D2C Impact: What Does it Mean for Insurance Distribution?


As we discussed in a previous D2C article, the direct-to-consumer model is poised to change everything about how insurance is bought and sold. With that in mind, let’s look at the distribution landscape.

What’s not working

The existing model is troubled by a “vast amount of friction.” According to one Insurance Governance Leadership Network (IGLN) participant, “distribution is simply taking too much money out of premiums.” The problems, another executive said, “are obvious. No one thinks it works well. It is hard for the customer and expensive for the insurer.”

Indeed, the only player that the current model really works for is the agent – and “that can’t last.”

What’s about to change

The need for direct sales at a lower cost is not new, but most participants of IGLN “agree that the mandate for change is greater today than in recent memory.”

So what’s coming down the pike?

  1. More partners, for one thing. In the new landscape, survival will have a lot to do with who your partners are – and there will be a lot of partners, specifically from fintech and insurtech. “New firms are flooding into this space,” IGLN reported.
  2. Tech platforms with large user bases, including Google, Apple, Facebook and Amazon, are good examples. “You could have insurance companies and other financial services providers competing along with other retailers on these platforms,” a participant told IGLN. “There will come a time when you can get an insurance policy or file a claim through these technologies. These platforms will be the next battleground for broad commoditized products.”
  3. There will also be more distribution channels – for example, point-of-sale insurance, an add-on that customers can opt into when purchasing some other product or service. “This distribution method is popular in several insurance lines currently, such as travel insurance,” IGLN said, and it’s likely to become more popular yet in the usage-based and sharing economies.

Why it’s a good thing

New partners bring new strengths to the table. Whereas a large insurer might struggle to develop “real and scalable solutions,” startups are adaptable and resource-efficient.

They’re also good at “sourcing existing technology and applying it to insurance problems,” IGLN said. An insurer can be their “own worst enemy,” as one fintech participant put it, but startups are motivated to find the technology and use it to deliver results.

Simply put, “Distribution will change. It must change. Business as usual is no longer working.” And that’s not the only thing that will change. This article is part 1 of an 8-part series. Next time, we’ll focus on the impact of D2C on intermediaries. And, if D2C is of interest to you, start thinking about your policy administration system. Is it set up to handle direct-to-consumer? Silvervine is. Request a demo today.