Critique Essay
Introduction
The 2003 research paper ‘ Insurance Distribution Channels: Markets in Transition’ written by Dumm and Hoyt addressed the change of the insurance distribution network, which took place in the insurance industry for property/liability. The usage and viewpoint of several writers regarding the availability of the distribution network in the insurance industry would be discussed in this essay. As it examines the simulation of the paper, key findings, and conclusions of the paper as well as reviews its academic contributions to the paper.
Article Exposition and Research Question
The research issue of this paper intended to address the expectations as well as realities of Internet-led channel acceptance, which will affect the distribution network for property/liability insurance products. The Internet-led platform could substitute the conventional agent-channel as the main platform for distribution, with many experts and writers being positive about it. It is because the internet has the features of broad dissemination, which contributes to the changes in people’s choices for the purchase and delivery of products. As a consequence, it forecasts that the traditional agent-platform would have a negative impact. Nevertheless, the product purchased via the internet was less than two percent. Don't use plagiarised sources.Get your custom essay just from $11/page
The researchers of this paper carried out a separate study of the distribution platform, and the result was that the complexity of the commodities was the key factor slowing down the Internet network adoption rate. Many authors argue the presence of commodity intricacy, and the value is taken into account since the focus of business is also influenced. Dumm and Hoyt relied on the empirical study as one of their research methodologies by gathering details from Best’s Insurance analysis on the insurance channels as well as business lines to analyze the causes and the accuracy of the surveys.
Complexity and Cost
As per Wang and Lu (2014), the extent of difficulties in understanding commodities or services usage is seen by customers in terms of product complexity. Complexity is seen in the field of internet commerce as one of the main factors influencing customer preference for commodities. Furthermore, the Internet adoption rate of a commodity consisting of a greater degree of complexity is decreased.
This article has shown that the customer’s process during the purchase of insurance focuses on using the internet as a helpful tool to gain information on rates and commodities and return to buy the items from the agent. This shows that in this case, cost savings have no significant role to play. Similarly, the conventional agent-led channel has costs that vary from what is anticipated and service delivered. Most scholars argued that the costs between an independent agency’s program and a direct author, whereby the expense ratio is higher, would lose their share of the market. The independent agency fell from 69 percent in the year 1970 to 59 percent in 1990, as shown by auto insurance products where industry saw this as a standard product. But, the other writers claim that a greater expense ratio is associated with different levels of customer service. Most of the authors analyzed the complexity as well as transaction costs. They pointed out that demand for an individual entity is essential for the increased complexity of a commodity, regardless of the cost incurred by customers. This is appropriate since Wang and Lu (2014) have mentioned that details and contrast with other related goods are a challenge for consumers.
Simulation and Main Results
This empirical study centered on a collection of details from Best’s insurance studies, including business lines as well as distribution networks from 1990, 1995, and 2000 within the top 20 property/liability insurers category. The result in the year 2000 shows that in commercial lines, the independent entity and traders have risen by 4,700. This means that customers have been highly dependent on the independent agency for the complex commodities from the last few years. This led him to rise in market share both in the commercial(73.6 percent in 1999 to 75 percent in the year 2001) as well as personal lines(33.4 percent in 1999 up to 35.1 percent in 2001). As for individual lines, it fixates on intended personal lines in the lower risk, where numerous distribution channels, comprising the one led by Internet network, are involved. The channel distribution also has an equal effect as a combined enterprise. Whilst, the percentage rate for personal lines increased in the Direct Response Channel’s market share (from 7.9 percent in the year 1999 to 8.4 percent in 2001).
In addition, Dumm and Hoyt are also providing the outcome of the effect on personal lines of the direct response network and the internet-network (super-channel approach). As technology progresses, the strategy will rise by 7 percent from the distribution marketing performance model of Datamonitor over the next five years ending in 2003. Even if the market share for the channels rises, the channels must be embraced alongside the conventional agent-Platform
Academic Contribution
In contribution to academics, the different kinds of distribution networks in the insurance sector were addressed while primarily analyzing the effect of the Internet system on the other system. It gives us an overview of the use of the internet and offers a glimpse into the actions of customers in buying the insurance product. By interpreting the key findings of the above section, it shows the consumer’s expectations and other expectations that the cost of a commodity is higher. It aims to implement a new distribution system, and the customers will know more about the commodities in the industry. However, the Internet adoption levels of the travel as well as the insurance industry, have been contrasted amid the article analysis and was a fair comparison to demonstrate the major gap within this field. The explanation for this is that these goods are commodity types and help us to get a greater understanding of the insurance industry scenario.
Most of the paper has been addressed at the conventional agent channel because of its diverse products provided to customers in the insurance industry, particularly in insurance products of the property/liability, requiring a high degree of the process as well as knowledge of the customer to buy their own requirements and also needs. Every customer has various needs, so decisions have to be made on the situation in which they currently live. Within this paper, the market interest was adequately discussed where the scope of the purchasing process was taken into account by the researchers. The paper will also act as a guide for customers to decide which conventional agents they want to use by classifying themselves as per their insurance needs or requirements. This paper has also gathered different findings from surveys and backed by multiple writers and experts; it gives the beginners or the novice an overview and guidance for the medium they want.
Moreover, this paper also addressed the point of view of the insurers, providing customers with an outlook. It addressed the insurers’ choice in giving information and categorized insurance products directly depending on the needs of the customer, and the availability of quotations for customers or consumers. Therefore, this argument complements the actions of the present insurer in internet use as a platform for customers to search for and interact.
Critiques
This paper’s strategy and approach are ideal for analyzing many authors ‘ survey findings or outcomes. Data from Best’s Insurance Reports which comprised of the profile, performance, as well as corporate risk assessment of insurers. It notices improvements in analysis and scores and worthiness (A.M. Best Company 2019). Its primary results can thus show certainty after the outcomes of the author’s study, and readers can perfectly understand the outcomes of this article.
Furthermore, the textual review, a different approach from various scholars and writers, can be suggested for this approach. The textual analysis may be a bit of advice in the set of consumers ‘ choice in this case, as the paper has listed some of the surveys. The explanation is that textual research can calculate the truth’s accuracy about the fact is illustrated by McKee (2003). Currently, the insurance commodities provided via the internet may be unable to satisfy the demands of customers, particularly in the individual lines of business. By this study, insurers and customers become more involved, in which insurers can build the networks instead of focusing on the underwriting as well as handling of claims. Therefore, this incentive would increase the chance to raise internet penetration rates, which will contribute to the sector’s rise in the Internet channel.
The effect of the critical findings can be substantially different from the adaptation of the textual analysis findings since the finding seemed to be a repeat correlated or linked with the study of the other writers in the empirical review. The descriptions are also so insensitive. The paper mentions several factors that hinder the adoption of the internet, comprising of variables relating to trust as well as service, although the document does not address these two factors thoroughly. The reason being that the greater the sophistication of the transaction, the higher the value of agents in connection with insurance companies, according to Faber and Van der Spek (2005). This is because of the trust problem, as well as the Wang and Lu article (2014), from which they considered to be a major factor in making a positive influence on the internet. The higher the complexity of the product, the greater the confidence is important as the customers face a high degree of incertitude and also a risk. Moreover, they noted that value-added service requires trust in the operational process since it includes system quality as well as information performance, which can minimize the complexity of the product viewed by all consumers.
At the same time, it is relatively uncomplicated to explain this article, which can instantly be answered by the readers. The paper is nevertheless, inadequate to explain factors like product complexity and risk exposure. It does not specifically describe the risk for the customer and how much product uncertainty the customer perceives or sees. Besides, this article may have taken the readers the wrong way, as most of the explanations addressed the styles of a conventional channel operated by agents, where the Web is the core topic and is hardly discussed. Besides, the Wang and LU article (2014), which dealt with the e-commerce insurance market, made it clear that the uncertainty and confidence in the product is the principal factor in adoption or acceptance of the internet and that it offers the condition and situation that factors may have influenced the purchase of the insurance product by consumers.
Conclusion
In conclusion, products are known as commodity types of goods in the insurance industry. However, the acceptance of the Internet channel is limited because of the key factors of complexity. That platform can be used by both customers and insurers to assist each other as it affects the purchasing of the policy on a two-stage basis: (1) the collection of data and (2) the purchase through insurers. Besides, the paper mentions the various kinds of distribution channels and the implications for the consumer’s needs. By which the insurance industry is helpful for a novice to comprehend. Since the article suggested the internet is difficult to adapt to in this enterprise, this article will be a key paper in explaining the reasons in the future. This reason may be important, though, as the internet continues to grow, and could influence the internet channel’s adoption.
References
Dumm, R. E., & Hoyt, R. E. (2003). Insurance Distribution Channels: Markets in Transition.