Insurance carriers today need to leverage all possible insurance distribution models to expand access points for new customers and retain relevance in the continuously evolving insurance ecosystem. In addition to retaining the value of traditional sales channels and relationships made through brokers and agents, many are also leveraging digital channels to connect directly to customers and integrating with partners — like insurtech startups and partners in adjacent industries — to enhance digital experiences.
Four key distribution models helping insurers drive growth are: embedded insurance, API marketplaces, insurance aggregators, and agency channels. Insurers can capitalize on these insurance distribution models while optimizing existing channels by leveraging the power of application programming interfaces (APIs). APIs support distribution expansion by allowing insurers to:
- integrate with partners and third parties,
- improve customer experience, and
- enable expansion into new sales channels and market segments.
Leveraging New Insurance Distribution Models
What are the benefits of each distribution channel? What new options and trends are emerging from their capabilities? Let’s take a closer look at the value proposition for each one.
Embedded Insurance
Embedded insurance bundles an insurance offering together with the purchase of a product or a service in real time at the point of sale. At checkout, whether in a brick-and-mortar store or online, shoppers are offered insurance coverage for what they’ve put in their carts. This offering identifies a potential need for customers in a buying journey separate from traditional channels; it allows customers to include insurance as a seamless add-on from the seller to protect what they’re buying.
Embedded insurance is not only offered for big ticket items like flight reservations, furniture, appliances, and electronics; carriers have extended this option to everyday products, many of which are priced under $40. Growing partnerships between insurtech firms, carriers, and businesses have further enabled this expansion. For example, Airbnb partners with Zurich Insurance to offer host liability insurance as part of its AirCover for Hosts protection when people sign up as hosts on the Airbnb platform.
By partnering with third-party providers and integrating data with these businesses, insurers not only gain access to new customers with an additional digital touchpoint, but they are also able to launch highly specialized products offered when consumers need the coverage most.
API Marketplaces
API marketplaces provide agents with access to multiple carriers through a unified API for quoting and submission capabilities, making it possible for agents to gain access to all their insurance needs under one virtual roof.
Advanced digital integration enables the marketplace to get code from multiple carriers and relay responses in near-real time. Unlike other distribution models, API marketplaces do not have any user interface (UI) or web application for agents or customers to interact with each other directly. The marketplace simply brings together the APIs that the carriers expose to gain access to this distribution channel.
Herald is one example of such a marketplace; its platform can enable insurers to reduce the time needed to connect to the insurance ecosystem from months to mere minutes. Carriers participating in these types of marketplaces gain exposure to multiple distribution partners, allowing them to reach more agents and agencies than they could through traditional channels. For insurers with proper API capabilities, marketplaces offer accelerated speed to market and access to many distribution partners without a complicated onboarding process.
Insurance Aggregators
Insurance aggregators bring together multiple carriers to give customers and intermediaries access to varied options and choices for protection products — all in one place. Consumers have become accustomed to the convenience of one-stop comparison shopping delivered by the likes of Amazon. They are accustomed to seeing all of their options laid out in a single platform rather than hopping from site to site to check out each carrier individually.
Aggregators offer their own UI to customers, then pull in relevant information from carriers. By integrating with an API marketplace, insurance aggregators can take on multiple carriers with a single integration process instead of repeating a months-long onboarding process for each one. Insurers can utilize aggregators to reach customers who may not have considered contacting them directly while offering variety, decision-making information, and ease of choice.
For example, CoverWallet is an aggregator platform for commercial business carriers. Small business owners across a range of industries can use the CoverWallet platform to search for and compare commercial insurance products to find the right coverage for their business.
Agency Platforms
Agency platforms, like IVANS and Bold Penguin, incorporate features of both API marketplaces and aggregators. Agency platforms are used by agents to partner with multiple carriers to provide products and services to their customers. The carriers expose their APIs to share information on the platform, enabling agents who use it to offer online quotes and bind policies. Since a single application retrieves quotes from multiple carriers, the platform helps agents cut down on manual processes.
The integration also enables policy data to transfer back to the carriers’ core systems, reducing data entry time and errors introduced by copying. This improves the experience for agents and makes it much easier for them to sell the carriers’ products. As agents are an important sales channel for all insurance products, especially commercial products, it is critical for carriers to integrate with their agents’ platform of choice to improve agent experience and retain their business.
For example, NEXT Insurance partnered with Bold Penguin to offer its small business policies on the Bold Penguin Terminal platform, enabling agents to leverage NEXT’s digital underwriting tool through its integration with Bold Penguin’s technology solution to quote and bind policies for small business customers. Agency platforms underscore the continuing importance of the agent-customer relationship; they allow carriers and agents alike to improve operational efficiency and simplify the agent’s role as facilitators.
Building the Foundation for Integration Success
As digital ecosystems continue to expand, establishing an API platform and delivery capability is crucial for insurance carriers that seek to expand their distribution channels and offerings. While core systems can manage some APIs, they often lack the agile capability and decoupled architecture necessary for direct integration and maintenance to work with partners in other industries.
Building an API layer on top of the core system allows insurance carriers to safely expose relevant APIs to form those integrations. But pulling it off successfully takes time, effort, and expertise. Insurers seeking to drive growth from API integrations that have limited in-house experience executing these initiatives can benefit from partnering with a system integrator (SI) with both technical and domain expertise in insurance.
Learn more about modernizing your distribution strategy by viewing our on-demand webinar “Evolving Digital Distribution Strategies for Insurance.”