In our recent independent research, 56% of the market cited distribution as the greatest challenge and opportunity facing the insurance industry.
Many businesses – retail, utilities, transportation, communications, financial services, trade bodies, etc. – have strategic interests and ambition to grow into financial services with their existing customers who are looking to transact on-line more, trust the brand, need insurance but struggle to find the right solution or insurance partner in the current market.
Consequently businesses seek flexible offerings from insurance providers, via an affinity (white label) partnership, but most often they are provided with generic base insurance solutions that have little relevance to their brand and its unique brand values.
With 42% of consumers suggesting that brand is one of their key considerations when purchasing insurance, this situation does not appear to make a great deal of sense. Historically insurers have been slow to move into the affinity space, given the associated long running system constraints and massive overheads, and as a result they have chosen to partner with big brand names such as John Lewis and Sainsbury’s in the UK, or Coles and Woolworths in Australia.
If we take the view that intermediaries with their smaller operations should, on the face of it, be far more agile, quicker to market and more focused, why haven’t we seen more of them going after the affinity space and satisfying the needs of smaller brands? This works in not just in the favour of the intermediaries but also the underlying insurers as there is less likelihood of them cannibalising their own risks, as might be the case for a standard price comparison play.
A clue may be in the research where 70% of insurance professionals called for “significant investment” in technology to drive distribution solutions. This is perhaps most painfully felt within the intermediary market where scaling offerings to support new sales processes, channels and brands tends to result in a significant scaling of cost too. This effectively leaves intermediaries to face the same problems as large insurers and therefore only really able to cater for the larger opportunities within the affinity space.
If more intermediaries, specifically brokers, sought to innovate and consider solutions that ensure their costs do not scale exponentially with the number of partners they have, then there could be an opportunity to serve this burgeoning space, which will also be attractive for the underlying carriers. 80% of the market has a desire to innovate but there is little evidence of this to date, with the majority of the market tied up on the same old technology platforms, with reliance on custom development and little differentiation.