Multi-Channel Distribution in InsuranceChallenges and scope Multi-Channel Distribution in InsuranceChallenges and scope

www.niit-tech.com

Anuja Verma

NIIT Technologies White Paper

CONTENTSIntroduction 3

Emerging Trends 3

• Customer Segmentation 4

• Social Media 4

The Right Technologies 4

Challenges Faced in Multi-channel Distribution System 5

IT to Improve Multichannel Distribution 5

Multichannel Distribution – Delivering on the opportunity 6

• How does Technology ease the work of insurance companies? 6

- Customers 6

- Channel Partners 6

- Business 6

Conclusion 6

About Niit Technologies 7

The Indian life insurance sector is evolving and growing substantially

and is one of the key drivers of India’s economy. The Indian insurance

sector is moving rapidly towards international standards with new and

innovative product offerings. With rising income levels, customers are

demanding more sophisticated risk solutions.

Life insurance was once purchased primarily as a tax-saving tool.

A paradigm shift in regulation led to more customized solutions.

The number of insurance holders has more than doubled to 5.32

crore policy holders in five years to 2010, with the total life insurance

premium tripling to Rs 2.65 trillion during the same period.

The Indian customer is offered innovative solutions that combine

protection and long-term wealth creation. Improved services ,

sound advice and innovative products are provided through a

range of distribution channels such as banks, agents, direct offices

and online platforms. The emergence of a more diversified and

multichannel distribution network has revolutionized the insurance

sector, with increased access and better service to customers.

Apart from the conventional ways of marketing an insurance policy,

which include brokers, agents, kiosks, worksite marketing and

direct marketing, insurance companies now explore new avenues

of innovative and attractive range of distribution techniques that

can be exploited to their advantage. Today, an insurance company

leverages multiple channels for distributing its services to target

customer segments.

Distribution channels not only affect the top line and bottom line of

a company but also raise concerns on the cost management of

the firm. In this fluid environment, an insurance company needs to

Introduction

In the last few years we have seen unprecedented growth in the

choice of channels that customers can use to interact with the

business. Insurers are now adopting a multi-channel distribution

strategy to drive operationa l efficiency. With changing

demographics of insurance buyers, Insurance companies are also

using multiple types of distribution systems. Based on the needs

and status of target customer segment distribution systems are

chosen. A combination of all or most of the following distribution

channels make it a multi-channel strategy:

• Broker

• Individual Agents

• Corporate Agents

• Micro-Insurance

• Bancassurance

• Cell Phone/PDA

• Kiosks

• Internet

• E-commerce

• Work Site Marketing

• Direct Marketing – Internet

• Digital TV/Satellite Selling

• Supermarkets and other retail outlets

• Affinity Channels and Groups

• Insurance specific debit/credit cards

• Call Centers

Emerging Trends

3

have a deep, actionable and detailed analysis of the end users or

target segments, so the distribution channel can be set up to reach

the segment effectively. Inefficient customer segmentation and

targeting actually ends up delivering less value to the customer and

hence to the insurance company also.

This whitepape r explores the need to develop an effective

multi-channel distribution strategy that meets customer demands

and delivers differentiating customer experience.

4

The five key and current technologies that support multi-channel

distribution:

The Right Technologies

If any agent has a concern about a new product or program, the

underwriter can proactively reach out to the agent with a relevant

communication as well.

The recent and prolific rise in social media has created an irreversible

shift in the way the distribution world is changing. Figure 1 lists all the

multichannel choices that are available

Customer SegmentationSegmentation in marketing is important because it matches a

customer’s requirement to the offerings. This helps in creating brand

loyalty as the customer will be happier to purchase a product that is

specifically targeted to his or her needs better than competition. This

spells more gains for the business as people are willing to pay more

for a product which are tailored to their needs. Segmentation, thus,

leads to customer retention as well.

Here is an example of how different sets of customers can be

approached using different channels:

Social MediaToday, social media platforms have started playing a significant role

in the distribution strategy of insurance companies. A Twitter

account or company/brand pages on Facebook are various ways to

reach out to prospective and current policy holders.

The important element for such platforms is the status update which

enables a company to be aware of the activities and intent of a large

group of people without having to ask them.

For example, for an underwriter working with 100 agents, it can get

difficult to know about their achievements or updates. Here, tweets

or updated status messages on social media platforms can be

captured and used for monitoring performance in almost real time.

MarketSegment

Dis

trib

utio

n

Wealth • Full Service Brokers

• Brokers• Vendors• Agents

• Insurance Agents• Bundled Vendors• Banks

• Banks• Credit Unions

Affluent

Mass

Marginal

Figure 1: Multi-channel options

• Mobile: Insurance companies will adopt mobile

technologies, particularly tools such as iPad for brokers

and underwriters. Adoption of this technology is

expected to rise in the commercial lines space.

• Analytics: Leveraging analytics for micro segmentation

of customers will help insurers target the most

profitable customers and brokers. This will in turn

increase their return on investment and help retain

customers and aid in cross sell and up sell initiatives.

• Social Media: These platforms will play an

increasingly important role in influencing purchase

decisions. Customers, particularly the youth,

constantly communicate about their life status

through social media. Insurance companies need to

Mobile

TVRadio

Newspaper

Direct Mail

Email

Friends/Family

Retails Location

Customer Service

Online Forums

Blogs

RSS

YouTube

MySpace

Twitter

Facebook

Company Website

Multichannel Choices

• Cannibalization : This occurs when one service of a brand is

marketed more than the others. As a result, the market share of the

other service is affected.

5

create the technology and service infrastructure to

listen to relevant 'narrative bits' by establishing

effective 'listening posts'. Social media and gaming

present a great opportunity to bring a 'fun' element

to the sales process. Also gaming can help insurers

improve their brand image. For example, Farmers

Insurance in the US has partnered with the popular

Facebook game called Farmville and lets players buy

'protection insurance' for their online 'crops'!

• Collaboration: Increased collaboration between

underwriters, customers and brokers is possible

through the effective use of collaboration technology.

These technologies also help to personalize the

conversation between the underwriter and broker

and cement long term relationships. These help in

reducing the sales cycle.

• Product Configurators: These help insurers create

the building blocks for effective multi-channel

infrastructure. Product configurators also help insurers

launch products quickly into the market, bundle

product offerings and customize quickly based on

changing market demand or competitive pressures.

Organizations striving to deliver the right products and services to

customers via the right channels at the right time are facing challenges

on two main fronts.

• Brand dilution: Brand dilution can happen when insurance

companies choose inappropriate channels for different customers.

Challenges Faced in Multi-channel Distribution System

Technology is a transformation agent and its processes and systems

have ensured efficiency in customer service and operations .

Technology can be deployed to make multichannel distribution more

effective. The various tasks that technology can simplify include:

• Data warehousing

• Providing access to accounts, services and assistance online:

Customers can view the premium, tenure and other terms related

to their insurance policies.

• Analytics: Insurance companies can analyze behavior patterns,

needs and desires of the customers.

The figure below depicts the channel integration using information

technology, which allows smooth flow of information across the

different elements.

IT to Improve Multichannel Distribution

Role of IT in multichannel distribution

UnderwrittingApp ProcessingCust. ServicingPolicy issurance

Product InfromationNew offers & promotionCustomer enquiry

Internet

InsuranceProviders

IT SystemsProduct Policy/Customer/Agent

ThirdParty

Network

Internet

Cus

tom

er

Independentagents/broker

Web basedchannels

Tele Sales

Direct Sales

6

The product information, new offers and promotions, and

customers’ enquiry on new offers flow from the insurance

company to the customer. The third party channels such as

insurance agents/brokers, web based channels, tele-sale

executives etc. coordinate with the customer as well as the

company to get new business.

Once a case has been logged in, the entire process of

underwriting, customer servicing and policy issuance and

application processing is done through complex systems which

are developed as per the requirements of the insurance

company. After a policy is issued, technology is used to regularly

interact with customers and provide efficient service.

NIIT Technologies has evolved multi-channel distribution strategy to

optimize the opportunities that social media revolution and multiple

channel choice present and offer:

• Lower costs: Insurance companies have moved from

single-channel distribution strategies to multi-channel

distribution as the market evolved and competition intensifies.

These changes have shown a significant decrease in the average

cost of distribution services. Sophisticated well trained wealth

management consultants target high value customers. Insurance

is treated as just another financial product for others at the lower

end of the customer spectrum.

• Personalization: Insurance companies can work on more

customized selling by adding a technical sales force for selling

complex products or providing personal assistance to high

net-worth individuals. The various factors here are trust,

customer servicing, multiple and accessible service points, good

IT support and the comfort factor.

How does Technology ease the work of

insurance companies?

Customers

The portal of an insurance company can offer a plethora of services

to customers that can be save their time and also purchase policies

Multichannel Distribution – Delivering on the opportunity

The growing insurance market offers scope for better penetration

and accessibility through diversified channels. Insurers have an

opportunity to differentiate themselves through their distribution

channels. There is substantial value to be gained in each channel.

Innovative and customized products can be offered to customers

through multi channels. Incremental investments over a sustained

period of time across multiple channels provide the best solution. A

company’s ability to offer an integrated multi-channel experience

will be the key to customer satisfaction and profitable growth.

Conclusion

online. Customers can calculate premiums, bonus amounts, tax

and communicate with an insurance advisor. They can also check

the status of their policies and calculate the amount of loan they

can avail on their insurance policy. They can also download forms

for purchasing other policies and pay their premiums online.

Customers can also give details such as change of address right at

the website.

Channel Partners

Online portals can be developed for channel partners such as

brokers and agents. These portals will allow them to check their

commissions and payment status. It will also give them the

advantage to check claims position and track the status of the

case deposited.

Business

The insurance company can see benefits in various other spheres

as well. Some of them are:

• Gain economies of scale from a common set of data and

business rules.

• Reduce agent-based administrative tasks to maximize sales

activity

• Provide analytical support to manage the producer and customer

life cycle

• Track distribution partner activity and establish key performance

metrics

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Write to us at marketing@niit-tech.com www.niit-tech.com

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About NIIT Technologies

NIIT Technologies Ltd.Corporate Heights (Tapasya)Plot No. 5, EFGH, Sector 126Noida-Greater Noida ExpresswayNoida – 201301, U.P., IndiaPh: + 91 120 7119100Fax: + 91 120 7119150

NIIT Technologies is a leading IT solutions organization, servicing customers in North America,

Europe, Asia and Australia. It offers services in Application Development and Maintenance,

Enterprise Solutions including Managed Services and Business Process Outsourcing to

organisations in the Financial Services, Travel & Transportation, Manufacturing/Distribution, and

Government sectors. With employees over 7,000 professionals, NIIT Technologies follows global

standards of software development processes.

Over the years the Company has forged extremely rewarding relationships with global majors, a

testimony to mutual commitment and its ability to retain marquee clients, drawing repeat

business from them. NIIT Technologies has been able to scale its interactions with marquee

clients in the BFSI sector, the Travel Transport & Logistics and Manufacturing & Distribution, into

extremely meaningful, multi-year "collaborations.

NIIT Technologies follows global standards of development, which include ISO 9001:2000

Certification, assessment at Level 5 for SEI-CMMi version 1.2 and ISO 27001 information

security management certification. Its data center operations are assessed at the international

ISO 20000 IT management standards.

A leading IT solutions organization | 21 locations and 16 countries | 8000 professionals | Level 5 of SEI-CMMi, ver1.2 ISO 27001 certified | Level 5 of People CMM Framework