have changed over time.