Jim Dwane

Chief Revenue Officer, bolt

Alternative distribution is one of the most exciting things in insurance today because it impacts so many parts of the insurance journey.

This creates real diversity in the way insurance products get distributed. That’s why, in recent years, companies that excel in building customer journeys have entered the insurance space. Companies like Petco, NerdWallet and Keller Williams have all become key distribution channels for insurance products precisely because those companies focus on adding value to their customers.

How do they do this? By connecting their customers with the right insurance products at the right moments along the intersection of commerce and risk.

For carriers, this emerging ecosystem of alternative distribution channels presents an opportunity. These non-insurance businesses have created novel, cost-effective ways to connect with customers. Carriers that embrace this set themselves up to win a customer’s business for life.

Adding Value for Customers

It’s helpful to think about what alternative distribution looks like as part of another company’s customer journey.

Imagine a real estate company, whose customers are primarily interested in buying and selling a home. A home purchase typically compels several other purchases, one of which is buying homeowners insurance. A real estate company that’s focused on its customer journeys will recognize this and looks for ways to add value. For example, this could mean making it easy for its customers to buy the homeowners insurance they are about to need.

This real estate company then becomes a destination for its customers. It owns a major portion of the home-buying experience. It’s through this positioning that the real estate company becomes a natural distribution channel for homeowners insurance.

The same thing applies to automobile dealerships, which can integrate an insurance purchase smoothly into the car-buying journey. Again, this allows the non-insurance company to position itself as a destination for its customers, not merely a seller of a product.

Insurance Customers Want This

Customers don’t want to go through a long buying process just to get homeowners insurance or car insurance. They just want the right product for their needs. That’s why alternative distribution can be so effective.

And customers are willing to share their personal data to make it easier for carriers and insurance resellers. Kenneth Saldanha and Todd Staehle at Accenture’s insurance practice note that customers “are increasingly demanding to be charged based on behavior and habits—and they’re willing to allow insurers to collect and use their data in exchange for that value.”

Customers are willing to demonstrate a clean bill of health to get discounts on health insurance. They’re willing to demonstrate a clean driving record to get discounts on auto insurance. This is a key aspect of what it means for a business to be a destination for its customers.

The Business Case for Carriers

For insurance carriers, this is all great news because such a customer-behavior-focused distribution model creates a clear path for business growth.

Alternative distribution does two very important things for insurance carriers:

• It decreases the cost of customer acquisition. Having multiple channels to introduce a needed insurance product along another customer journey creates new opportunities for insurance companies. This allows carriers to diversify and to reach a broader audience of potential consumers.
• It increases the lifetime value of each customer. You can materially increase the lifetime value of a given customer by meeting that person’s insurance needs at each point along their insurance journey. That is a very compelling value proposition for carriers.

This change is coming quickly to the insurance industry. Insurers who move first stand to benefit the most. As McKinsey’s Simon Kaesler, Matt Leo, Shannon Varney and Kaitlyn Young note, insurers should focus in the near term on ways to test alternative distribution channels, learn what works and iterate quickly. Spending too much time on strategy now would be a setback.

Images by: Tierra Mallorca, Obi Onyeador