There are many ways to distribute products. This month, Greg Becker looks at ideas from South American power utilities.
Distribution models change: everyone who owns an e-reader would certainly understand how profoundly book distribution has changed in the recent past. Amazon now sells more e-books than physical books.
However, changes are not limited to books. While it is easy to see how digital products can be served up in different ways, many other industries have changed as well. Just consider how hobbyists and collectors have seen their product options explode on eBay. Many industries have been revolutionised by disruptive change.
The one that has affected many the most is the way flights are distributed. Many people would no longer use a travel agent if it was just transport that was needed.
Protection sales in the UK are still dominated by traditional distribution methods, with recent ABI statistics suggesting that more than 90% of life protection premiums originated with IFAs and single-tie distributors (which includes bancassurers) in 2010.
Many believe the stars are aligned and that new distribution models will emerge that will reflect the increase in the use of smartphones, the acceptance and uptake of online purchases, regulatory changes (not least of which is RDR) and the rapid pace of evolution in other sectors where insurance is at times playing catch-up.
The Brazilian insurance industry is more than 200 years old, with life insurers having operated for more than 150 years. While hyperinflation damaged the long-term insurance market in much of South America (as nominal face amounts were quickly eroded) economic reform and stable prices in recent years, coupled with regulatory changes, has seen the insurance sector grow.
Interesting approaches have been followed, and Companhia Paulista de Força e Luz (CPFL) offers a good example of what is happening with general insurance.
The Brazilian utility company offers Super Casa Protegida (translated as ‘Super Safe House'), which includes protection against theft (BRL1,000/£353) and home insurance covering fire, lightning and explosion (BRL30,000/£11,000) for a premium of BRL5.50 (£2) per month. The benefits are not noteworthy, although the way the product is marketed and distributed is as follows.
CPFL offers this insurance product to existing customers by sending them two colourful bills: one with only their utilities priced up, and the other with the premium for the cover included.
The customer then has the option to pay the larger bill, and if they do, the policy starts. To further increase the attractiveness of the offer, all those who buy the product are entered into a lottery with a chance to win BRL5,000 (£1,800) each month.
