Distribution Management - New Tools for Strategic Growth

Growth and retention continue to be the top business goals affecting IT investments. Many insurers are focusing on improving their distribution practices as a key technique for driving growth. Designing, developing, maintaining and managing productive channel relationships can create a sustainable competitive advantage.

Almost every insurer we talk to is focusing on how to grow their book of business. Some are using underwriting strategies, some are focusing on improving customer service, and others are looking at acquisition. Virtually every insurer we talk to is also focusing on distribution management. They’re looking at expanding channels, adding distributors, moving into new territories and working to expand their existing channel in order to improve customer acquisition and retention.

These multiple channels are effective at targeting different aspects of the market, but add complexity when it comes to channel management. Additionally, the explosion of InsureTech startups carries with it the potential for channel disruption. However, a wide variety of issues creates difficulties for insurers when it comes to effectively managing the distribution channel.

As an insurer begins to focus on managing their distributors more strategically, many put resources towards managing their distributors more effectively in order to extract more revenue from them. Some insurers are focused on managing the compliance aspects of distribution management – assuring the distributors have the right licenses and that state appointments are made in a timely manner. Others are focusing on using compensation tools and techniques to more effectively stimulate production. Still others are placing their priority on servicing high priority distribution channels and improving service to distributors. They are utilizing increasingly complex segmentation schemes and tailored programs for preferred producers as a way to retain and grow business.

But in doing so, they often run into a common set of issues. Standard processes and automation were designed for an environment that has long since passed, one that was much more stable and predictable. In a typical insurance environment today, multiple departments perform separate tasks in the cycle making coordination of activities and integration of information difficult. This is especially problematic since producer management involves large numbers of distributors, different types of distributors, a substantial volume of transactions and data from multiple sources. As insurers expand the number and types of distributors they work with, hierarchies become more complex to manage. This is compounded by multiple jurisdictions, multiple policy admin systems, and limited reporting and analytic tools.

These conditions result in multiple issues including poor service, a lack of insight into producer performance, unreliable data, and high support costs. The inability to link information means that distributors are managed on transactions instead of strategically. Compliance issues continue to plague insurers who find it difficult to monitor licenses and process appointments in a timely manner.

Distribution management systems provide tools and technologies to help insurers with the administrative aspects of distribution management. They are most typically used by insurers with a mixed distribution channel, multiple policy admin systems, multiple jurisdictions, complex compensation programs, or some combination of these factors. These systems encompass a wide variety of administrative functions that are focused on operational issues such as registering and licensing producers, configuring compensation plans, administering payment and reconciliation, and tracking performance. They provide tools and technologies to help insurers with the administrative aspects of distribution management. They are most typically used by insurers with a mixed distribution channel, multiple policy admin systems, multiple jurisdictions, complex compensation programs, or some combination of these factors.

I’ve just published a new report Distribution Management System Vendors: North American Insurance 2017. It describes what these solutions do and profiles 16 distribution management solutions that are relevant for property casualty and/or life and annuities. There’s another report that covers all the global vendors as well. Check it out – or send me a note if you’d like to talk about the report. And keep your eyes on this space for an upcoming report – Reinventing Distribution - which will give tons of examples of cool stuff that insurers are doing to manage, enable, and shift their distribution channels.