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Distribution Model Advantages By Carrier Type

November 6, 2020

The life/annuities/group benefits market consists of a myriad of products and companies that sell them. Striking the right balance is an important tool for companies to differentiate themselves from the competition. Each type of carrier must look at distribution differently, which is further complicated by the fact that many insurers have multiple distribution channels and may sell across various product types. Below are the most typical types of carriers:

  1. Pure Individual Life & Annuities—Many companies have historically utilized a pure agency model, which has become less appealing over time (a trend that is accelerating); nevertheless, customers have not yet lost trust with the brand many of these companies have built. Many of these carriers now have a direct channel for term life, simple annuities, and (less frequently) simple whole life products. These can include call centers and/or online quote/buy capabilities. Many insurers offer a “pseudo-direct” model in which customers can do much of the sales and servicing on their own, but an agent is still assigned and ready to assist.
  2. Pure Group—Offering group, voluntary benefits, and or worksite products, these carriers are focused mostly on pure broker/agency model in which both brokers are competing for the market share and finding ways to reach companies and other entities through digital marketing, and to improve the sales, onboarding, and servicing processes through digital initiatives. However, the direct (primarily online) model is starting to emerge for the small business part of this market.
  3. Mixture of Individual and Group—While these products are typically separate and siloed within a carrier, portability of products is starting to break down some walls. Digital initiatives are also typically siloed as well and follow the same patterns as the pure individual and group carriers.
  4. Life/Group Carrier as Subsidiary of a Larger P&C Insurer—These life insurers often behave similarly to the carrier types above, but frequently suffer from IT departments that are either second-class citizens behind their P&C peers (in which most initiatives happen for P&C first), or else may be underfunded or otherwise disadvantaged. Additional challenges may arise from having to align with P&C initiatives that don’t fit the L&A/group business, which can result in everything from a forced direct-to-consumer model to a sub-optimal portal strategy or agents that have little interest in selling life products.

While a more detailed discussion will be covered in a future blog series, there is a convergence in the market of retirement products with “cash value” across the financial services Sector: Life (e.g., UL, WL, Lifetime Benefit Trust annuities), Wealth Management (e.g., managed accounts, mutual funds and IRAs) and Group Retirement (e.g., 401(k) and 403(b)). This is leading to some blurry lines between financial planners, wealth managers, insurance agents, etc. that presents further distribution complexity for those selling insurance products (choosing to work for an IMO, broker, agency, or becoming an independent agent creates enough of a challenge).

For each of these, the diagram below looks at various key carrier distribution initiatives and the criticality of each by carrier type.

Figure 3:   Key Moments That Matter for Insurance Carriers and Agencies (Heat map)

Source: Capgemini Financial Services Analysis, 2020

Every carrier aims to achieve greater market share (at least for profitable products), whether through cross-selling, up-selling, or adding new clients. Whether an insurer is a pure life and annuities carrier, a pure group player, or a mixture of both helps determine the growth available and helps define which distribution channels are appropriate. Examples of this might include whether to pursue small business channels via a direct model for group benefits, to combine selling of commercial P&C and group benefits products, to align A&H and life products, or selling individual life and A&H products through affiliate channels.

The arrival of the next-generation customer has already brought the need to sell into new markets. Depending on the insurer’s brand, relationship with distributors, and the ability to differentiate products and channels for different markets, this may require insurers to develop a new brand, and/or to promptly find new opportunities in which they can transform their product offering and technology to pivot to a digital-first approach. This has potential impacts for the agency force, for alignment across the sales channels, and may cause an insurer to reconsider which marketplaces they are—or want to be—competitive in. Even though the percentage of sales for customer to agent sales are decreasing (while brokers’ and direct channels’ shares are increasing), determining how a company will capitalize on other opportunities to leverage agents—such as pre-closing and post-closing with the customer—and how those opportunities can improve the brand experience will be critical.

This blog was co-authored with Lawrence Krasner. To continue this conversation, connect with Lawrence or me on social media. You can also write to