New Developments in Technology and Functionality
Abstract
Out of necessity, insurers are becoming much more sophisticated in how they think about distribution management. While the primary channel for both life and property casualty is independent agents, most insurers are experimenting with other channels (or have made them a fundamental part of their distribution strategy). Digital agents, affinity marketing, wholesalers, and MGAs have all become mainstream channels, while embedded insurance and direct distribution are on the rise. Each of these channels is different enough that managing them requires slightly different processes, ways of looking at segmentation, and forms of compensation.
Meanwhile, the dominant channel—the independent agency—is undergoing massive change. The aging workforce is driving a massive number of mergers and acquisitions as baby boomer owners look to exit. The largest agents are amassing enormous power, with some becoming equivalent in size to a Tier 1 or 2 insurer. They are using their mammoth stores of data to choose where to place business in a way that optimizes their revenue and reduces their own operating expenses.
This increase in insurance agency mergers and acquisitions, the proliferation of channels, and the growing demand for data are driving a need for new sophistication in the tools necessary to manage agents and are driving an increase in interest in distribution management systems. Standard processes and automation were designed for an environment that has long since passed, one that was much more stable and predictable. Combining a payments system and party management functionality is not enough to optimize for the current environment or to prepare for a more digital one in the future.
Based on our research of distribution management systems worldwide, Celent has created a primer to help decision-makers identify what is important to them in a new distribution management system selection. These solutions typically include one or more of three components: compliance, compensation, and performance management.
This report provides valuable insights to help insurers make informed decisions as they look at new tools to manage their changing distribution channels.
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