Navigating the Constraints of Direct-to-Consumer Insurance


The direct-to-consumer insurance sales model has the potential to reshape the insurance industry in its entirety – from the type of products sold, to the way they’re bundled; from how those products are distributed, to the role that agents and brokers play in the sale. But to everything, there is a limit. Which brings us to our next question: What constraints stand to get in the way?

#1: Legal constraints

According to Slayton Search, the first answer is legal. D2C is a relatively new model in a highly regulated industry, and as such, it’s likely to run into some regulatory roadblocks “that make this transition more complex and intimidating.”

Every state imposes its own set of requirements and limitations on how insurers engage in marketing, underwriting, and rate-setting. Personal insurance products are generally subject to more restrictions than do business or commercial insurance products, but laws vary widely. Depending on their states of operation, an insurer’s ability to truly embrace D2C could be limited.

#2: Operational constraints

Perhaps more universal are the operational constraints that D2C insurtech firms and insurance carriers face. According to the Insurance Governance Leadership Network (IGLN) , insurtech firms can expect to face “significant challenges in scaling … and competing directly against insurers.”

As for the insurers themselves, their obstacles are also significant. For example, rapidly quoting, binding and issuing products that are housed in separate silos will require a central point of access – something that only a handful of insurers have today.

Small D2C insurance firms of all sizes will be challenged to meet every aspect of consumer need. Many may want to offer products from other carriers and suppliers to enrich their offerings and create product bundles. Taken separately, the insurer and the insurtech firm have significant strengths and weaknesses in the D2C landscape. Together, however, they have potential to fill one another’s gaps.

Define your strategy

As we all know, there are two ways to overcome any problem: either make a smart plan or become really lucky. When it comes to building your D2C attack, you’ll need a strategy that includes four things: a problem, a goal, a plan, and a way to measure results.

“If DTC is not a strategy that is deeply ingrained across the entire enterprise, customers will quickly see it for what it is: a smoke screen,” Slayton Search said. It’s not enough to introduce a fancy interface. If you’re struggling with “operational siloes and uncoordinated business functions,” your customers will feel the discontinuity, and ultimately you will not achieve your goals.

“For DTC in insurance to work effectively, it must be seamlessly communicated and implemented at every level, from executive leadership to frontline agents,” said Slayton. “Every customer touch point must be designed to delight, and every business function involved in the customer journey, from marketing and sales to underwriting, claims, and customer support, must be able to communicate coherently.”

That sort of strategy doesn’t happen with a snap of your fingers. It takes some deep thinking about your value proposition, your offerings, your marketing, your policy administration system, your payment processing platform, your customer communications and your metrics.

Tall order? Yes – but necessary

According to a study by the IBM Institute for Business Value, insurance industry leaders who’ve grown faster than the rest of the market by at least 5 percent over five years share four common efforts that they consistently prioritize:

  • They plan for the customer of the future
  • They integrate interactions across all channels, including digital ones
  • They offer broad insurance services
  • They have invested in flexible structures

“There’s no denying that this a time-intensive overhaul, but the return is exponential,” Slayton said – ushering in an improved customer experience, better acquisition, stronger retention, greater business efficiencies, and a sharper edge on your competition.

Stay tuned for our next D2C blog article. In the meantime, you can download our comprehensive Direct 2 Consumer Blueprint for Insurers.