Two years ago, Allstate bought online auto insurance carrier and internet bubble survivor Esurance in order to better compete with direct auto carriers Geico and Progressive. Over the past six years, Allstate has steadily lost market share while Geico and Progressive have gained.
Now, Crain’s Chicago Business reports that Allstate will double-down on the direct insurance business. It will sell its homeowners policies together with Esurance auto policies in order to attract more upscale households with multiple cars and a desire for a bundled offering. (Neither Geico nor Progressive underwrite homeowners policies).
Predictably, Allstate’s sizeable agent force – which still generates over 90% of the carrier’s property and casualty premiums – has raised concerns about cannibalizing their sales (and hurting their commissions).
A few years back, John Hancock decided to sell life insurance products directly to consumers. I was recruited to, among other things, open up the internet as a distribution channel. The effort was very successful and we became the leading distributor of life insurance online in the U.S., selling more than 12,000 term life policies in my last year directly to consumers with no agent involved. These were fully underwritten policies with average premiums well north of $500. We also used direct mail and DR TV and explored several affinity deals, but the majority of our direct sales originated online.
What did we learn?
When we started, all of Hancock’s sales went through agents or other intermediaries. Agents were understandably concerned about channel conflict. But all of our direct sales were to new clients. There was no cannibalization. And agents did not report losing prospects to our direct efforts. (In fact, the opposite was true. Our online advertising drove some prospects to call agents and become clients through that channel.)
How could this be? Psychographically, direct clients are very different from the agent-sold clients. The person who will sit down for 30 minutes at a computer at 11:00 at night to get an accurate term life quote and fill out an online application is not the same person who will invite an agent over for a sales presentation across the dining room table. They are very different people and we saw no overlap.
This means all of our direct-sold clients were net new clients to John Hancock. The type of person who wants to buy term life insurance direct and online is not going to go through your agent channel just because you don’t sell direct. This person will simply go to a company that supports his or her preferred method of purchase. So, without a direct channel, you lose that business.
How to succeed in direct sales
Make sure you are committed. If your CEO isn’t going to stand behind your efforts publicly, and commit significant resources for several years, then don’t do it. Half measures are unlikely to succeed.
Communicate constantly. Don’t let your direct sales initiatives surprise anyone in the home office or in the field. Let everyone know your plans early and often.
Leverage your brand. Your brand is a major asset in the direct channel. Don’t be tempted to create a different brand for your direct efforts. This will only increase your marketing costs.
Don’t mix your channels. Don’t agree to pay commissions to your agents on direct sales they have nothing to do with just to get buy-in for the effort. This only burdens the direct channel with unnecessary expenses. Also, don’t turn over new direct clients to agents for cross-selling. If these clients wanted to work with an agent, they’d have done so. Remember, these new clients are different. Do develop additional products to offer them through their chosen channel.
Manufacture for the channel. At Hancock, we didn’t succeed until we created and priced a fully underwritten term life policy specifically for direct distribution. The direct consumer is going to compare prices. You don’t need to have the lowest price – at Hancock, we often didn’t – but you do need to be competitive. You know that old canard about insurance products being sold not bought? It’s only true of unattractive products.
Improve your operations. With direct sales, there is no agent to shepherd an application through underwriting or fix a glitch in customer service. All of your operational shortcomings will be exposed, and you’ll lose a lot of sales if you don’t acknowledge and address them in advance. Your agents will love you making these improvements, too.
Focus, focus, focus on user experience. To succeed, you need to make it as easy as possible to purchase a policy online. Understand – really understand – how your prospects are using your site or app, and smooth the path to completion. Simplify everything. Each online impediment you remove means more prospects emerging from your sales funnel as policy owners.
Open a call center. Just because your prospects want to buy direct doesn’t mean they won’t have a question or two. They will. And, your conversion rates will be significantly higher among people who talk to – or chat on your web site – with a well-trained call center representative.
Here’s your link to the Crain’s Chicago Business article on Allstate’s plans: http://j.mp/16x9tn1
What a great analysis of channel change. With so many technological and generational shifts happening all at once, channels are going to attract very different types of customer, especially if they are adding newer technology to old, like digital direct purchase vs. personal sales.