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Forces shaping insurance distribution

Three forces are shaping insurance distribution: 

  • the resilience of intermediaries, 
  • rising expectations among commercial and individual buyers 
  • and the elusiveness of building scale in direct channels.

Yes, these were factors a few years ago too. In fact, carriers built roadmaps to adapt their strategies accordingly. But the COVID-19 pandemic upended those plans, along with many others, by compressing timelines. In a matter of weeks, consumers and businesses began to shun in-person meetings and rely much more heavily on digital tools for research and communication. Their perceptions of risk changed quickly, as did the kind of help they looked for when evaluating insurance products. And while some carriers were able to pivot, many continue to struggle and those multi-year roadmaps now look like wishful thinking.

Let’s look at each of these three forces to see what’s happening, why it matters now and what you can do to turn it to your advantage.

The resilience of intermediaries

Across all sectors intermediaries, agents, brokers and advisors remain strong, demonstrating value to today’s insurance buyers.

Rising expectations among commercial and individual buyers

Customers of all sizes continue to want more from carriers and intermediaries: seamless service, how I want it, where I want it, when I want it.

The elusiveness of building scale in direct channels

Digital natives do find on-line offerings appealing — but direct distribution platforms are struggling to achieve scale and fully compete on the main-stage. Brand building is tough.

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Podcast: Insurance distribution strategies

Insurance distribution is becoming even more challenging. What can carriers do about it?

Force 1: Intermediaries are resilient

Recently, a prominent broker confronted a major insurer with a challenge. “We are going to be more strategic selecting the carriers we work with. We’ve been splitting our business across ten or more carriers, but now we’re going to start focusing on just a few. We’d like to work with you, but we’re going to need more aggressive pricing for our clients and a new commission structure — and we need you to tell us exactly what risk you want from our book.”

COVID-19 may have ramped up the pressure, but it has merely accelerated a phenomenon already in progress, exposing where value is created. Many insurance relationships have endured on a form of inertia, with family-run agencies and broker ties that go back decades. Those human connections are still vital — but sales activity has shifted toward finding real answers to real business problems. 

As the pandemic limited some prospecting activity, many brokers have made their relationships stickier by providing objective advice around emerging risk management issues. They’ve been nimble in adapting to a digital-only environment, and they’ve helped clients whose overtaxed human resources departments have needed both advice and hands-on assistance.

For their part, most carriers have known that they will need to engage differently. They have the five-to-seven-year product roadmaps to prove it. But suddenly, providers and producers are all being expected to offer more help at lower prices now, not in five to seven years. As the pandemic recedes, these expectations won’t.

Force 2: Customer expectations are rising

Changing customer expectations affect every type of insurance model: business-to-consumer (B2C), business-to-business (B2B), business-to-business-to-consumer (B2B2C) and other permutations. We’re seeing traditional carrier-distribution demarcations breaking down.  Companies are joining forces to form ecosystems that evolve with each new partnership and/or acquisition. We’re also seeing managing general agents (MGAs) wanting to take on risk themselves, morphing into full-stack insurers. Some MGAs are even assuming underwriting chores as well. Across the value chain, intermediaries are stepping out of traditional roles to address new market expectations.

What do these examples have in common? They’re all responses to a perception that insurance should be easier. Brokers and agents derive their value from staying close to their customers. So, as expectations rise, producers are listening and they’re quickly adding tools and establishing new relationships to support those expectations. This poses a challenge for carriers as intermediaries assume more risk and find other ways to strengthen their own relationships. If they ignore these expectations, some traditional carriers may find that they have become little more than commodity providers, limiting the value they add and endangering their bottom lines.

Insurance intermediary roles continue to change

GM is resuming its own auto insurance offering for vehicle buyers.

For homeowners insurance, Hippo has acquired customers through relationships with Comcast and Lennar — a telecom company and homebuilder, respectively.

Progressive Insurance has teamed with Credit Karma, a personal finance company, on a usage-based insurance (UBI) product.

Bestow, an online life insurer with a traditional MGA model, is now starting to write its own business and take on risk directly.

InsurTech firms like Bold Penguin (which American Family Insurance is buying) help agents or brokers compete with direct sellers, letting them triage, quote and bind commercial policies.

Force 3: Achieving scale is elusive

A few years ago, it seemed that digital natives would bring their strong, insistent preferences for direct, on-line models to insurance. It is happening, but it’s more complicated — and it varies considerably by sector. Carrier-side start-ups, in particular, often struggle with direct sales initiatives. Insurers are rightly concerned about channel conflict and alienating (or cannibalizing) existing customers. As a result, they often don’t invest in or commit to innovative approaches at a scale that might let them succeed. Meanwhile, as the economy has reeled, some firms have diverted their attention. That’s understandable. They’ve had plenty of other issues to think about, and the rate of change/adoption has been too slow for many impatient corporate ambitions.

Building a brand is tough. Standalone companies continue to grind it out in the free market, but they need success to fuel more success and longevity. Nonetheless, the argument in favor of direct models continues to be strong, and we believe there will be big winners in the space, with available capital to make it happen. Some carriers are still investing heavily in brand reinforcement on television and in social media. And there’s new money eyeing the sector. Flush with capital, a growing number of private equity firms are showing interest in insurance acquisitions.

Shifts in behavior and buying patterns could be lumpy. That is, much as we saw with desktop video calling over the past year, sometimes the right product presents itself at the right moment, cued by changes in the broader environment. Conditions are ripe for the financial services version of a product “going viral,” tipping the scale and changing the pace of change. Under these circumstances, companies that opt out — or opt for “fast-follower status” — may not have time to position assets when the shifts start to occur more quickly. Digital products take on momentum of their own. We rarely hear about the fourth largest music streaming service or the fifth largest social network.

What to do

Choose where to compete

We believe that insurers should be prepared to adjust their distribution models to effectively respond to a range of market trends, from the growth of direct sales to the morphing of what it means to be a broker. But it’s unrealistic to cover all the possible permutations because each path requires a specific investment in sales enablement and, often, technology integration. A group insurer, for instance, could choose to pursue the direct channel or sales to “garage-based” start-ups. It might address the needs of sophisticated brokers, and it might build and support multiple integration paths at once with different benefits administration platforms. Few carriers, if any, will do all this well at once.

How to prioritize? Define what really differentiates your company, and be very clear about the specific capabilities you need to succeed at to support that identity.

Spot the challenges, spot the opportunities

Many insurance companies are starting with sales operating models that no longer accurately align to their customers’ needs. This was shifting even before the pandemic hit, but the disconnects are more obvious now. In some sectors, for example, carriers remain heavily oriented toward in-person meetings while brokers are begging for a more virtual work environment. So what does success look like? Often, insurance executives don’t have adequate visibility into which clients to call on, how to make those calls, whether they have the right capacity, how productivity varies and how all these factors are changing as client behavior and needs evolve.

That’s why the first step is often to create a baseline assessment of where they’re winning and where they’re lagging. In your assessment, you’ll want to hold structured discussions with your distribution partners to understand their goals and positioning. In looking beyond size and traditional territories, some companies find that they have been mapping their most effective sales resources against clients that aren’t likely to fulfill overall corporate goals.

Sales enablement isn’t a one-time review. It has to be iterative because the market itself keeps changing. You’ll want to create a process that continuously updates your assessment, collecting and assessing actionable metrics that go beyond revenue and client count. In particular, you should be able to quantify the value that you are bringing to your distribution partners. 

Invest in novel solutions

To create value, carriers must deliver solutions that clearly articulate value with client needs. Why is your price offering more value to any individual buyer? How can your disability coverage help get people back to work faster?  And how will that better position your brokers or agents?

Solutions need to be unique because there are no standard customers anymore. Instead, we see a constantly changing flow of independent brokers, large brokers, benefit consulting firms, InsurTech companies and direct-to-consumer companies serving those customers in the new insurance ecosystem. Carriers need to be able to understand and provide a solution for each channel's needs. And they need to determine the attributes that end customers value most, and then deliver them on the platform of their choice.

This is an issue of product design as well as marketing communication. Your distribution partners have to be able to understand and convey how your particular offerings will make them more successful in their sales efforts. As a result, you may need to think differently about your sales team, too.

Invest in the ‘digital’ insurance sales rep

Many insurance carriers still hire sales reps the way they did 20 years ago. But today’s reps can’t merely be good at building in-person relationships with strong networking skills. They’re going to have to be savvy with digital marketing and communications tools. Building the agent of the future requires new ways of thinking around how you recruit employees and incentivize them, how you educate and train them, and ultimately how you arm them with the tools and technology to engage in data-driven conversations about your products and services and your customers needs.

Recruiting and targeting for your workforce will require a deeper understanding of the potential employee pipeline. Which colleges and universities will you target for new hires and which pools of more seasoned agents will you target? Designing the right rules-based incentive program is no longer a one-size-fits-all exercise. It will require serious consideration about the balance of compensation, company culture and benefits, and sales versus service work. 

Pulling all of this together will be sophisticated employee segmentation tools that help you understand and ultimately predict which recruits will be successful, what kind of training and education do they need, and what type of company environment is the best fit for them. In the most recent PwC US Remote Work Survey, the youngest employees were the ones who wanted to work from home the least. Unlike their more experienced counterparts, they probably see more value in having office interactions earlier in their career. 

The pandemic has accelerated many of the changes that were already in play such as a shift from traditional networking to more digital interactions through mobile communication, social media and online events. Being tech savvy is important and continued CRM investments will need to be made, but that’s just a platform and a means. Your future sales rep also needs to be able to show value quickly to customers looking for data-driven insights on how your products will make their workforce more productive, manage risks and get their employees back to work more quickly.

Use data for better targeting

Deep analysis is crucial when sales reps, agents or brokers call on clients. Business owners don’t have time for empty chatter, especially in the wake of the pandemic. Reps who visit a client with nothing more than a glossy brochure won’t be invited back. They need to come to meetings armed with specific sales opportunities, including data to show how and where the opportunities exist and actionable ideas for how to pursue them.

Reps should be able to help brokers identify holes in the market to exploit. They should be prepared to walk into a meeting with specifics: “John, we know that bowling alleys in this area are growing again as families look for ways to hang out when the pandemic starts to wane. You should be selling them (product X). Here are the 10 bowling alleys that are actually waiting for you to call, and here’s a way to call on them.” Carriers need to arm their reps with data so they can be more knowledgeable about how to drive business, and about why their product offering will resonate with the broker’s buyers.

As an example, one insurer had a program targeting high-net-worth prospects, and one of its enterprising brokers sought to pursue the same opportunity with mass affluent individuals. The carrier could identify the attributes that made this outreach program successful to replicate it around the country. Criteria like income are necessary but no longer sufficient; other data points (children, profession, lifestyle information) may also be correlated. Using external marketing data sets as well as the information it already has, a company might identify thousands of appealing targets — and then deliver those leads to brokers with guidance on how to modify the sales pitch. This is the conversation your brokers want to have. (The first step, of course, is using a baseline assessment to spot the outlier opportunity and identify it as a program worth replicating.)


For a while, changes affecting insurance distribution channels were visible on the horizon, but they seemed hazy. COVID-19 has given many carriers’ planning discussions much more urgency because complementary shifts have already happened. Agents and brokers aren’t calling on clients the same way they once did — because they can’t. That means agents and brokers need a different kind of support from carriers, and they can’t wait years to get it.

You’ll want to shore up where you are and address where you’re going.

  • Focus on the basics. Intermediaries aren’t going anywhere. They’re evolving, so you’ll need to up your game in distribution management. That means investing in digital tools, aggregating data sources and incorporating behavioral economics — all that while adjusting products and operating models more quickly. Keep shaving time off quote-to-bind and improving field productivity. Be more fact-based in the support you give to producers. And be more data-driven in your sales-management discipline, in rationalizing field and territory management and in product and portfolio management. This applies broadly. You’ll want to link appetite, underwriting and sales management processes so that you and your distributors all benefit. 
  • Don’t stop innovating. Keeping focused on what’s coming next should color what you do, even if it’s someone else that’s pushing the limits. The pace is unpredictable, but because the market has become so much more dynamic and agile, you can’t afford not to participate. For many carriers, the winning, risk-adjusted strategy could be to focus more on corporate development and inorganic strategies, forming smart alliances and participating in ecosystem development.

The forces changing insurance distribution are actually encouraging for insurers. Producers and consumers all want carriers to succeed. The hard part isn’t doing the work, it’s recognizing that the real danger is inertia. If you don’t realize how significant the industry shifts have already been, you may not be in position to move once the realignment is complete.

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We are grateful to PwC's Susmitha Kakumani, Paul Livak, Vivek Paharia and Joshua Schwartz for their contributions to this report.

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Juneen Belknap Kirk

Advisory Financial Wellness Leader, PwC US

Marie Carr

Global Growth Strategy, US Financial Services Practice, PwC US

Mark Rosenthal

Managing Director, PwC US

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