Producers face a range of threats to their business model, not the least of which is the prospect of carriers, possibly with an assist from technology titans like Amazon.com, marketing their life products directly to consumers and cutting out agents and brokers in the process.
But the direct sales channel faces a number of challenges to growing its share of the revenue. Chief among them: How to communicate effectively with customers to close the sale.
The problem is not localized to the U.S. A new survey from Celent (an Oliver Wyman company) on direct insurance sales in South Korea identifies the communication issue as a stumbling block facing the channel as a whole. According to the report, direct sales now account for just 1.8 percent of revenue for that nation’s life insurance industry.
The survey shows the direct channel’s life insurance revenues have grown steadily, rising from $117 billion in fiscal 2007 to:
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$124.5 billion in fiscal 2008
$139.9 billion in fiscal 2009
$147.8 billion in fiscal 2010; and
$156.6 billion in fiscal 2011
The report notes, however, that face-to-face sales involving an agent or broker remain the “dominant” source of life insurance revenues, accounting for 98.2 percent of the industry’s total.