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Point of sale fills important gap in insurance sector

05 September 2011 Centriq Insurance
Mark Stone

Mark Stone

Mark Stone, Business Head: Affinity, Centriq Insurance

Distribution costs have a huge impact on the price of insurance products to the consumer impacting on the viability on certain products. Hence, many insurers turned to more innovative ways (e.g. multi-product, multi-channel distribution models or alternative distribution strategies) to realise cost efficiencies in distribution and to access target markets in more remote areas. Benefits realised include:

  • Reduce operational costs and potentially price
  • Utilise resources better (e.g. reputable retail outlets act as insurance distribution outlets, enabling insurers to focus on product development, claims management and risk management)
  • Maximise the speed at which insurance products are rolled-out into the marketplace
  • Showcase their products in a professional environment, thus increase customer confidence
  • Develop and implement unique product strategies to meet specific distribution channel needs or goals
  • Simplify cross-selling and support product blending
  • Streamline the sales process (agents don’t have to go to customers – customers come to them)
  • Gain customer loyalty and increase their own, or the affinity partners’ brand presence (white- labelling)

In embarking on these distribution strategies it is critical to ensure relevant safeguards are in place to protect the consumer and the insurer given that the outsourced distribution partner does not typically engage in insurance as their core business.

To give effect to this, industry role players, specifically regulators, introduced various codes of conduct, regulations and legislation, providing guidance on how to:

· Identify the needs of specific target markets;

· Develop products that address those needs;

· Stress and field test products to ensure they meet the target market’s needs under a variety of scenarios;

· Take steps to control the risk of the product being sold outside of the target market;

· Disclose all necessary information to the customer in a clear, understandable and accurate way at the point of sale;

· Once the policy is in force, communicating to the customer in a timely, accurate and understandable way and, in particular, ensuring that customers are promptly informed about key changes to the policy and likely returns.

Although these safeguards do not guarantee complete customer satisfaction at point of sale and beyond, they have helped to build consumer confidence in the industry as a whole by introducing improved transparency; pro-actively identifying and addressing systematic faults; tightening product governance and compliance; and strengthening underlying processes, operations and controls – all key elements when managing public perception.

Case-in-point as illustration

With over 21 million people visiting their stores each week, Marks and Spencer (M & S) – a British retailer with more than 700 stores in the UK and over 300 stores spread across more than 40 countries - is a great example of how point of sale insurance products can add value to both the insurers’ and retailers’ overall product and service offering as well as the customer experience.

Although the company has achieved great heights since being established in 1884, M & S suffered financially in the late 90’s and early 00’s culminating in an attempted takeover in 2004. A recovery plan was put in place, with Financial Services (M &S Money) being an integral part of this plan.

M & S Money now offers numerous insurance products, underwritten by professional insurers (AXA, Royal Sun Alliance, etc) which, in conjunction with Credit and Foreign Exchange contribute substantially to M & S’ bottom line. Underwriters have access to M & S customer base, thus enabling focussed product design and delivery.

With that said the partnership between an affinity brand and underwriter can be a very profitable one, not only financially, but also to satisfy customer needs, building brand loyalty and filling a cost effective distribution gap in the underwriters’ strategy.

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