Impact of Direct Channels in the Insurance Industry

Impact of Direct Channels in the Insurance Industry


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Impact of Direct Channels in the Insurance Industry

Question 1

Services can be described under four characteristics that include intangibility, inseparability, variability and perishability (Coldren 2006). This applies to all services including progressive products. The major progressive products are car and auto insurance where the company insures client vehicles. This requires customers to pay money for insuring their vehicle, a service that is not teachable like goods. One cannot tough an insurance cover since it is based on trust and promise. The other characteristic is inseparability, where the service cannot be separated from the user as well as the provider. However, unlike other services such as having hair done, insurance requires paying, and a person does not have to be there except when something happens to the vehicle (Coldren 2006). The third characteristic is variability of heterogeneity whereby the service cannot be provided in exactly the same way is provided to another person. However, insurance is a bit different since people can buy the same service. However, when a car breaks down, and one claims the insurance, services will be different. The fourth characteristic is perishability. In this case, perishability may not apply as other services since one pays and waits when there is a need to claim payment from the service. Precisely, the insurance will not be perishable as long as one pays for the service.

Question 2

There are several advantages as well as disadvantages of having a direct or indirect channel to insurance for customers. With direct channels, customers have the advantages such as cost saving since they do not have to pay the agents. Agent services to insurance come with their costs, as opposed to dealing with the company directly. The other advantage of a direct channel is time saving, since the customer goes directly to the company instead of having to wait for the agent to deal with the company and relay back information. Disadvantages of direct or online channels in insurance include the perception of insurance services from customers where customers consider insurance products to be a complex issue that requires professional knowledge (Schultz 2011). The other disadvantage is lack of assurance to security for customers with online channels. On the other hand, indirect channels where agents are involved there is a higher level of trust since the agents are supposed to be professionals. Additionally, there is more advice to the customers since the agents can have a personal relationship with their clients, as opposed to online channels. The disadvantages of agents or indirect channels are costs associated since customers have to pay for the agents services. Additionally, it is time consuming since the customers do not deal with the company directly. The value of a direct online channel is offering customers convenience where they can access the services anytime, while agents offer better advice at a personal level.

Question 3

The progressive video did mention that prices could be different depending on whether the customer uses online channel of through an agent. This does not seem to be a customer oriented strategy. The fact that the company varies its pricing depending on the channel used seems to be a strategy aimed at encouraging customers to adopt one channel. Favoring one channel does not seem to be customer oriented since the company could be considering its costs. For instance, if the costs associated with the agency are higher, the company could price it at higher while reducing prices at the online channel in order to encourage people to use the channel that would favor the company. In this regard, the strategy fits more as cost cutting measure rather than a strategy aimed at customers. Therefore, this strategy does not seem to be customer oriented.

Question 4

Depending on the advertisements by the three insurance companies, Progressive, All State and State Farm, one can differentiate each company by the characters they have taken to attract people. For instance, when one sees Flo they know it is Progressive (Schultz 2011). People associate with a brand or a company depending on the image it portrays to the people. Each of the three characters employed by the three firms creates a distinct image of the company that people can identify the company with. However, considering that the three advertisement campaigns focus on humor, one requires identifying the characters and which company they represent. The humorous advertisements are working considering that the companies have seen an increase in the number of people visiting their social media websites (Schultz 2011). The humorous approach elicits more emotions than other advertisement, therefore attracting more people.


Schultz, E. J. (2006). How The Insurance Industry Got Into A $4 Billion Ad Brawl. Retrieved from

Coldren, C. (2011). Four Factors that Distinguish Services Marketing. Retrieved from