Product distribution weakness is one of industry’s greatest challengespar La rédaction | November 23 2012 07:56PM
Bill Black believes that one of the biggest challenges companies face today, is a lack of diverse strength in distribution – this means companies will likely be looking at alternatives to the traditional agent or advisor-driven sales force in the future, such as direct distribution.
As former CEO of the Maritime Life Assurance Company, and today as a member of the board of directors at Standard Life, the Bank of Canada, and other organizations as well, Mr. Black has a unique view of the industry and the pressures influencing insurance company decisions. He suggests that to strengthen distribution companies could make use of so-called captive sales forces, but he also says direct personal sales is not an area that should be ruled out so quickly.
“Any sophisticated use of the products absolutely needs (to be sold by) a personal advisor, but there is, I think, a simple part of the market that can be served this way.”
This direct distribution effort is already being made by some companies who try to sell burial or non-medical life insurance, directly to the public, by way of television advertising and other marketing efforts. “Whether it represents good value or not, I don’t know, but people are spending enough money on it – it must be working for them,” he says. “There’s a much broader opportunity than that.”
Establishing a brand presence in this way is no small feat either. In addition to breaking through other competing media messages, he says the effort is many times more difficult for insurance companies as well. “It’s inherently a low-interest product.”
Mr. Black says banks will likely play a larger role than they do today. “I still believe there will be a prominent role for good, independent advisors who are dealing with sophisticated client needs, but I don’t think that will be the whole market.”
Banks, he points out, already have strong brands and experience leveraging that to deliver and distribute simple-needs products.
Insurance companies in this new order, he says will need to be focused and cost-conscious going forward. “Some companies tend to be very high cost; they’ll have to improve on that, and they’ll have to be patient,” he says.
Turning to other ways he believes the industry can get better in the future, Mr. Black points to the problem of product complexity. Even if some complex products are disappearing from the market – a good thing, he says – “this sort of takes away a problem, but it doesn’t create a strength.”
“I think the industry has tended to produce products that are overly complicated so that not only the consumers, but sometimes distributors – the advisors – have trouble understanding and explaining them properly,” he says. “It’s a business that has a strong tendency to commoditize. What you try to do is create product differentiation so you can get some margin. Sometimes that’s useful, and sometimes it really isn’t. It’s just complication that adds no value.”