Digitization and profitable growth are important to insurance
executives. While concepts exist to merge these goals in a direct sales
environment, their application to the classical face-to-face distribution
channel is more of a challenge. This is, in part, because there is no clear
definition or corresponding applications of digitization and because it also
reflects the demarcation of profitability, which is usually owned by the
insurer, and growth, which is the remit of the sales force. Applied properly,
digitization can connect profitability and growth.
Digitization is often associated with e-commerce sales in many
markets; however, for insurance sales, the Internet is only one of several
distribution channels. Of course, Internet sales are increasing. However, in
many markets, the traditional face-to-face sales channels still own substantial
market share, particularly when individual advice is needed or special groups
of customers are targeted.
As a result, a way needs to be found to apply digitization in
the best possible manner to support traditional distribution channels. We
examine possibilities for European non-life insurance companies, but many of
these ideas can be adapted by other insurance markets. What our review makes
clear is that digitization must deliver research information in a highly
flexible manner at the PoS.
THE MANTRA OF PROFITABLE GROWTH
All businesses, including insurance, ultimately strive for
profitable growth, but only a minority offer clear guidance on how they will
achieve it. The reason is simple: Growth and profitability can be contradictory
and are often owned by different stakeholders. Growth in profitable areas is
difficult because these segments must be identified and targeted by sales
forces in an increasingly competitive environment. Sales forces might pay more
attention to the sale than to profitability. Even if profitability is tied to a
sales force's remuneration, rarely is relevant information on the expected
profitability of an individual customer available at the PoS.
The PoS, however, is a critical point for the profitability of a
non-life insurance contract. A second is the annual contract renewal. While
measures around contract renewal are often determined independently of the
sales force, the support of your distribution is particularly relevant for the
sale of the contract.
DISCOUNTS PROPEL GROWTH
In the P&C business, agents and brokers regularly require
the opportunity to reduce tariff premiums using discounts in order to better
manage clients and reach their growth targets.
This practice gives rise to a central question: Do individual
discounts support the overall profitability targets of the insurance company?
Unfortunately, this is not always the case: An example taken from an Italian
motor portfolio (Figure
1) shows that higher discounts have been granted to clients with a
worse profitability expectation.