Insurance Industry

Disrupting Insurance Distribution

More insurance distribution channels are opening up, which could disrupt business for both underwriters and brokers.
By: | December 10, 2014 • 3 min read

As more insurance distribution channels are being created, the potential disruption of the ordinary course of business for underwriters and brokers increases.

One of those channels, although details are hazy, involves Overstock.com Inc., a Utah-based e-commerce site that survived the dot-com bust by selling dying Internet companies’ inventories.

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Since April 2014, Overstock.com has sold insurance, including auto, property, liability and workers’ comp for businesses, through an exchange where consumers receive live quotes, pick which the coverage they like, and then have a policy bound for them.

“Overstock’s mission is to offer high-quality products at low prices in order to save people money, and the launch of our insurance tab fits this mission beautifully,” Dave Nielsen, Overstock.com’s senior vice president, said in an email.

Or as the slogan on the Overstock insurance site says, “We Do the Work, You Do the Saving.”

But who is really doing the work … a.k.a., the underwriting?

Apparently, the underwriters’ names had been confidential, but when we asked Nielsen, he shared some of them: 21st Century, Progressive, Safeco and American Strategic (ASI).

Overstock.com is “seeing good traffic” on the site, Nielsen said, and he’s expecting to “see [sales] continually increasing month over month” as the company adds more products.

The logistics of claims and other policy-servicing depends on the carrier, Nielsen added. Overstock services some accounts in-house; others it transfers directly to carriers. But no matter what, policyholders contact Overstock first.

Denise Garth, partner and chief digital officer, Strategy Meets Action

Denise Garth, partner and chief digital officer, Strategy Meets Action

Most of the insureds probably care little about the identify of the underwriters, said Denise Garth, partner and chief digital officer at consultancy Strategy Meets Action (SMA).

As far as the insurance buyer goes, they’re a customer of Overstock.com.

“[Overstock is] definitely the channel where it’s been sold, and it’s the channel where the customer is going to go to for service,” Garth said.

And it’s just one channel of many it seems that are on the verge of disrupting well-tread insurance distribution networks.

In particular, according to a report from London-based market risk and consulting firm Finaccord, as many as 281 retail brands around the world are selling insurance, up from 232 retailers in 2010.

Global names like Walmart, Tesco, Marks & Spencer, and Carrefour are “leveraging” their brands and huge customer bases to sell mainstream insurance products, said Finaccord Director Alan Leach.

“They can supplement the thin profit margin that they can earn from their core business by selling financial services,” Leach said.

They wield data they already collect on their customers to empower cross-selling. If they know which of their customers buy pet food, they know which of their customers to maWalmart300x300rket pet insurance to.

At this point, however, this trend of retailers selling insurance is “not so much” in the United States, Leach said, and in many cases, they’re selling personal lines products to consumers. (Walmart does offer an auto-insurance exchange in 19 U.S. states.)

Impact on Industry

But retailers are just one group the traditional insurance world must confront.

Some observers, like Garth, argue that this trend doesn’t just put the insurance distribution process at stake, but affects the industry’s business model as a whole.

Some of the savviest, brawniest, data-driven companies in the world are coming. Alibaba, of the recent record-breaking IPO, launched an online insurance platform in 2013 called Leyebao, aimed at Alibaba’s online store owners and their employees. Google forayed into the insurance space in the U.K. in 2012, with a car insurance comparison tool.

They’re coming because consumers apparently want them to.

“Competition in the insurance industry could quickly intensify as consumers become open to buying insurance not only from traditional competitors such as banks but also from Internet giants.” — Michael Lyman, global managing director, insurance industry practice, Accenture

In its report on this new competitive landscape, SMA cited an Accenture study that found that two-thirds of respondents would consider buying insurance from organizations other than insurers. About 23 percent said it could be Google or Amazon; 14 percent said retailers.

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“Competition in the insurance industry could quickly intensify as consumers become open to buying insurance not only from traditional competitors such as banks but also from Internet giants,” said Michael Lyman, global managing director for management consulting within Accenture’s insurance industry practice, when he announced the Feb. 2014 research.

The disruption will not be as black and white as an Alibaba launching an insurance company or Walmart taking jobs away from Main Street agents. The invaders seem to care less about the means than the end result.

“They want to own a customer for a lifetime,” Garth said.

Their success at that could leave insurers as mere “manufacturers” of insurance products, and agents and brokers as mere customer service representatives, for the companies that will own consumer loyalty and lifetime customer value.

Matthew Brodsky is editor of Wharton Magazine. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]