The future of distribution: insurers grapple with a rapidly changing landscape

May 2017

Advancing technology and changing customer preferences, regulations, and market conditions are propelling significant shifts across the insurance distribution landscape. The need for insurance to be sold more directly and at a lower cost is not new; however, most Insurance Governance Leadership Network (IGLN) participants agree that the mandate for change is greater today than in recent memory. “Distribution will change. It must change. Business as usual is no longer working,” one director said.   

Most IGLN participants view the mandate for change as the result of a system where, according to one, “distribution is simply taking too much money out of premiums.”  Experts say the relative share of expenses related to distribution has been rising since the early 2000s, stubbornly resisting downward trends evident in other expense categories. Participants quoted shares ranging from 15 to 40 cents of every dollar lost to distribution in the form of intermediary, acquisition, and technology fees and costs. “Maybe that is fine if you are adding a lot of value,” suggested one director, but participants and, increasingly, customers, agree that the current structure does not provide enough value for the money.  

Although product type (e.g., retail or commercial, complex or simple) and local market conditions and customs drive variations in methods of distribution, participants in two IGLN meetings, in New York and London, and dozens of pre-meeting conversations observed a number of broad trends. See Appendix A for a list of participants. This ViewPoints synthesizes key insights emerging from these meetings and related discussions and centers on two themes:

  • Boards are increasingly focused on distribution strategy, impediments to transformation, and risks

  • Insurers foresee significant shifts in distribution systems in the near future