“The Right Touch” – Reducing Distribution Costs in Alternative Channels for Microinsurance

This case study provides an exploratory study of insurance demand of a Colombian insurance company, Suramericana. The insurance products are distributed through two alternative delivery channels having distinct touch levels. Touch levels refer to the nature and extent of a company’s interaction with the buyer or end user of its product. The first segment of the study consists of customers of credit cards who are cross-sold insurance by customer service agents, signifying low touch levels. The second segment consists of customers of regional gas companies who buy insurance from door-to-door sales people, signifying high touch levels. The study identifies key characteristics of each customer segment and factors influencing the purchase of insurance. Key findings include:

• Ensuring that clients trust and perceive value in a product can be difficult and can require a higher touch approach to distribution leading to higher costs;
• Previous experience with financial services and trust in an insurer may be important influencers of the purchase decision of insurance;
• When populations are unbanked and unfamiliar with insurance, high touch strategies may be best suited to reach low-income people;
• High touch sales, if effective in building experience and trust, may be a precursor to a gradual transition to low touch customer service over time.