How do insurers and their distributors continue to sell their products in the post-pandemic era? What can new distribution channels look like in the future?
The past two years have presented insurance distributors with major challenges. It became impossible to provide personal advice in the customer's environment or in the agent's office. Instead, people reoriented themselves: population groups that had seldom used the Internet to access information were now seeking answers online. The important question for insurers in the post-COVID era is how to sell insurance products in this changed environment.The growing importance of online sales
Experiences during the pandemic have led to a massive shift toward online activity in numerous industries. Currently, there is no indication that this shift is a temporary phenomenon. The importance of online sales for insurers therefore continues to grow. Compared with the retail sector (such as furniture, accessories, clothing and lifestyle), insurers are naturally having a more difficult time in this area. While retail companies can use social networks like Instagram to share their inspiration and product suggestions, the words of Christian Mumenthaler, Group Chief Executive Officer of Swiss Re, still hold true: "No one sits down in the evening and has fun picking out a new insurance policy."
So, it is all the more important for online insurance product sales processes to run smoothly and that they are simple. Here, insurers also see their processes as being well-positioned. However, as a recently published study from Germany shows, the perception that insurers have of themselves differs significantly from the customer's experience. Online sales processes may function smoothly, from a technical point of view. But as long as policyholders are unable to find out what they consider important, there is still plenty of room for improvement.Contextual and embedded insurance at a premium
Because insurance companies are still struggling with the image of being especially complicated, sales models grouped under the terms "Contextual" and "Embedded Insurance" may have good prospects of success. The idea is a familiar one: purchasing insurance is embedded in the context of the purchase of another product or the commissioning of a service. Examples include extended warranties on used car purchases, such as those offered by the new insurer Element. Or Apple Care, which insures damage to hardware and can only be taken out during a narrow time window when purchasing an Apple product. It can also be parametric cyber insurance, which is an additional offer when signing a hosting contract with a cloud provider.
As a result, customers do not have to contact the insurance company, because the insurance company appears in the context of another offer. For example, the insuretech AutoProtect wants to bring the purchase of auto insurance directly to the dealership through a cooperation with Nissan Financial Services.
Collaboration with insuretechs can make sense at this point, especially for B2B2C providers who want to make it possible for those outside the industry to offer insurance products. Precisely because they usually have a modern technical foundation based on (open) interfaces, it is easier for insuretechs to place insurance products in other contexts. The cooperation between Huk-Coburg and Neodigital, which have founded a joint venture for car insurance, is also heading in this direction.
There are also opportunities arising from simple insurance policies based on parametrics. Since the assessment of claims is linked to fixed events and coverage amounts are usually capped, these policies are also easier to integrate into other products.Bancassurance gets a second chance
An interesting development in recent months has been the renaissance of bancassurance. The first attempts to sell insurance in the context of banking services had already been made in the 1990s. At that time, as a result of too little return on investment and the amount of (consulting) effort involved, both sides had let their cooperations expire. However, many attempts were still being made in the era of traditional branch consulting.
Since then, banking has increasingly shifted to the online world. Today, neo-banks, smartphone banks and digital banks – all of which are grouped under the term fintech – are extremely successful. N26 is certainly the best-known example. All of these benefit from the opening of the PSD2 interface, the consistent use of APIs and the use of the cloud. As a result, they have several important assets: stringent and fully digitized processes, customer access and customer data.
Account data in particular can prove valuable in insurance sales, as it can be used to gather information for marketing and specific product proposals. This also seems to strike a chord with customers, who increasingly expect to receive product offers based on this data. There have been plenty of examples of bancassurance in recent months. Neobank Revolut now offers pet insurance in its app, and the Qonto account offering, aimed at SMEs and the self-employed, has added insurance to its account model. And Signal Iduna, Germany's tenth-largest insurer is participating in a digital bank. As part of this cooperation, Penta will also act as a sales agent for the insurer.
With the ongoing systematic digitalization of their processes, , greater customer centricity of their own online application lines, and cooperations with third parties, insurers will continue to have many sales opportunities in the future, which only need to be exploited.
Would you like to talk about the digitalization of insurance? Then feel free to contact our expert, Karsten Schmitt, Head of Business Development at adesso insurance solutions.