For years now, Germany's insurance companies – faced with an increasingly mature market, tighter regulation and changes in customer behavior – have been looking at ways to position their organizations to be more cost-efficient. Until now, though, the distribution units of many companies have been spared any radical restructuring. Cutbacks in front-line customer areas were deemed too hot to handle, confrontation with self-employed brokers too problematic and restructuring the centerpiece of their business model too complex.
Up against a saturated market and ongoing contraction in new business in many areas, companies are under growing pressure to act. According to an extensive benchmarking survey carried out by Bain, the exclusive distribution networks recently suffered their steepest decline in new business since 2008. With interest rates remaining stubbornly low and the regulatory screw being constantly tightened, the pension provision business is feeling the pinch. At the same time, an uncertain future lies ahead for comprehensive private health insurance, with new business already low even today. Many suppliers are faced with ferocious competition. In these conditions, weaker insurance brokers find it difficult to make ends meet and are withdrawing from the market. Since 2011 the number of brokers on the market has fallen noticeably. The companies participating in the benchmarking survey also reported a decline of an average 2.5 percent.
Advances in digital technology also mean that action needs to be taken in the field of distribution. Many customers take it for granted that their insurance companies offer a broad range of digital services that are networked to existing channels – but most insurers are still a long way off from demonstrating universal omnichannel competence. Another feature of the digital age is that the barriers for changing suppliers are steadily falling while prices become more transparent. Here, too, companies urgently need to deliver solutions.
It is therefore imperative that insurance companies undertake a radical transformation of their entire distribution operations.Download PDF