Zooming in on key elements of channel strategy optimization

In my last article about channel strategy optimization, I outlined why mastering digital distribution capabilities is essential to running a customer-centric business and expressed my belief that insurers must be able to execute a successful multi-channel strategy to be successful. In this piece, I am going to zoom in on specific channels and give my thoughts on key elements to do each of them well. 

Zooming in: Optimizing the aggregator channel

Let's take a closer look at the aggregator channel as the first example. This channel, also known as 'price comparison websites', allows consumers to request comparable quotes from different insurers. What I really like about the aggregator channel is that it exposes the best – and the worst – in the companies that engage through this channel.

The aggregator channel is highly competitive and very dynamic. It's online, direct and real-time. For the insurer, this channel will reward superior execution and ruthlessly punish any tactics short of market benchmark.

Being deeply rooted in the insurance industry, I don't think it's fair to evaluate an insurance offering on price only – but since this is the direction the market is taking, we must acknowledge the heavy demands this puts on the insurers. If your price is too low compared with the risks your company is accepting you might sweep the market, but eventually be punished by poor underwriting results. If your price is too high, you might satisfy your actuarial team but you're not going to sign up any new business. Ultimately, if you miss out on providing the right price for the right product at the right time, you won't get a second chance.

Zooming in: Tailoring for social media

Let's take a look at the social media channel. Many insurers are beginning to experiment to see how social media can help them in winning new business and retaining happy customers. Friendsurance, a German insurer, has re-invented their business model to accommodate social media. Friendsurance allows people to form their own network of friends using social media platforms. This group of people mutually covers small claims which allow them to save on their premium price.

Friendsurance facilitates this co-coverage concept and also facilitates that larger claims are effectively being re-insured through a classical underwriter or insurance company. Because Friendsurance basically works direct, on-line and based on word-of-mouth marketing, the company operates on a very low cost-base, which means lower fees and more competitive prices for their customers.

Friendsurance is leveraging two important key characteristics of social media channels:

  • Word-of-mouth marketing – cheap, dynamic and strong because it endorses Friendsurance products and services across the users social networks
  • The community aspect – mutual groups are being formed by someone who invites friends to join the group. Expectedly, these people will only be inviting friends who are 'good' risks to the group, so there is a built-in pre-qualification of new customers

Zooming in: Going mobile

Another good example of tailoring the business model to accommodate a different channel is about mobile solutions. Many insurers are simply applying a mobile front-end to their current business model. But I challenge that this approach is only partially successful and recommend that you re-think the business model to a better fit with a mobile channel.

One of TIA's customers, to whom its mobile platform is essential, has asked its actuaries to come up with a motor product with a reliable rating based on only four questions. That's because all of the usual questions when selling motor insurance over the mobile phone are just not going to work. Mobile consumers expect fast and easy transactions so an insurer must settle for less input from them. Other important information must be retrieved from external registries and automatically processed in order to manage risk better for this type of channel.

Zooming in: Gaining customer insights

A final example is Woolworths, a supermarket chain in Australia and New Zealand, which tracks consumer buying behavior through loyalty cards. Woolworth also happens to own an insurance company so it has consolidated and analyzed its supermarket consumer behavior data with its claims records and thus has unique insight into consumer risk profiles. In fact, they have found that consumers who drink a lot of milk and eat lots of red meat are very good car insurance risks versus those who eat a lot of pasta and rice, fill up their car at night and drink alcohol. How is that for gaining consumer insights!

I hope this piece gives you some ideas on the different key capabilities you need to master for the different channels you are using. When considering a new channel, it's imperative to re-think the business model to make a better fit with the channel in mind, apply a customer perspective to establish a winning customer experience and identify the key capabilities required to succeed the new channel.

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