Risk Management and Insurance Finance 431 Property Casualty Insurance Marketing and Distribution

Goals of our discussion Overview of marketing and distribution related to insurance industry Discuss some alternatives to traditional marketing and distribution of products and services Career opportunities

Marketing and Distribution Types of private insurers A quick review  Stock companies  Mutual companies  Reciprocal exchanges  Lloyd’s organizations

Marketing and Distribution How do you market and distribute products and services What are some considerations in thinking about how companies access customers What’s different about insurance

Marketing and Distribution Considerations of a marketing and distribution system or strategy Type of product or service New v mature Size of geographic area Who are your customers Sales force

Marketing and Distribution Write down what you may know from your own experiences about what a traditional marketing system may be for insurance …. get to know a neighbor

Marketing and Distribution Traditional marketing systems Independent agents and brokers Exclusive agency system Direct writers Direct response writer Multiple distribution system

Marketing and Distribution In class discussion questions Work with your neighbors

Marketing and Distribution Independent agency and brokerage system Independent agents and brokers National and regional brokers Independent agent networks Managing general agents Excess and surplus lines brokers

Marketing and Distribution Agent v broker Legal v real differences  Agents  Brokers

Marketing and Distribution What do the various types of independent agents and brokers have in common Represents several companies  Access to products and services Agency owns the expiration or renewal rights Compensation = commission  Varies by line  New v renewal Expenses generally paid by agency

Marketing and Distribution Exclusive agency marketing system Characteristics  Represent one company or group of companies  Generally do not own renewal rights but may vary with some companies  Compensation = commission New v renewal  Strong support from company

Marketing and Distribution Direct writer marketing system Characteristics  Salesperson is an employee  Represents only one company  Compensation = salary plus Salary plus commission Salary plus bonus  Insurer pays all expenses

Marketing and Distribution What do agents/brokers/producers do Prospecting  Look for customers Risk management overview  Initial look see  Submit to company Sales  Insurance products and services

Marketing and Distribution What do agents/brokers/producers do Policy issuance  Varies by company and line Premium billing and collection  Direct billing more and more common Claims handling  Small amounts set by company  Varies significantly by company and line of business

Marketing and Distribution What do agents/brokers/producers do Customer service  Key= most important  Understanding the needs of the business or individual Consulting services  Customers consider agents and brokers as trusted advisors  Relationships very strong

Marketing and Distribution Is one system better than the other Independent v exclusive v direct Some considerations Customer base  Personal lines-individuals  Commercial lines-business

Marketing and Distribution Some considerations continued Complexity of customer needs Sophistication of customer  Small business v national concern  Risk manager v no risk manager  Expectations of producer/agent- broker

Marketing and Distribution Some considerations continued Territorial issues  Metropolitan v rural Pricing/cost issues  Customers want value added services

Marketing and Distribution What is/are the most important consideration(s)

Marketing and Distribution What are the requirements to be a producer in Illinois Age Educational requirements  Pre-exam  Continuing Examination  Property Casualty  Life and Health License fee

Marketing and Distribution Picking an agent or broker What’s important  Professional qualifications/experience  Understanding your business or personal needs  Relationship  Communication skills  Integrity  Represent you  Access to markets  You need to feel comfortable  Service

Marketing and Distribution A career in Marketing Company v agent or broker

Marketing and Distribution Direct response system Not very prevalent in property casualty  Personal v commercial  Heavy advertising

Marketing and Distribution Multi distribution channels What does it really mean  Customers are looking at alternatives  Customers are more sophisticated Companies are testing the waters in a number of ways  Acquisition  Partnering  Alternative marketing Issues  Barriers to success

Property Casualty Insurance Financial Services Modernization Gramm-Leach-Bliley Banks and insurance companies Impact on each Distribution Cross sell Opportunities from act Issues

Property Casualty Insurance Financial Services Modernization Advantages to customers  “One Stop Shopping”  Cost efficiency in services provided  Relationships

Property Casualty Insurance Financial Services Modernization Issues for banks and insurance companies  Consolidation efficiencies difficult  Returns for investors  Management of balance sheet different in both  Relationship building more complex  Expertise across a broad set of financial services very difficult to build/buy/partner and maintain

Property Casualty Insurance Financial Services Modernization The Travelers and Citigroup  Has it worked Surety  Bonding and banking services  My own experience

Property Casualty Insurance The Internet Will it be an effective means to distribute/market insurance products ?  Issues  Positives  Negatives

Property Casualty Insurance Marketing and Distribution Summary thoughts… A career in Marketing  Many opportunities As a Business Exec you need to be an informed buyer/a sophisticated buyer in managing this component of your business