Digital Distribution Fuels Market Network for Insurers
Kathleen Garlasco | November 15, 2016
Perhaps the best-known market network is the interior design site Houzz. On its one-year anniversary, Houzz celebrated a significant milestone, as over 35 million monthly users tuned in to view a multitude of design ideas and options, as well as purchase products from retailers based on insights taken from the website.
Today, a similar market network is revolutionizing Property & Casualty insurance as a new option for carriers to sell and market products and for consumers to research and purchase coverage. This universal market network combines on-line channel engagement capabilities with a vast marketplace of products, allowing consumers to explore options and fulfill a wide variety of coverage needs to protect their investments and assets while carriers are positioned to meet more of the customer’s needs more of the time.
A One-Stop Shop
James Currier, a consultant to some of the most prevalent market networks such as HoneyBook, Houzz, and AngelList, says, “The time to adopt market networks is now. [Market networks] are hard products to get right, but the payoff is potentially massive.”
This is particularly relevant to the P&C insurance industry where today’s customer expects not only a seamless online experience, but also the ability to purchase insurance for all of their needs in one transaction. In fact, 79 percent of insurance customers reported that they want to consolidate their coverage with a single carrier, according to Mark Vallet in his blog on insurance.com.
Consider the customer with a multitude of insurance requirements. He or she may need homeowners, auto, pet, business liability, business owners’ policy (BOP), and more. The ability to offer this type of product-rich environment is a significant advantage of a universal market network, where insurance products from various carriers can be bundled to meet the exact needs and cost requirements of the customer. Carriers can sell to a larger pool of customers without taking on additional risk, yet provide a one-stop shopping experience.
Why a Universal Market Network?
In any industry, the top five companies have a customer retention rate between 93 to 95 percent. The average customer retention rate in the insurance industry is 10 percent below that mark, according to Lynn Thomas in a report for the Independent Insurance Agents of Dallas.
The main reason an insurance customer will switch providers is price. More than half of consumers would switch insurers to save $250 or less per year, according to Vallet, but increasing customer satisfaction can turn the tide. Research conducted by AT&T found that when customer satisfaction was at a “4,” 85 percent of customers stayed, and when it rose to a “5,” 92 percent remained with the company, according to Thomas.
A universal P&C market network gives carriers the opportunity to attain higher levels of customer satisfaction by fulfilling their complete insurance requirements. In addition, as insurers bundle their products with others available through the network, they retain 15 to 20 percent of the policy premium, making it a win-win situation for all parties. Customers receive a greater selection of personal and business products, allowing them to shop, bundle, and conduct business on their terms, with their provider of choice. Insurers realize expanded wallet share and customer retention. But these are not the only benefits a universal P&C market network offers.
Leveraging products that your organization didn’t manufacture can be a meaningful profit driver, as launching new products can be risky and expensive for insurers. Significant effort is required to conduct market research, determine risk, develop a potential product, and bring the product to market. A universal P&C market network reduces the risk for carriers while providing customers the products they need today and offers invaluable insight on which products may be worthy of consideration for future development.
Embracing Digital Distribution Tied to a Universal P&C Market Network
The first step for insurers who want to capitalize on a universal market network is to adopt a digital distribution platform that offers a rich set of P&C insurance products. Carriers that do can expect to see immediate benefits, including:
- 14 percent expansion in net premiums
- 24 percent increase in revenue over five years
- 12 percent jump in customer retention
- 8.5 percent boost in market share
It’s time for the insurance industry to reap the rewards of a universal P&C market network to capture greater customer wallet share, increase acquisition rates, and retain more existing clients.
Kathleen Garlasco is senior vice president of enterprise marketing for BOLT Solutions, Inc.
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