Resolving Distribution Channel Conflict in Financial Services
A shift in distribution strategy can cause severe damage to a company's perception and image, and careful consideration, planning, and management is needed in order to avoid loss of support and trust from the existing distributors.
We have learned from the Financial Services Council in New Zealand that 60% of people surveyed found life insurance difficult, confusing, and were unable to understand the value proposition.
To be fair, life insurance products are all of that to the layperson, and the advent of combined life insurance policies to include 'rider benefits' - Total & Permanent Disability, Major Trauma cover, Income Protection, and in some cases, Private Medical Insurance - can present a daunting list of concepts, features, and terminologies to someone unfamiliar with the industry.
Providing guidance and advice via intermediated distribution has been the traditional route in New Zealand, whether by tied agents, salaried advisers, non-aligned brokers, consultants, planners etc.
But intermediated distribution has recently been the subject of critical review, and questions about the reach, and the depth of the intermediary channel have been raised in influential places.
The Financial Service Council has formed an internal body to look at the extent to which intermediated distribution fails to provide an across-the-board service to all levels of the NZ social demographic.
Sorry, 'fail' is perhaps too strong a term, but there is no question that there is a substantial segment of the community which is not served by intermediaries, but which nevertheless has broad-based financial protection-based needs. I drew back from suggesting failure on the part of intermediaries because it's more appropriate to suggest that market forces will drive intermediary behaviour naturally toward the more lucrative end of the client spectrum, hence suggestions from various quarters that products such as Income Protection are perceived as the preserve of the middle-upper income earners in NZ.
In this regard, I believe some acknowledgement of Cigna's efforts should be recorded.
Yes, the Cigna direct sale income protection product does not have as comprehensive a specification as other products sold by registered advisers, but I submit that the target market for Cigna's product is not the same as the intermediaries' target market.
And with respect, Advisers who feel that their client relationships are threatened by direct marketing products, need to take a long, hard, and critical look at their relationship management strategy!
After all, if a member of the community is rendered unable to earn a living by illness or accident, surely it's better to have something in place, rather than nothing at all.
Futhermore, Gail Costa, Cigna CEO, has adopted a sensible distribution strategy that some others are only now considering. (Congratulations, Gail, on a well-deserved promotion).
Intermediaries should not be threatened by high-spec, low-touch protection products, and life companies contemplating extending their distribution marketing strategy are welcome to make contact.
- Get it right, and all sorts of shareholder/stakeholder added-value opportunities emerge.
- Get it wrong, and brand value can be seriously and permanently damaged.
WANT TO GET IT RIGHT? CALL ME!
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The Laird of Albany