When it comes to obtaining financial services on the Web, consumers have embraced brokerages and banks, but not insurers.
Despite its relatively poor showing — less than 1 percent of all consumer insurance is sold on the Web — the insurance industry hasnt given up. In fact, insurers are rolling out a spate of offerings in both the business-to-consumer (B2C) and business-to-business (B2B) markets in an effort to reach more customers and reduce costs.
Insurance "is not as sexy and glamorous as online brokerage," says Paul Lockmiller, a principal of consulting firm Booz-Allen & Hamilton who recently co-authored a study of the online insurance industry. People might check their online brokerage or bank accounts several times per week. By contrast, they consider their insurance coverage once or twice per year. That lack of interest has dissuaded many insurance carriers from making big investments in their online sales channel, he says.
This year, insurers will write about $3.1 billion worth of policies on the Web. But by 2005, Booz-Allen expects that figure to rise to $12.5 billion, or about 1.5 percent of the $800 billion domestic market for auto, home, renters and life insurance.
Toby Alfred, Internet site manager of Progressive Casualty Insurance, a leading auto insurance carrier, says a key factor in getting consumers to use the Web is reducing complexity. "It may take you five pieces of information to trade a stock or make a balance transfer at your bank. Comparatively, an insurance transaction may take upwards of 50 pieces of information," she says. Because of that, consumers will often pick up the phone and let a company specialist guide their purchase and input the necessary information, she says.
That inclination is reflected in usage statistics. In July, about 6.1 million users visited the top 10 insurance sites, according to Nielsen//Net Ratings. By comparison, about 10.9 million people visited the top 10 bank and credit union sites.
To combat that, companies are continually trying to make their sites more useful and user-friendly. "Its all about trust and comfort," Alfred says. The average premium for an insurance policy is $1,000. "You arent going to put down $1,000 on a purchase if you arent comfortable. This isnt like buying a book on Amazon.com," she says.
In addition to big insurance carriers such as Allstate Insurance, Geico and Progressive, which sell their coverage directly to the public, there is stiff competition among independent agents that use the Web to sell coverage from many different carriers. Insurance.com and InsWeb Insurance Services are leading examples of companies that offer auto, home, health and renters insurance, and even health insurance for pets.
Although InsWeb provides many types of coverage, auto insurance is by far the most popular online coverage, says Mark Guthrie, president and chief operating officer of InsWeb, which sells coverage from 26 different carriers. A key challenge is integrating the computer networks of the insurers with its own. "We have to take information from one form on our site, then tap into many insurers systems and show quotes to you in under a minute," he says. If consumers wait longer than that, Guthrie says, theyre likely to go elsewhere.
B2B Use Increases
For the last few years, most insurers have focused their energy on consumers. But theres a growing effort to use the Web as a B2B channel. "We are seeing movement of emphasis among the insurers, from revenue generation to cost containment," says Kimberly Harris, a Gartner senior analyst who tracks the insurance industry. That has resulted in growing use of the Web for online claims adjusting, settlement and other paper-intensive insurance matters, Harris says.
Another growth area is the use of the Net as an information conduit from carriers to insurance brokers and agents. Rather than send snail mail letters to agents with information about how much the carrier owes them in commissions, insurers are using the Web. Companies have realized that its more about customer service, and use the Net to support traditional sources such as agents.
Another interesting B2B play is a Web site called Quomp, which sells workers compensation coverage to small and midsize businesses. Workers compensation is a fairly standard coverage that is mandated in almost every state, which makes it a natural candidate for online sales, says Rob Fruend, Quomps COO.
Launched last month, Quomp was created by re-insurer American Re, insurance broker Arthur J. Gallagher & Co. and workers compensation insurer Safety National Casualty. It is one of the first pure online B2B plays in the insurance sector. Quomp currently offers coverage in just four states: Georgia, Illinois, South Carolina and Wisconsin. And the companys not in a hurry to add more states — at least not yet, according to Fruend. "We are intentionally not growing ahead of the market. We are going to see how well we do in these states, make sure they go well and then expand regionally from there," Fruend says.
That cautious approach makes sense to InsWebs Guthrie. "The insurance industry moves slowly — and it should," he says. "We are talking about peoples financial security. You dont want to get that wrong."