Distribution Fragmentation

Although there are lots of interesting things happening on the product front, I personally think innovations in distribution are far more interesting. One example is Life Insurance Direct Marketers -- distributors selling fully underwritten products (mainly term) through some combination of advertising, online quoting and call center agents. This small niche has been gathering steam and today accounts for a noticeable slice of term insurance market share.

Dating back to the pre-web days, pioneers like Quotesmith (now called Insure.com), SelectQuote, Matrix Direct and Accuquote began advertising in print and radio. The Web changed everything and these entrepreneurs quickly embraced the new technologies. New competitors joined the fray, including Reliaquote, Intelliquote and eFinancial. Online auto insurance marketers, like Insweb and Answer Financial, got in on the act.

Many marketers came and went (anyone remember InsureMarket?). Some timed the Internet bubble and went public in the late 90’s (Quotesmith, Insweb). Many have “merged,” formed alliances, joint ventures, etc. Some have received financial backing and or have been purchased outright by carriers.

The most successful model involves providing customers with limited choice from the best carriers, drive enough volume to a couple of carriers to get top tier compensation and focus like a mad man on operational efficiencies. Advertising expertise is also a critical factor and each of the leading marketers has their own “secret sauce.”

Another model involves carriers who operate their own call center sales center marketing to some type of affinity market or association. Degree of affinity and operational excellence are critical to their success.

Where this market will go is anyone’s guess but I think it has a bright future. One thing holding the industry back are the application/underwriting/case management processes inherent in fully underwritten products. Some carriers and marketers have developed simplified issue products and have had some success. However, as long as these products cost significantly more (and they do), they will only appeal to a limited (generally less healthy) segment. Teleunderwriting, electronic signatures and electronic policies and other forms will certainly help. Most major term carriers are working on these and eventually we will see progress.

Those interested in learning more should check out, LIDMA (Life Insurance Direct Marketing Association), the new association dedicated to this channel. Some of LIMRA’s research can be helpful as well.

And of course, post your comments and questions here. Many of the Direct Marketers mentioned here have Blogs so check them out too.

PS - My apologies to Don Jackson who would tell me that this form of distribution only represents a sliver of the the entire life insurance direct marketing universe. I'll weigh in on other areas another time.