Insurance And The Internet The Great Mystery Continues

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Insurance and the Internet. Its complicated, but the bottom line is, after seven years of Internet insurance activity, nothing much works. In most business models, the idea is to produce revenue and profit. Except, it seems, for the Internet. The business model there seems to be to provide free information or useless services that generate little or no revenue at enormous costs. It is a mystery.

The experts arent helping either. Usage figures tell us that when consumers go to the Internet, they go with a purpose. If they want to make a purchase, they go directly to the relevant site. If they want to read the news, they go to the source. If they want to do research, they head for a search engine. It seems that consumers today dont want to leave their Internet experience to chance or waste time “surfing.”

According to the experts:

Insurance sold via the Internet will have accounted for more than $5 billion in premiums for 2002.

Online sales are expected to jump to more than $12 billion in 2005.

For every consumer who buys an insurance policy online, or completes most of the buying process online, Forrester Research estimates that five will have used the Internet to influence their purchase.

Various sources, including PC Data, Nielsen/NetRating and Booz Allen Hamilton, estimate that more than 10 million consumers research insurance online each month. Thats 120 million consumers a yearor roughly twice the total U.S. Internet user population, including kidsaccording to other estimates. And Quotesmith regularly reports 10 million unique user sessions per monthgive or take a million or so!

What these statistics tell us is that everyone in the U.S. is shopping for insurance on the Internet all the time! The reality is, few of the “experts” agree on whos doing what when it comes to insurance and that, at least for now, very few actual sales are being completed online.

The barriers. Insurance marketers face formidable challenges in making online sales. First, companies must meet consumer demand for instant gratification. This is easier to do for auto insurance than life insurance simply because of the more straightforward nature of the product. Second, insurance companies need to make sure the Web doesnt cannibalize their agent sales force or other direct media channels. Third is the problem of measuring online successthat is, differentiating between what behaviors were simple research and what behaviors led to an actual sale.

The quoting function presents additional challenges. Approximately 50% of users will jump to another site if the quoting process becomes too time-consuming or unwieldy. And while insurers dont necessarily want to quote competitors pricing, to keep up with competition, some feel that they now must make themselves look like aggregators. But while price is certainly a factor in a consumers decision to pick an auto insurer, it is not the only factor. Brand, financial strength and perceived level of service come into play, too. Not surprisingly, it seems that consumers who shop for insurance online tend to look and behave much like consumers who shop for insurance offline.

The good news. So, is anybody making insurance sales online? The answer is “yes!” A number of companies are profitably selling insurance online. The secret to their success has been offering the right product to Internet buyersa key concept that others seem to have ignored. These companies expand underdeveloped markets. Or they create new ones. And importantly, they follow the rules of direct marketing.

These pioneers have also learned from the mistakes of others. For one, they dont think about marketing after the site is done. Rather, they recognize it as an integral component of the strategic planning process. They create sites with a singular purposethat is, to sell an insurance product online. Theyre also prepared to answer the hard questions: What impact will a Web site have on other efforts? On agents? Can the Web be used to drive sales to other channels and vice versa? How much can I afford to spend to make an insurance sale online as compared to other media? Is my online target audience differentand if so, how will I reach out to them and with what message?

If all this sounds like good old direct marketingit is.

So what does the future hold for selling insurance online? The potential for selling insurance on the Internet is there. So is the potential for profitability. As an industry, however, were not very good at it yet. And while were working on it, the consuming public will no doubt continue to use the Web to assist itself in the purchase process, continuing to confound actual measurement of true online sales.

Currently, less than 1% of all insurance sales are conducted on the Internet. Why? Because most insurers dont understand that consumers who shop for insurance online look and act very much like consumers who shop for insurance offline. Until insurance marketers open themselves up to the reality that the Internet must be treated like the direct response medium that it is, dont expect to see much change. Those who arent succeeding in this arena have a lot of lessons to learn from those who are–direct marketers.

is chairman of JCG, Ltd., a horizontally integrated international insurance and financial services direct marketing consulting group. He can be reached via e-mail at donjackson@jcg-ltd.com.


Reproduced from National Underwriter Edition, March 3, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.