VIEWPOINT

2023

DESIGNING INSURANCESALES CHANNELS FORM A X I M U M I M PA C T
Dimensioning channels
with data analytics

AUTHORS
José González

Fierce competition for clients and the adoption ofGuillem Casahuga

new technologies are pushing insurance companies

Borja de la Cuesta

to make bold efforts to improve their sales force
and emphasize their most profitable channels.

Pau Fuentes

Developing a data-driven strategy to properly

Eduardo Munguía

dimension sales channels will allow companies toJavier Novoa

maximize their resources and deploy efficiency
initiatives. In this Viewpoint, we define an organizedapproach to sales dimensioning that can be used byinsurance companies and other sectors.

ARTHUR D. LITTLE

VIEWPOINTFIRS T S TEP S
The relationship between customer value
and acquisition cost has a direct impact on
profitability. The output of each type of channel
differs in cost and target segment. For thisreason, it is important that channels alignwith the company’s strategy to optimize ROI.

THE TRADITIONAL
TRIAL-AND - ERRORAPPROACH CAN LE AD
T O PA I N S TA K I N G L A B O R
A N D I N A D E Q U AT E
R E S U LT S

Our experience shows that the right channel
dimensioning can improve productivity by 10%20%. This Viewpoint explores how to define theoptimal process for dimensioning sales channels,
which focuses on creating optimal configurationsof agents in distribution channels. The actions
that occur during and after this process areparamount to improving agent performance. The
traditional trial-and-error approach can lead topainstaking labor and inadequate results. Thisoutcome is inevitable for any company in almost
every sector; our approach avoids these negativeoutcomes.

DEFINING THE
BES T CONFIGUR ATION
Data analytics creates the foundation for thisstage. For the purpose of dimensioning sales
channels, it involves the process of examining
raw data to uncover hidden patterns, correlations,market trends, and other relevant information
within each type of channel. These analyses are
the basis for determining new segmentation
models, establishing sources of customer

Although an insurance company’s sales

potential value, or identifying value agent

department usually has the necessary knowledge

drivers. The results establish a foundation forand reporting tools to identify and track results,

channel modeling in the next phase and provide

roadblocks, and game changers, dimensioning

relevant insights about distribution performance,

the necessary efforts of each sales channel

extraction of actionable insights, and positioning

is often hindered by a lack of resources. The

in relation to peers.

agent configuration in a channel is typicallyExperience has shown that not all channels areorganized by comparing the variation of average
performance metrics and ratios impacting astatic profit and loss (P&L) statement. It assumes
linear behaviors that are a vague representationof the actual constraints faced by the sales force(during the operation) and the sales director(during the sales strategy definition).
A robust and flexible methodology, based onmarket and internal data, is necessary for properly
facing the endgame channel-sizing problem. This
data-driven approach has the additional benefitof allowing sales directors to understand thesuitable for all segments, nor do they have thesame cost or offer the same return:- Remote channels typically offer a lower

acquisition cost but less advisory potential.
The cost and effectiveness of the channel
depends on the quality of the leads. Internal
leads (e.g., former customers) offer better
results, but their number is limited. External
leads, on the other hand, have a lower
impact and can cost three to four times
the acquisition cost.

constraints and the best growth direction, while
incorporating efficiency improvements that havebeen vetted and found worthy.

DESIGNING INSURANCE SALES CHANNELS FOR MAXIMUM IMPACT2

ARTHUR D. LITTLE

VIEWPOINT- An insurance company’s own channels tend

Internal and external analyses are conducted

to offer average performance at a medium-

during the Phase 1. The completed internal

to-high cost. The risk falls on the company, soanalysis provides important and useful

it must establish adequate management andinformation, including:control policies. Poor channel management- Customer characteristics and product tenancy- Customer-channel distribution relationships

can lead to a degradation of the acquisition
cost and liability for the development of new
distribution strategies.

- Intermediated channels offer a medium-tohigh, but variable, acquisition cost. These

are suitable channels for targeting customer
segments where the agents have difficulty
initiating a commercial conversation, orconversion is difficult.
New data analytics and the exploration tools usedhere can process a large amount of information(customer mix per channel, acquisition cost)- Customer value and its relationship with thedistribution channel- Each channel’s contribution to businessperformance (volume, margin, persistency)- Agent dynamic in the channel (rotation)- Agent sales performance (ranking, bestpractices identification)

in a short period of time, which is needed toThe external analysis involves benchmarking,carry out different cross-check analyses andand the knowledge it provides can help

support the three-phase structured approachcompanies:

to dimensioning insurance sales channels.

- Understand current insurance marketdynamics

Three-phase methodology
The Arthur D. Little (ADL) methodology to address
endgame channel sizing combines data modelingand business intelligence to design an optimal- Analyze roles of each player- Identify best practices- Discover commercial opportunities (lowproduct penetration in areas or niche markets)channel mix to make the sales process more
efficient. The methodology is frequently divided
into three phases: (1) an exploratory analysis
to diagnose the problem, (2) an examination of- Define aspirational commercial objectives(penetration by segments or regions)scenarios to find the optimization model, and(3) an exploration of new initiatives (see Figure 1).

ure 1. Three-phase methodology to define optimal channel
mensioning
Figure 1. Three-phase methodology to define optimal channel dimensioning

01

Market & internaldiagnosis• External analysis• Internal analysis

02

Optimization model• Different channeldimensioning scenarios• Final-mix decision03

Initiatives to go
the extra mile
• Ad hoc new initiatives
for improving sales
agents’ efficiency

Source: Arthur D. Little

DESIGNING INSURANCE SALES CHANNELS FOR MAXIMUM IMPACT

3

ARTHUR D. LITTLE

VIEWPOINT

Defining different strategic scenarios provides

Phase 3 begins once the agent configuration has

the starting point of the Phase 2, sales channel

been selected. The attention shifts to the agents,

optimization. It involves forecast modeling andanalyzes how to improve their productivity, andscenario analysis using current and historicaldevelops initiatives to help them go the extra

data patterns to determine probable futuremile for their customers. Conducting interviews

outcomes. Scenario analysis interconnects all

and follow-ups with the top-performing andelements related to channel performance to show

low-performing commercial agents will identify

the economic impact of different insurance sales

best practices, pain points, as well as drivers

strategies (e.g., being cost-effective, maximizingthat impact performance. During this phase, itmargins, or focusing on customer segments).

is important to analyze incentive schemas, sales

Each scenario seeks to identify the best
configuration of agents in the channels to achievea strategic objective (e.g., maximizing return, cost
efficiency, maximizing customer acquisition). The
modeling will only work on the configuration ofagents in the channels in a ceteris paribus (“otherthings equal”) environment. Thus, we can identify
which configuration drives impact to the differentstrategic ambitions. Understanding these drivers
in the channel configuration in the different
strategic ambitions will help select desirable
scenarios. The company’s decision makers aresupport tools, sales area, or sales monitoring
and control. The knowledge gathered during thisphase can be implemented later in the form ofeffective best practices to improve overall agent
performance.

BES T PR AC TICES FOR
IMPROVING CHANNELPRODUC TIVIT Y
The most common initiatives to improve
productivity can be classified into three sets:

responsible for selecting the optimal option tocapabilities, time, and prioritization (see Figure 2).

achieve the financial and strategic objectives.

Another course of action, also with three elements,relies on tools, data, and ongoing training:

2. Areas where productivity can be improved 1. Volume — reducing the time spent on
purely commercial activities by making
Figure 2. Areas where productivity can be improved

them simpler, faster, and/or more
automatic. Companies can adapt operational
processes and provide the necessary tools

Timeto increase the time spent on sales and theirquality. Systemizing the selling process
helps create a standardized and streamlined
sales process, which can be easily replicatedacross a sales team. This will help ensure

Commercial
effectivenessintroduce intelligence into the sales process.

Prioritization

Capabilities

consistency and provides an opportunity toSales support tools simplify the sales process(e.g., a quotation tool), giving an agent time tofocus on customer engagement and advisory.
It is important to eliminate and reduce
administrative tasks (e.g., manual reporting
activities) or reduce sales preparation time(e.g., sales pitches and competitor benchmarks
can be developed by a commercial intelligence
Source: Arthur D. Little

unit instead of agents).

Little:DESIGNING INSURANCE SALES CHANNELS FOR MAXIMUM IMPACT

4ARTHUR D. LITTLE

VIEWPOINT

2. Focus — prioritizing commercial actions

3. Quality — improving or developing

through enhanced visibility/analysis ofcommercial skills of the sales force.

the available information. It is increasingly

Developing standardized multichannel leadcommon to use sales support tools thatmanagement with clear roles, responsibilities,

help prioritize the contacts most likely to beand interfaces can help to build a high-sales,

successful or to focus the conversation on theprocess-oriented company. Ongoing training,most suitable product. These tools rely on thecommunications, and side-by-side coaching,availability of customer information to extract

using experienced agents and coaches, canvalue for sales planning. Implementing tools

create a strong sales culture. These bestthat focus the agent’s activity on the rightpractices are essential to improving selling byleads can improve productivity by 15%-25%.

ensuring that agents have the necessary skills,

Additionally, the continuous improvement oftools, and processes to effectively engage

selection and sales conversion by tracking

with customers, while maintaining high-objective key performance indicators helps

quality service standards.

develop data-driven funnel management. It
increases conversion rates and lowers thechance of early cancellations or churns.

DESIGNING INSURANCE SALES CHANNELS FOR MAXIMUM IMPACT

5ARTHUR D. LITTLE

VIEWPOINT

CONCLUSIONSUMMARIZING THE PROCESSE M P L O Y I N G A D ATA - D R I V E N A P P R O A C H
TO DIMENSION SALES CHANNELS ALLOWS
A N I N S U R A N C E C O M PA N Y T O R E A L I Z EITS FULL POTENTIAL

The expanding competition landscape and the availability of newtechnology to address myriad issues and tasks have motivatedsales forces to revisit their approaches and strategies. Employing
a data-driven approach to dimension sales channels allows aninsurance company to realize its full potential while minimizing
deviations from target results. Ideally, using a strategic process
will launch the company toward a strong outcome:
1Conduct external and internal analyses prior to theoptimization exercise to understand the main and hidden
blockers that hinder results and to define the constraints
and bundles for sales channel dimensioning.

2

Use data analytics models to replicate real challenges present
in the sale-dimensioning exercise to find the best configurationfor each insurance company and market.

3

Implement efficiency-improvement opportunities after thebest configuration is deployed.

4

Prioritize opportunities according to quantitative andqualitative criteria and consider their potential enabling nature.

5

Deploy improvement opportunities, which can lead to a newparadigm for an insurance company, and rerun the analytics
model for sales dimensioning to meet and exceed expectations.

DESIGNING INSURANCE SALES CHANNELS FOR MAXIMUM IMPACT

6VIEWPOINT

DESIGNING INSURANCE SALES CHANNELS FOR MAXIMUM IMPACTARTHUR D. LITTLE

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Arthur D. Little has been at the forefront of innovation since1886. We are an acknowledged thought leader in linking
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