Channels of Distribution in Insurance

Abstract

The forces responsible for stimulating change in insurance marketing channels and the reaction of parties affected by change are the central issues studied in this paper. The intriguing questions of the direction of the flow through marketing channels, the optimum length and width of insurance distribution channels, and the rate of flow through these channels are examined. The factors influence the manner in which insurance flows from producer to consumer are discussed: economic forces, technological developments, and the changing sociological environment. That efficient cooperation between insurers and insureds is the ultimate end of change in distribution channels is the basic tenet advanced in this article. The concept of of distribution is an interesting one. Channel means a closed course or conduit through which anything or that through which anything passes. The focus of this paper will be on the ways in which insurance flows, or passes from, the insurer to the insured or from the insured to the insurer. A provocative aspect of distribution channels is illustrated by analogy to river channel; or, more accurately, to river channel in the pro,cess of changing its course. In the process of altering courses channel may disturb an entire environment which for years had been dependent upon its flow. As the river pushes forward in new directions, areas were formerly dry or barren may become productive. One may become fascinated as small offshoots start forward into new territory, meet an obstacle and Robert I. Mehr, Ph.D., is Professor of Finance at the University of Illinois. He is immediate Past President of the American Risk and Insurance Association and Chairman of the Executive Committee of the Pacific Insurance Conference. Dr. Mehr was Founder of the Risk Theory Seminar and was Director of the American Finance Association. This paper was submitted in July, 1968. end; or else, find better route and eventually lead the whole channel in this direction.' Few would question change is taking place in insurance marketing channels. The change has received attention in professional journals and in the trade press as well as in other sources. That change is taking place, however, is not the fundamental concern here; more important are the forces responsible for stimulating the change, and the reaction of the parties affected by the change.