Attention brokers: Do you think that competition from direct writers and direct marketers is tough? Do you feel the predatory breath of the banks on your neck?
Get ready for what’s next: Facebook the Underwriter!
Scary? Perhaps, but we see it as having opportunity for brokers with a conviction in their own worth. But lets describe how the Social Network might become the next direct writer.
Blogger Scott M. Fulton, III, writing in ReadWrite Enterprise reviews a recent report from Gartner’s Predicts 2012 series. Gartner Analysts suggest that changes in consumer buying behaviour have driven large players – including financial institutions and social media – to compete in a disintermediation contest for the mind- and wallet-share of consumers who want large measure of convenience with low levels of cost.
The scenario looks like this. Banks are facing competition from social media sites which are introducing on-line payment and financial intermediation services in order to drive new revenue streams. Gartner analysts Stessa Cohen and Peter Redshaw, write that, “Examples of recent activity include the social payments startup Twitpay, the virtual currency Facebook Credits and the acquisition of the U.K. price comparison site BeatThatQuote by Google.”
The banks, feeling squeezed, start to use social media sites, like Facebook, to market and conduct transactions as an alternative to the financial institutions proprietary websites. The banks also use the social media to access ‘life events’, like new jobs, marriage, new child, etc. to trigger marketing offers for financial products.
The social media, in turn, accelerate introduction of their own financial products. These would likely be simple products, targeted at the social media’s market segment. These could easily include basic p&c and life insurance offerings.
Fulton writes: “The Gartner analysts perceive this as a genuine threat to the existing insurance industry. In their report, they advise insurers to plan now for the commoditization of their products and services, implying that they should perhaps be sold through portals the way cloud service customers purchase bandwidth and virtual machines today.”
Here’s where the good news kicks in for the independent distribution system. It has already seen “portals” for insurers selling commoditized products, supported by major marketing campaigns. It has seen price focused consumers turn to Google, rather than a local representative, for advice. Independent brokers – individually and through associations – have developed strategies to focus on the independent’s strengths – professional advice and quality service. And independents using social media tools are seeing there is a market in the networked community that uses social media for more than pure price shopping (see our post on Ryan Hanley, for example).
While the banks and social media giants are competing on price alone, and accelerating a race to the bottom, wise brokers might look to a contrarian strategy which focuses on individualized service. ACT’s recent report that we reviewed earlier this week would be a great starting point for anyone interested in this approach.
And we’d welcome your views.
By the way, Kimberly Harris-Ferrante, VP and Distinguished Analyst from Gartner, who edited the report cited above, will be a keynote speaker at the 2012 Insurance-Canada Technology Conference, March 5, 2012 in Toronto. Get Registered, Be there and Be informed!