Changes in channels of distribution


Internet disrupted many industries and many industries had to adopt the changing customer behavior as customers got used to using the internet. There is hardly any legal and regulated industry today that is not touched by the internet or technology. And technology keeps on evolving, it evolves fast. In this paper we are going to explore one industry that has witnessed a substantial change in channels of distribution, we will see the fundamental reasons behind the change and try to figure out what is the most significant among those. We will discuss the insurance industry because I believe Insurance industry has evolved a lot including their distribution channel,


Keywords: distribution channel












Changes in channels of distribution

Insurance is a basic need that provides us financial security. In the pre-internet era, the distribution channel for any type of insurance product was Broker/agent. The company had to pay commission to the insurance agents or brokers for every sale. Insurance brokers or agents, had and still have the contact factor, they communicated with a potential client, worked out a customized plan for the client and they were there to answer questions.  Ellen Carney(New York Times, 2015), a researcher from Forrester Research said that among the 40000 insurance agencies in the US will shrink by a quarter and those who survive will deal with complex product required by affluent customers.

According to LIMRA’s 2016 Insurance Barometer Study, 60% of US adults have some type of insurance policy (, n.d.). According to A.M. Best on NY Times, talking specifically about Auto Insurance, direct sales have jumped to 28% in 2012, which is double than it was in 1995.

Changes in technology played the biggest role in the insurance sector, people are using the internet more and more for everyday use and with a smartphone and other handheld devices, people are carrying internet everywhere. According to Daniel Newman on Forbes, the insurance industry has cut down their costs up to 65% just by using technology. And this cost reduction has some benefits to customers too, customers now enjoy a discount on the price.

The marketing strategy has also changed. Now any customer has access to the self-service dashboard where it is possible to add or reduce coverage and all, get a quote for free almost instantly. And claim processing is really fast, you can submit a claim using your smartphone, and the companies process it as soon as they can. And insurance companies are marketing all these benefits to customers, while the customer can save money and time using all these features, the insurance company also saves on agents and broker commissions0 they had to pay.

Competitors often offering something others are not. Like Geico markets that you will save 15% on your insurance premium, liberty mutual markets that your premium won’t be increased after first accident and Allstate gives you money back for being a good driver. According to Newman, customers love to compare before they purchase. And the internet gives customers option to compare all competitors easily before they decide which insurance company to buy from.

Customer behavior has evolved and still evolving with time. Initially, the insurance industry was selling their products directly on websites, then they started providing everything and some more on smartphone apps. For example, if you have Geico Auto Insurance policy, whatever you do on a website you can do those on an app (, n.d.) and get roadside assistance or talk to an agent with one tap on the screen. And since customers are using smartphone and internet more and more they love these features. According to Pew Research, 89% US population use the internet and according to John Greenough, auto insurance companies are going to use internet of things to cut cost. The insurance companies will monitor insured customers and their driving habits using the internet and might offer some more discount. One more thing is, of course, the customers are more knowledgeable about the product so they can shop around and choose what fits their need most.

In my opinion, the marketing strategy is the most significant factor behind the change in the distribution channel. Customers were very used to their previous distribution channel which was mostly agents and brokers. Insurance companies had to educate the customer base about the fact that everything can be done on the web and it is usually faster. And the smartphone apps are even better now. Insurance companies are marketing the benefits, and customers are adopting the benefits because mostly it is free and saves them money, time. I do realize the fact that all these are possible because of the internet, but customers adopting the advancement because of the awareness being spread by the marketing team of the insurance companies.


Conclusion – Insurance industry has changed the distribution channel mostly to the internet. But they need to keep working on providing better user experience, making it easier to interact, get help, easier to understand products and cutting the cost and reducing the price to consumers (Beauchamp,2018). And the marketing team has to work on the marketing to spread the awareness.













Winer, R., & Dhar, R. (2011). Marketing management (4th Ed.). Boston; Prentice Hall.

Beauchamp, P (January, 2019). 3 Ways the Insurance Industry Must Change to Survive. Retrieved on

Newman, D. (September, 2017). Top 5 Digital Transformation Trends in Insurance. Retrieved from

Greenough, J (November, 2015). Auto insurers are using the Internet of Things to monitor drivers and cut costs. Retrieved from

Dougherty, C (January, 2015). Insurance via Internet Is Squeezing Agents. Retrieved from

Retrieved on 3/17/2018. Retrieved from

Retrieved on 3/17/2018. Retrieved from


Add a Comment

Your email address will not be published.