The shift from advised to direct insurance

There has been a marked increase in the percentage of life insurance customers in Australia and the US purchasing products direct, bypassing advisors.

The 2017 Survey by Accenture, The Voice of the Customer: Identifying Disruptive Opportunities in Insurance Distribution Identified 3 distinct types of insurance customers. There are the ‘Nomads’, who are comfortable with the idea of researching and buying through digital channels only. The ‘Hunters’ are motivated almost solely by price and the ‘Quality Seekers’ are looking to form a long term, trust based relationship with a provider. The responses prove that the ‘Nomad’ group is growing.

74% of consumers surveyed were willing to receive computer generated advice on which insurance to purchase, 39% of those believe that online advice will be more convenient and 26% believe it would be more impartial.

Although consumers are getting more confident in researching their options themselves, agents are still playing a role later on in the process, with most, but not all, tech savvy customers still purchasing their insurance from an agent in person.

And yet, these numbers are nothing compared to the percentage of consumers who stated they would willingly buy online in the future. According to a recent study by Noble Oak “Nearly seven out of 10 Australians say they would be confident in purchasing life and income protection cover online without a financial adviser, despite the policies' complexities.”

So why is this a trend?

Customers are demanding more agency. Gone are the days when people fully trusted “professionals” to offer the best advice for their unique situation. The internet age has produced savvy consumers who like to research before they buy and purchase on their own terms.

This trend is reflected across many other sectors, not just insurance. In fact, this particular change in consumer behavior is relatively late affecting our industry. Banking, hospitality and retail have all felt the effects of changing appetites and they’re not the only ones. We’ve all heard the success stories of Uber and AirBnB and the negative effect they’ve had on the traditional players in those spaces. Consumers now expect their consumables to be “on demand,” and they expect to be able to make an informed choice.

Trust in buying online is also growing. As people get used to the idea of buying plane tickets, doing their banking and applying for official government documents online, the question begs: why not insurance? This sentiment, in its extreme, cuts out the role of the advisor completely.

There are some companies that are viewing this shift as the opportunity it is. Haven Life, for example, after launching in 2015 is already well known in the industry as forerunners when it comes to customer centricity. In the words of founder Yaron Ben-Zvi “We are the first place where you can buy a fully underwritten policy completely online. Customers can go to our Web site and in 20 minutes see how much they need, apply for a policy online, get a decision and start coverage right away.”

But as the Accenture study shows, both agents and direct sales still have their place. Both the “Hunters” and “Quality Seekers” view relationships with real life people as important. The key to winning these customers is a focus on trust, trust that you will either deliver excellent service, or that you’ll hunt out the best possible price for any customer.

At Shifting Gears we argue that customer satisfaction should always be a central goal, if not the main driving force behind business decisions. Especially those to do with product and distribution. For some customers this means a focus on usable direct distribution channels that allow them to maintain control over the buying process. As the millennial generation comes into greater wealth, this piece of the pie is going to grow. As will trust in technology.

Insurers need to decide whether to include this growing segment into their strategy. If not though, it doesn’t mean things should stay the same. Advisors need to work at staying relevant, and insurers can make that possible.