As the insurance industry evolves, so do the complexities of distribution. When distribution channels don’t perform, it can be hard to just diagnose the problem. Have we stopped doing the right things? Are our competitors getting better? Do we have the right product and is our pricing still right? It’s tempting to chalk it up to difficult economic conditions and a saturated market – although these things may still be true!

A distribution channel that has never quite got off the ground is even more challenging. With confidence shaken, it’s easy to wonder whether success and scale will ever be possible.

Over the last couple of years, I haven’t engaged with a life insurer that hasn’t experienced some of this. You might be surprised by how ubiquitous this is:

• Yesteryear’s giants of funeral products struggling against the compelling advantage of bank branch, app and call centre distribution. This shakeout has probably benefitted customers with more attractive pricing at the cost of margin for providers.
• Organisations with strong brand and huge existing customer base struggling to generate meaningful volumes of commodity products, becoming reliant on expensive aggregators to achieve some amount of scale.
• Insurers seeing their market attacked by banking competitors investing significant sums into their banking operations – looking for a share of banking revenues and profit, but very much also looking to defend their insurance customers from extremely competitive banks. Some of the success of banks relates to their better digitalisation of distribution systems and related processes. Digitalisation is necessary but not sufficient – as evidenced by the banks slow progress in distributing complex underwritten products.
• Established insurers with success in non-underwritten products, and others with success in complex fully underwritten products, both struggling for scale, persistency and profitability in simplified issue / lightly underwritten products. Maybe it’s only a matter of time before someone cracks this, but for now I’m pretty wary of impressive sales volume projections.
• Insurers with impeccable track records of successful distribution feeling unfamiliar pressure on margins and volumes. (Increasing prices to improve margins can be self-defeating if volumes drop and fixed expenses burn margins further.)
• Life insurers urgently looking for new markets to expand to, including non-life, in order to keep growth going as their core market stagnates. (There are opportunities, but it’s not a simple transition. A key message is that what works for one market segment quite likely won’t work for another.)

I’ll be posting more on this theme in the coming weeks. If you have questions, post below and I’ll try to work them into future posts.

If you are a master of the dark arts of distribution, what do you see as the common or recent failings? What is the key to focus on? Is there just one?