A new report suggests the Australian insurance market is going to be dominated by direct sales, but with the right evolution brokers can still flourish. Here’s how you can embrace the demand for direct sales...
The Direct Life Insurance in Australia: Racing Onto the Radar report by Plan For Life and Oliver Wyman consulting found direct insurance has been growing at a significant rate as consumers become more confident with purchasing life insurance products through channels such as the web and smart-phone technology.
More than 40% of new life insurance business in Australia is expected to come from direct mean by 2021, reaching a sum of more than $2 billion.
“The reality is that life insurance remains largely sold rather than bought and successful players are using sophisticated marketing techniques to reach their clients,” said Brad Clarke, one of the report’s authors and Head of Insurance Strategy for Oliver Wyman.
“Digital adoption and technology advances as well as scaled and remote forms have assisted and will continue to present opportunities. We expect many players however to continue to struggle to differentiate between what sounds like a great idea and one that will result in a sustainable business.”
The report discusses three key elements:
With the direct business representing 25% of life insurance sales in 2010-2011, continued rapid growth is expected, driven by demand-side changes and supply-side expansion
Growth of new business models with cross-selling via outbound database marketing or through partnerships, and customer-pull models through different types of websites and through online brokers
Insurers need to find new areas of focus to gain a competitive edge such as channel integration, leveraging new media, segmentation of insurance propositions and reclaiming the customer relationship
The recent IBISWorld report, Insurance Brokerage in Australia, suggested that of the $10.8bn worth of revenue generated by Australia insurance brokers in the past year, some 42% of that is through life insurance sales.
With life insurance proving to be such a vital component to brokers, does this shift towards direct means serious damage to the broker channel? Not necessary so.
The report outlines four main drivers that will impact future growth:
Evolving customer behaviour and digital adoption moving purchases in all categories, including life insurance, from traditional channels, and passive technology to utilise social media, mobile internet and interactive tools
The acceptance and positioning of direct insurance as a complementary channel for advisors rather than as competition, assisted by FoFA and allowing insurance advice to be provided at different price points and service levels
Increasing participation by major diversified financial institutions, keen to see increased returns from their wealth subsidiaries, driven in part by an expectation that insurance revenue growth will be greater than banking revenue growth
The growth of aggregators and other online advice, with mergers and acquisitions within smaller players, expansion of larger players and new entrants from outside the traditional insurance arena, potentially mortgage brokers, retailers and even search engines
“The players that have built a strong market position will continue to do well. Behavioural changes from an evolving customer base will offer significant options but many lessons will be learnt from mistakes, made even by the most sophisticated firms as the Direct Life market starts to emerge around the world,” continued Brad Clarke.
Brokers will need to evolve with this customer base that is demanding more digital and online capabilities from their insurance purchases.