Report: Big Changes Due to Insurance Sales Model

Life insurers, facing low interest rates and anemic premium volume growth, need to change the way they do business in order to maintain profitability, according to a new report.

A more intimate customer relationship is one way for agents to boost their value as insurance products morph into commodities and persistent change turns the traditional commission-based revenue model upside down.

Titled “Reimagining Insurance Distribution,” the Accenture report offers a broad look at the changes facing life and property casualty carriers in the next few years. Digitization is expected to affect every aspect of the insurance sales process from information gathering to binding a contract.

“Some carriers are responding with conviction,” to the new order, the report concluded. “Others are more tentative, hoping the wise course of action will become obvious in time.”

Information contained in the report is based on answers from 414 respondents, 27 percent of whom represented life insurers, 28 percent of whom worked for property-casualty carriers, and 45 percent of whom worked for carriers.

Carriers were located in Europe, the Americas and the Asia-Pacific region.

“Most carriers recognize they cannot change their agents’ behavior without changing their incentive and remuneration structures,” the report said. “Experience has shown there is more to this than simply using a different carrot.”

Incentives, Diversification

In the next three years, 53 percent of respondents said they would provide incentives to boost sales of more profitable products, and 44 percent said they would incentivize agents to stay more closely connected to customers. About 41 percent said they would push agents to target new customer segments, and 40 percent said they would increase the incentive for agents to cross-sell, the report found.

Which specific products and services carriers and their sales forces choose to emphasize depends on the client base and the business model of individual carriers.

Clues abound, though, and carrier executives haven’t been shy about where they want to steer their ships: away from capital-intensive products — variable annuities with expensive lifetime income riders, for example — that impose higher reserving requirements.

One area where agents can expect changes is through diversification. Thinning commissions and with more insurance products distributed online, one way for agents to make up the lost revenue is to sell into silos in which they’ve not sold before.

“We think it’s going to be difficult for a lot of agents to remain relevant if all they do is personal lines,” said Ron Kerr, vice president of multichannel customer experience, Agency and Field Solutions with Nationwide Insurance.

“Some will be big and innovative enough to still make a go of it, but we believe we have to help our agency partners diversify,” said Kerr, who was cited in the report.

Carriers have a huge influence over agents, particularly captive agents who are under contract to sell specified volumes of a carrier’s product. Sixty-three percent of respondents said they place a high priority on refocusing agents where they can add the most value, the report found.

Where once agents used to sell life insurance mainly through a face-to-face discussion, multichannel environments include selling coverage through a far-away call center, websites, television and social media.

Forging Deeper Ties

Erik Sandquist, who co-authored the 17-page report with colleagues Jean-Francois Gasc and Robert Sollmann, said carriers are looking for agents to “deepen” the relationship with a customer instead of boosting the frequency of interactions.

“The ability to cross-sell is No. 1 skill that insurers look for in recruiting new agents” Sandquist said.

As many as 63 percent of respondents plan to prioritize the use of customer data for needs-based selling and 58 percent are prioritizing the use of customer data at the point of sale, the research found.

In addition, 58 percent of respondents are prioritizing a move to a more customer-centric model and 48 percent have or plan to build a “customer-centric hub” using data to improve the service experience, the report said.

Sandquist, managing director and North American distribution & marketing services lead with Accenture, said the report had uncovered a “clear shift” from product-based selling to needs-based selling.

Helping to forge deeper, more long-lasting ties is the shift away from commission-based income models to fee-based models that encourage agents to handle more complex planning tasks and develop a stronger bond with clients.

“The frequency of interaction with customers was one of the lower prioritized customer improvements so, in fact, there’s more opportunity in engaging with the right customers with the right message at the right time through the right channels,” he said.

Engaging at the right time in the right place with the right person is easier said than done, but carriers plan to do this using better analytics generated by customer relationship management (CRM) platforms — and big ones are already doing so.

Paul LaPiana, executive vice president of MetLife Premier Client Group, which is selling 4,000 captive agents to MassMutual later this year, said MetLife was applying predictive analytics to anticipate the needs of individual customers.

“It means advisors are responding directly to customers’ evolving needs,” said LaPiana, who was quoted in 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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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].