2018: Property-Casualty Insurance Distribution - Evolution, Not Revolution
Advances in digital communications, data availability and InsurTech investments have spawned the development of impactful new tools, improving the delivery of insurance, and putting more power and choice into the hands of insurance buyers. This study explores the unfolding changes to and pressures on traditional insurance distribution models, along with implications for intermediaries and insurers. The study concludes with a window into the future of property casualty insurance distribution to explore likely outcomes.
1. Introduction
2. Executive Summary
3. Insurance Distribution Overview/Landscape
- The Role of the Intermediary
- Insurance Distribution Spectrum
4. Pressures Forcing Change
- Pressures Influencing Distribution
5. Agent, Broker, and Insurer Responses to Pressures
- Distributor Responses
- Insurer Responses
- Disintermediation and New Entrants
6. Outlook for the Future of Insurance Distribution
- Providing a Better Customer Experience
- Introducing More Efficient Processes and Managing Costs
- Bringing in Outside Data
- Adding Value with Risk Advisory and Risk Management Services
- Pick a Partner
Appendix—Largest Insurance Brokers
Introduction
The channels and processes for property-casualty insurance distribution are undergoing unprecedented change. Advances in digital communications and data availability have spawned the development of new insurance distribution channels, putting more power and choice into the hands of insurance buyers. Prominent among the many forces driving change, the InsurTech movement is introducing impactful new tools, improving the delivery of insurance for distributors, insurers, and insurance buyers. This study explores today’s unfolding changes to traditional insurance distribution models and implications for intermediaries and insurers.
The study begins with an introduction to the current property-casualty insurance distribution landscape, with estimates of the size of the predominant channels—exclusive agents, independent agents, brokers, and direct sales. The pros and cons of the various channels are discussed. We also present how the channels have changed over the years, influenced by new customer preferences and adoption of technology advances by the various channels.
The study identifies external and market pressures driving change to the traditional models of insurance distribution, altering the current landscape. These include changing buyer behavior, technology advances, new products, consolidation, expense pressures, growth challenges, and new entrants.
We then present the broad spectrum of responses to the pressures affecting insurance distribution. These include responses by distributors, responses by insurers, as well as the emergence of InsurTech firms that work with existing agents or insurers or independently of them. We present profiles of selected companies representative of the various responses. Familiarity with the types of responses and firms pursuing them helps agents and insurers contemplating their own responses to the pressures affecting insurance distribution.
The study concludes with a window into the future of property-casualty insurance distribution to explore likely outcomes. At a high level, it finds that, contrary to some of the prevailing wisdom, innovations in insurance distribution are not poised to eliminate the role of agents and brokers. Incumbent players, whether agents, brokers, or insurers, are likely to collaborate with firms offering buyer-oriented solutions, efficiency, and innovation. We see today, and expect to see tomorrow, the fostering of partnerships exploiting complementary strengths of legacy players and new innovators.
In the course of preparing this study, Conning conducted in-depth interviews with numerous industry executives at the forefront of change in insurance distribution and with those affected by it. These included principals of small and medium-sized agencies, executives at regional and large brokers, marketing heads at insurers, agency M&A consultants, leaders of InsurTech firms, as well as venture capital and private equity investors active in the distribution and InsurTech sectors.