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Financial Advisers
Tuesday, April 1, 2008
Channel choice

Insurance may be here to stay, but present distribution methods are set to transform radically, according to Michael Blain, CEO of Centriq.

Transformation will recognise that consumers have become more knowledgeable while disclosure concerning insurance products and services will continue to improve.
However, it would be premature to write the obituary of the independent financial advisor or broker. This is because each market segment will experience changes to its distribution model in different ways,” suggests Mr Blain.
He notes that in the future anyone will be able to purchase insurance via their preferred channel, of which there will be many. From agents and brokers to retail outlets such as supermarkets and banks, as well as via the internet or cell phone, the channels of insurance distribution will continue to increase and evolve. But, as the range of channels for accessing insurance increases, so will the convenience of these channels improve. “Motor dealers, supermarkets, clothing and furniture retailers, cell phone providers, clubs and unions are all testimony to the trend of increasing convenience when purchasing standardised insurance products. One can expect to see much more of this in the years to come.”
Small and medium businesses are being targeted by direct insurers with some success. However, the complexity of risks faced by most businesses may entrench the role of the broker, especially as the size or complexity of the business undertaking increases.
For large corporate and parastatal enterprises, the role of the broker and risk consultant is largely guaranteed. This is due to the corporate governance standards applicable to these entities as well as the sophistication and uniqueness of their insurance needs.
In future, many insurers will struggle with white labelling their products to be sold under the brand of the distribution partner. Compliance and regulation become far more complex in a distributed sales model and will elevate the strategic importance of these matters to insurers.
It is difficult to anticipate whether consumers will embrace the changes in distribution channels. Failure to meet consumer expectations will now no longer impact on the insurer only, but on the retail distribution partner too. This will test the foundations of the relationships between insurers and their business partners in resolving consumer complaints. At the same time, consumers may appreciate the convenience, simplicity and affordability of products sold via non-traditional channels.

Copyright © Insurance Times and Investments® Vol:21.3 1st April, 2008
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