By 2018, the fastest growth in the direct-to-consumer (D2C) channel is expected to come from direct response TV, online lead generation platforms and “online direct” sales finalized without agent intervention, according to a new report.
The projected gains indicate that insurers, within the D2C channel, are placing their largest bets on television and internet-based segments, said consultant Samantha Chow, author of the report titled “Life and Annuities: Shifting to Direct-to-Consumer Channels.”
At the moment within the D2C channel, direct response TV lags behind telemarketing, print and online segments insurers use to reach consumers. Only 33 percent of insurers report using DRTV, said Chow, a senior analyst with research and advisory firm Aite Group in Boston.
“Given television’s broad reach, however, 22 percent of carriers report that they will add this channel to their strategies within the next 24 months,” Chow wrote.
Insurers are using TV to reach a broad swath of consumers, but also plan to expand their online lead generation segments to support agents and their online direct channels to help consumers reach the insurer through new channels, Chow added.
Agents still generate the lion's share of premium in the individual life insurance market so for the moment the direct channel isn't an immediate threat to agents.
Career agents and independent insurance brokerage channels each generated only a 2 percent increase in individual life sales last year over 2014, yet sold about 70 percent of premium, according to LIMRA.
Annualized premium growth for retail individual life insurance sales through the direct sales channel grew 15 percent last year compared to 2014, LIMRA data shows.
Premium growth for "personal producing agents" rose 29 percent over the period thanks to indexed universal life sales.
Chow notes, however, that in early 2000, approximately 80 percent of all individual life insurance policies were sold through some kind of agent, so agent market share has dropped by about 10 percentage points over the last 15 years.
Online Lead Gen, Online Direct
The online lead generation segment, used by 72 percent of insurers, is expected to grow 11 percent over the next two years and the online direct segment, used by 83 percent of insurers, is expected to grow 6 percent by 2018, the report said.
“It’s all about how to get to the consumer,” Chow said in an interview with InsuranceNewsNet.
Today, 94 percent of insurers use the D2C channel and 83 percent of insurers use the agent channel, according to Chow.
The D2C and agent channels are by far the most popular channels used by insurance companies to sell life and annuity products.
Other channels such as the worksite channel, affinity relationships and banks are projected to actually grow faster than the D2C and agent channels over the next two years but from a much smaller base, the report found.
In the survey, senior executives at 18 life and annuity carriers said they expect to have a D2C channel sales strategy in two years’ time, an increase of 6 percentage points from today.
Online Direct Segment Fractured
While the direct response TV and online lead generation segments are expected to grow faster, there’s no question that the online direct segment, with its projected 6 percent growth in the next 24 months, is the one in which many of the most interesting developments are taking place.
So what’s the online direct segment going to look like?
Think of the online direct segment as splintering into an online kaleidoscope with agent involvement in some cases, and no agent involvement in others.
The online direct segment is splintering into no less than seven different business models, Chow writes in another report titled “Emerging Life Insurance and Annuities Distribution Players,” published in April.
Those seven business models provide varying levels of engagement, agent interaction and innovation, and they include “online direct, online agent, online comparative, hybrid, engagement, on-demand, and digital advisor models,” Chow wrote.
In all cases, though, each model is moving beyond the initial lead generation functions envisioned for or assigned to them when insurers first explored selling through the internet, the report said.
Often the models blend into one another, which makes distinguishing between them at times difficult, but they share common properties: they make insurance simple to understand and present themselves as easy to buy, often through a mobile platform.
“How agents and consumers interact has changed,” Chow said. “That’s the key. It doesn’t need to be face to face, it can be through the internet, chat, phone or text.”
Seven Models Identified
According to the April report, the online direct model within the online direct segment of the D2C channel does not involve agents.
Only the insurer is involved and the online direct model involves minimal or even no commissions, the report found.
Examples of online direct model platforms include the London-based firm Bought by Many, Coverfox, Haven Life, Insurgram, Ladder Financial and Sureify.
The second model identified in the report is the online insurance agent model, which acts as the online equivalent of the brick-and-mortar agency appointed by a group of insurers.
Customers in this segment have the option of working with a live voice and typically value multiple options offered by more than one insurance company. The online agent model, as the name suggests, retains a very strong agent relationship with insurers, the report said.
Examples include Immediateannuity.com, Incomesolutions.com and Rootfin, founded by insurance agent Jeff Root in Austin, Texas.
The third model is the online comparative portal model, which many consumers may have used in the past. It is a “self-directed, price-driven, advice-adverse” model with many insurer product options that pop up in connection with policyholder data that need be entered only once.
This model generates leads by matching consumers with insurers. Examples include AccuQuote, Annuities.com, Annuity FYI, Compulife, Insurance.com, InsuranceQuotes, LifePlans.com, LifeQuote and SelectQuote.
The fourth model is a hybrid comparative portal, which serves primarily as a comparative tool for the insurers but can also act as a “pure direct option,” the report said.
The model “recognizes that some consumers coming to this type of site want to see their options and compare products but still want a full digital experience,” the report said. Companies catering to this model include Abaris, Annuities.direct, Bimadirect, Check 24, MoneySuperMarket, Policybazaar and Policygenius.
A fifth model, which Chow calls the “on-demand” model, represents a purely digital experience with minimal attention designed for the self-directed consumer.
This is “insurance at the touch of a button,” Chow added, and the best examples of this are represented by the Swedish company Bima, the U.S. company SureApp and the U.S. startup Trov.
Digital engagement platforms, the sixth model in the online direct segment, offer insurers and agencies the opportunity to engage with policyholders by incorporating mobile apps, health devices and wellness programs into insurance buying, the report said.
Examples include Insurance Lounge, Melius, Life.io, Society of Grownups, a brick-and-mortar location in Brookline, Mass. created by MassMutual in 2014, and Sureify, the U.S. startup.
The last of the models, a digital advisor model, is a digital insurance or financial advisor working to make sure buyers are covered with the appropriate amount of insurance coverage, according to a matrix table of the emerging online sales channel options.
The differentiator of this model is that it builds advisor loyalty and delivers a stronger relationship with policyholders who want insurance company direction or advice, the report said.
Examples include the U.K. startup Brolly, Germany-based digital advisors Clark, GetSafe and FinanceFox, the U.S. digital advisor CoverPocket, and the U.S. engagement and digital advisor Melius, according to the report.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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