According to the Global Insurance Industry Survey, conducted by Timetric in May 2016, direct-to-consumer (D2C) was a channel cited as having significant growth prospects over the next 12 months.
The insurance industry is in a phase of digital transformation; from underwriting to claims management, technological progress and greater connectivity has encouraged insurers to explore and establish the direct-to-consumer (D2C) channel.
Targeting small businesses through D2C
D2C offers opportunities for insurers to reduce operating expenses and increase revenues by targeting small commercial businesses. Those providing commercial lines should devise a D2C strategy, as many enterprises use the internet as a resource to find cover.
Although the insurance needs of small commercial businesses are far less complex than medium- and large-sized businesses, operators are very sensitive to price. It is easier to offer a competitive pricing structure if insurers use the D2C channel to reduce commissions and fees.
Zurich Insurance, QBE Insurance (Europe) and Axa UK have online websites, enabling them to serve small business clients – a market generally considered unprofitable by traditional channels.
D2C could lower barriers to entry
A handful of insurers conduct their operations purely through digital channels. These insurers could change the industry’s structure if they manage to drive down costs and experience fast sales growth. Next-generation companies are changing customer perceptions of products and services. Trov and Lemonade, for example, provide mobile services to customers.
Adopting traditional distribution channels can prove ineffective for new entrants, particularly in mature markets. The scale and cost of distribution play an important role for new insurers. It takes considerable time and investment to establish traditional channels, whereas selling online enables entrants to generate revenues immediately.
Changing customer behaviour
The emergence of the internet has increased the availability and transparency of information for consumers, causing a shift of power from insurers to consumers. Customers are placing importance on the ease of service provided, and expect delivery to be rapid.
Digital trends developed by online retailers such as eBay and Amazon make consumers demand the same level of digital convenience from insurance.
Providing good customer service will become even more essential to insurers in attempting to retain and attract customers. Customers have become more educated and demanding, making it difficult for insurers to satisfy demand using their current business models.