Life Assurer Goes Direct
Old Mutual, the largest life assurance company in South Africa recently announced it’s plans to go direct with a limited selection of products according this Business Times article. This move would activate the double margin effect by eliminating a broker or agent middle man and having the customer purchase their plan direct from the company via phone or the web. Their are many advantages for Old Mutual when it comes to going direct. A big advantage is customization. When the company deals directly with consumers they are better able to tailor their products to the customer’s exact needs. This is especially important given that Old Mutual operates in the market of wealth management plans. Other benefits for the company include lower costs, better consumer information and better transaction management.
Going direct isn’t all good news. Old Mutual laid off over 10,000 brokers and agents who are no longer needed do do their jobs. So although going direct may prove to be beneficial for Old Mutual, every silver lining does indeed have a cloud. Do you think going direct is the best plan for Old Mutual? Do the benefits really outweigh those of a traditional broker/agent system?