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Chapter 2 The insurance market 2/9

F1 Direct marketing channels

In figure 2.2 you can see that, alongside direct marketing are company sales staff, who will often sell a
range of policies. The home service agent channel refers to a method of selling insurance which has all
but died out in many countries, including the UK, does still exist in some parts of the world. Its roots are Chapter
in meeting the insurance needs of lower income customers, whereby agents typically provide low cost,
low value insurance by selling policies and collecting premiums direct from customers in their homes. 2
Direct marketing channels include targeted mailings directed at those categories of individual likely to
purchase the product on offer. Many different methods are used to focus the mailings, e.g. to the ‘over
50s’. Some companies have chosen to sell only over the telephone so that there is no intermediary
involved at all. Many private motor insurers fall into this category and their methods of promoting their
products and services are television or newspaper advertising, direct mailings and the internet.
F1A Features of direct marketing channels

Let us look at some of the features associated with direct marketing channels:
• Where products are marketed directly to the public, without involving paid sales staff, there are
reduced costs for insurers (as they do not pay commission to intermediaries). These savings can be
passed on to the customer through more competitive premiums.
• Although savings are made by not having to pay an intermediary, there is usually a significant
advertising cost that is passed on to customers in the premium.
• From the buyer’s point of view there is the greater ease and speed of obtaining insurance. This means
that immediate cover can be obtained over the telephone, subject to the return of a signed proposal
form.
• One disadvantage from the buyer’s point of view is that only one company’s product is available,
unless several telephone calls are made.
• A further disadvantage from the buyer’s point of view is that no independent advice is available
regarding suitability and no help in the event of a claim.

F2 Indirect marketing channels Reference copy for CII Face to Face Training

From an insurer’s perspective there are many reasons why indirect marketing channels are beneficial.
The intermediary earns commission, so there is an incentive to sell the product and benefits from any
promotional activity. The insurer must decide what type of intermediary will be appointed; if it chooses
to use an appointed representative, the insurer will, broadly speaking, be responsible for their actions in
relation to advice and sales. However, under regulatory rules, the insurer will be aware of the extent to
which the intermediary is tied to the insurer by virtue of any agreements with other providers. Often,
there is no competing insurer or product because they choose to tie themselves to a single insurer.
Independent intermediaries will provide advice to their client (the buyer) about a whole range of things,
such as the best premiums available in the marketplace, the range of cover and the extent to which the
product they are recommending meets their demands and needs. They may also provide other services,
such as help in completing a claim form or advice if a dispute concerning a claim arises. The
responsibility for advice rests upon the independent intermediary, although the insurer must ensure that
the intermediary is fully briefed on the scope and nature of the product. Complex commercial insurances
are particularly suited to this kind of arrangement.

G Price comparison websites

As we have seen, brokers and other intermediaries have traditionally searched the market for the most
competitive quotation for a client and many have subscribed to quote engines that provide a range of
quotations from those who they hold agency appointments with.
However, the internet has facilitated different ways of comparing prices, which has led to the
development of price comparison websites, or ‘aggregators’.
A price comparison website collects and analyses data from different sources and the term used for
Price comparison
information retrieval for goods and services on the internet is ‘aggregation’. There are web-based websites collect data
extraction tools that facilitate transparently gathering information from different sources. In theory, this from different sources
may be with or without the permission or knowledge of the underlying data sources.