A multi channel strategy is better suited for the indian market. Using the right distribution channel to reach the customer 3. We compare the various distribution channels and consider how insurance companies may. Lic was having its branches in almost all parts of the country and it attracted people local people to become their agentstraditionally, tied agents had been the primary channel of insurance distribution in the indian market. Regional director of a life insurance company is intrigued with the conflicting situation of more. In todays scenario agents continue as the prime channel for insurance distribution in india, as is the case in most markets, supported by call centers to a small extent. The emergence of digital technology and platforms like smart phones, tablets, and cloudbased systems are going to significantly impact the distribution channel of the financial services industry. For most classes of general insurance, the claim size distribution is markedly skew with a long tail to the right. Trends in insurance channels 3 the way we see it over the last few decades, continued environmental, operational, and technological changes have led to the development of multiple distribution channels in the insurance industry. Distribution channel conflict in the life insurance industry of india.
Digital transformation for the insurance industry 4 transforming the insurance industry as the global economy has improved over the past five years, the insurance industry especially property and life annuity businesses has experienced steady growth as. Indian insurance industry is the fifteenth largest in the world in terms of premium volume. Thus, it is very difficult for a producer to distribute his products all over the country. Companies are competing fiercely to acquire customers through various distribution channels, some of whom play dubious role. Will the cloud beat the agent, or will they be joining forces. Indian insurance market is a combination of multiple markets. Rise in usage of saas solutions to enable the insurance distribution process across multiple channels 4. Steep factors have an impact on all sectors of insurance personal, commercial and individual life, annuities and retirement. Channels normally vary from twolevel channels without intermediaries to fivelevel channels with three intermediaries. Focused on this goal, carriers increasingly recognize the need to refresh their distribution strategies. In the insurance industry, expense allocations are critical due to two trendsfirst, tightening margins and increased competition heighten the need to scrutinize expenses. However, little research exists about the distribution channel structure in india, which is largely traditional and quite unique.
Distribution is a particularly important question for those looking to deliver insurance to lowincome people. With low margins, insurers need to find lowcost channels that can reach clients in large numbers. Life insurance companies in many asian markets have always depended on individual agents as their main sales channel. Technology and innovation in the insurance sector executive summary innovation through new technologies is a key driver of change in the financial sector and this has led to immeasurable efficiency gains, even though these changes can initially be accompanied by uncertainty and doubt. Increased use of social media as a distribution channel 3. Mainly there are 2 major distribution channels in insurance industry.
The earliest insurance companies appointed agents, and opened branch offices to deal with both brokers and members of the public, but later companies that were content to rely on brokers for their business refrained from establishing. Distribution channels in the insurance business sector are changing rapidly. Insurance distribution is changing and agents and brokersretailers and wholesalershave to define the value they offer and what type. Pdf distribution channel conflict in the life insurance industry of. Distribution channels in insurance client first services. Over the past decade, however, these channels have shifted in three key areas. This is expected to give distributors especially agents a logical career. Distribution is the process of making a product or service available for the consumer or business user who needs it. Paul, there has been and continues to be a heavy reliance. The agents are from various segments in society and collectively cover the entire spectrum. This can be done directly by the producer or service provider, or using indirect channels with distributors or intermediaries.
India, a bank can tie up with one general insurance and one life insurance company as mandated by irda bancassurance practice is yet to. Distribution challenges and workable solutions sciencedirect. This has been driven by banking sector penetration where products are tied. Distribution for the life insurance industry is on the cusp of substantial change, fol lowing nearly a century of limited innovation in the distributors role in the value chain. Effectiveness and efficiency of distribution channels in fmcg. The distribution channels through which the industrial goods travel from the place of the production to the final consumers is known as industrial distribution channels. Discuss different distribution channels in india for insurance products within the service sector management forums, part of the resolve your query get help and discuss projects category. What is alternative distribution channels in insurance.
Big insurers are moving to omnichannel distribution channels to leverage their reach and scale in the digital economy. Markets in transition for insurers that are primarily involved in commercial lines e. Examine the role that distribution plays in services determine challenges faced by peopleprocessing, possessionprocessing, and information based services implications of delivery through physical and electronic channels understand the role of intermediaries determine the. We compare the various distribution channels and consider how insurance companies may use direct or indirect channels, or a combination of the two, to distribute their products. Life insurance was once sold primarily by career life agents, captive agents that represent a single insurance company, and by independent agents, who represent several insurers. If an insurer were to experience a large number of claims with respect to a particular block of business, its total payout i. Different distribution channels in india for insurance.
In the distribution of industrial goods, there are fewer middlemen and shorter channel of distribution, which should be in your mind. An effective distribution channel can be a source of strategic advantage for companies. The financial action task force fatf is an independent intergovernmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and. The wine and adult beverage industry is a perfect example of this long distribution. Therefore, he takes the help of some intermediaries to distribute his goods. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Uk insurance industrys sales and distribution channels, looked at the root cause of emerging problems in insurance distribution cost. An insurance cover is an intangible product evidenced by a written contract known as the policy. An intermediary in the channel is called an agentmiddleman. Different distribution channels in india for insurance products. Advances in software and hardware are transforming big data into actionable insights as the insurance industry reaps productivity gains from the most recent wave of automation, new technologies are significantly enhancing operational. This flow may involve the physical movement of the product or simply the transfer of title to it. Now, life insurance is also sold directly to the public by mail, telephone and through the internet. The other three elements of the marketing mix are product, pricing, and promotion.
Why did health generate the greatest overall increase in premiums. In order to select the right channel for distributing his product, a smallscale manufacturer should keep in mind the following considerations. This year, we have focused on the industry agenda with a specific nuance of the impact of all digital related trends on. The goods are produced at one place but the customers are scattered over a wide geographical area. Bancassurance new options for the development of serbian financial sector 19 b insurance products marketed through bancassurance through bancassurance, 3 to 5 times more insurance policies can be sold as compared to the number of policies sold through standard sales procedure 8, pp. Distribution channel is a means used to transfer merchandise from the manufacturer to the end user through retailer and other necessary intermediaries. Distribution trends in the asian insurance market celent. Pdf distribution channel conflict in the life insurance.
The first channel is the longest because it includes all four. Challenges faced by these insurance companies designing of products suiting the market. A multichannel strategy is better suited for the indian market. The 2016 federal insurance office fio annual report on the insurance industry report is submitted pursuant to section 502a of the doddfrank wall street reform and consumer protection act doddfrank act, which requires the fio director to report annually to the. Pdf on sep 1, 2002, randy e dumm and others published insurance distribution channels.
Future ready multichannel distribution in life insurance. Statistics in insurance encyclopedia of mathematics. Reinventing life insurance agency distribution globally. Insurance distribution system by deepa jagmohan suman swathi 2. The first part of this round table article provides an overview of distribution channels, particularly their constituents and. Insurers no longer rely solely on traditional channels such as agents and brokers, but have developed new alternate channels to drive growth at. Distribution or place is one of the four elements of the marketing mix. Turning change into opportunity, january 2012 we have explored the five steep drivers to identify 32 factors that we believe will have an impact on the insurance industry see figure 2. Markets in transition posey and yavas demonstrate that an equilibrium exists in which the independent agency and direct writer marketing systems can coexist. Regulatory changes in the insurance sector have also played a dominant role in shaping the industry, from both a growth and profitability perspective. Managing expense allocation in the insurance sector. And after the mixed designed channels, the next step is determine a proper distribution channel, evaluation, selection and contract signing with the best channel partners. The insurance industry in india is dominated by the individua. Distributing services through physical and electronic channels 2 nd p.
Multichannel distribution in life insurance niit technologies. Not surprising, since in india the traditional and modern have always survived together. Also known as a distribution channel, a distribution chain, a distribution pipeline, a supply chain, a marketing channel, a market channel, and a trade channel. It was introduced in india when insurance industry was opened up for private players. Distribution channels definition types of distribution. This isnt surprising considering technology changes even more rapidly, and consumers change along with it. In pursuit of profitable and sustainable growth, we had shared a 14point action agenda for the indian insurers to drive sustainable and profitable growth. Association of independent insurers, the national association of mutual insurance companies. The study endeavors to analyze the level of awareness among life insurance customers regarding services provided by distribution channels of life insurance industry in india. The paper analyzes the performance of single and multichannel distribution firms in the german life insurance industry in order to explain the development and the coexistence of the distribution. Distribution evolution in the insurance industry an integrationasaservice approach to profitability in the current economic climate, growth is a top priority for north american life, health and annuity insurers. Six new insurance distribution models are emerging as. However, the market share of this channel is decreasing, while that of. Sector leader insurance north america while increasing in emerging asia and latin america.
The distribution channels for the insurance market in asian countries are diversifying. The agency channel in particular which is of critical importance to the industry glo. Bancassurance has observed continued doubledigit growth, and new companies are emerging. The aim of a distribution channel is to allow customers to access and purchase products in the most efficient way for the business. Rise in customers use of the internet to buy insurance products 2. One of the pillars of the traditional distribution model of the insurance sector, traditional agency, has started showing signs of cracking due to technological advancements. Turning change into opportunity, january 2012 5 technological. Overview of the australian life insurance and wealth. Six new insurance distribution models are emerging as carriers seek to harness the huge potential of digital technology. While selecting a distribution channel, the entrepreneur should compare the costs, sales volume and profits expected from alternative channels of distribution.
The emergence of a more diversified and multichannel distribution network in todays dynamic business environment has revolutionized the insurance sector, providing customers increased access to better services. The internet remains an unattractive channel for consumers to buy life insurance, because consumers often do not. Insurers no longer rely solely on traditional channels such as. Nimble insurers target digitalonly customers with a single direct distribution channel. Insurers market various insurance covers either directly or through various distribution channelsindividual agents, corporate agents including bancassurance and brokers.