Omi-channel: digitalization in insurance distribution

A few years ago, interested policyholders almost exclusively bought their products from a local exclusive agent belonging to their insurance company of choice or from a broker. This is also confirmed by the GDV's annual sales channel statistics. The purchase was made after a personal consultation at the customer's premises or at the intermediary's office. Today, the majority of transactions continue to be concluded in this way.

For some years now, however, it has been noticeable that customer needs are changing in the direction of online conclusion with a view to advancing digitalization. Customers are making increasing use of digital processes across all sectors, with the result that the proportion of online contracts is growing, especially for property/casualty products, and, for example, the number of online contracts is rising and already accounts for almost one fifth of motor insurance.

How exactly has customer behavior changed?

Insurance companies are constantly optimizing their products in all insurance lines in an attempt to meet existing customer needs. Today's customers, however, expect individualized and at the same time simple options for risk coverage. They are interested neither in lines of business nor in products, but exclusively in covering their own risks in their current life situation. According to a study by management consultants Bain & Company, the vast majority of those under 35 years of age (74%) in Germany are open to offers from technology-driven insurance companies. This openness leads to more competition in the insurance market.

A Millennials study conducted by Nürnberger Versicherung and the F.A.Z. Institute shows that young customers in Germany increasingly want simple, fast communication channels that are geared to their language so that they can better understand the context.

Online shopping for clothes, electronics, furniture or food has become as much a part of everyday life as streaming music and movies. As a result, these target groups also want to handle insurance online and through the devices of their choice.

Insurance companies must offer solutions via different communication channels

The online-savvy customers are active on various communication channels and end devices. Therefore, the omnichannel capability of insurance companies is crucial for sales success via digital distribution channels. One challenge in developing omnichannel capability for insurance companies is the often outdated core systems that need to be modernized for a consistent and streamlined process.

However, the distribution channels are not uniform and must be considered in a differentiated manner. This means that insurance products can be offered not only on the company's own website or via aggregators such as Check24. There are other innovative ways:

• Conclusion at the point of sale: Insurance policies that can be taken out when shopping online from e.g. a shop are becoming increasingly popular. TVs, mobile phones, glasses, e-bikes, can be "added" immediately in the embedded process. Insurance companies need to cooperate with e-commerce companies for this.
  
  
• Conclusion via digital voice assistants: The conclusion of insurance policies via digital voice assistants is not yet widespread in Germany, but is already technically possible today. For example, Alexa's artificial intelligence can not only switch the lights on and off, but also take out luggage insurance for the upcoming vacation trip booked online.
  
  
• Video telephony: In the banking world, video telephony has been possible with online banks for years and is actively used when opening current accounts, for example, at ING. In this case, the customer legitimizes themself in a video call with an employee by showing their identity card and answering questions. This process is not yet common in the insurance industry, but is conceivable for the sale of more complex products that require explanation.

What technical requirements must insurance companies meet?

• Communication between front-end and back-end:All online sales channels have one thing in common: The customer sees something different in the front-end than is stored in the back-end. The front ends must not only access the data in the core systems, but must also be able to transmit the results to the core systems once an insurance policy has been concluded. For this reason, bidirectional data transfer with the inventory management system must be possible, if necessary by means of an additional software layer.
  
  
• An end-to-end closing process (TAA=Tariff Application Offer): Insurance company systems must have end-to-end processes from the completion of the entry in the front end, to entry in the inventory management system and delivery of the policy through standard processes. These processes must be applied to all relevant systems such as e.g. the cash-in/disbursement system, the printing system, the commission system, the distribution system and communicate with you. This often requires a separate component for the closing section.
  
  
• Straight Through Processing: A positive customer journey only occurs when the policy and confirmation to the customer only takes a few minutes. To ensure speed, complete straight through processing without manual intervention is required. This requires a workflow system that orchestrates the processes. However, the inventory management system must be able to customize the necessary activities small enough to allow flexibility in process design. This is the only way to achieve efficiency gains for the insurance companies.

The impact of developments on traditional distribution channels

Anyone who now thinks that insurance will be bought exclusively online in the future will probably be wrong. As the GDV's sales channel statistics show, the proportion of contracts concluded after personal consultation is still high. This can be seen especially with products that require explanation, such as life insurance.

Digitalization, and with it change in insurance sales, is advancing rapidly. But for intermediaries, it is now time to rethink and consider how digitalization and the various communication channels can best support sales. Digitalization offers intermediaries the opportunity to spend more time on their core task: looking after customers and building trust. For example, intermediaries can offer an equally qualitative consultation for each customer without long journeys over videotelephony and work even more efficiently and flexibly due to this. In addition, data can be collected via online sales channels, enabling intermediaries to learn about the current situation and interests of customers from the pooled data and thus to create even more personalized and targeted offers. This also increases the potential for cross-selling and upselling.

In summary, the digitalization of customer interactions in sales can bring great benefits to all parties involved. Customers experience a customer journey that is geared towards them, and agents can sustainably secure and even expand sales success beyond their region by merging traditional and digital sales channels.

If you would like to find out more about digitalization in sales and the modernization of product modeling and inventory management systems, feel free to contact our expert Ruslan Rabaev.