The following is a reformatted version of an article originally published in National Underwriter Life & Health Magazine March 27, 2000.
Despite barriers to selling life insurance on the Internet, recent studies suggest that life insurers will continue to use the Internet to promote their products — and products like disability insurance and long-term care insurance — although there was disagreement on just how big a role the Internet would play in actually selling those products.
A survey of 20 life carriers by Forrester Research, Cambridge, Mass., found that about 40 percent are currently selling term life on the Internet, reported Todd Eyler, a Forrester analyst who led the study.
But of the remainder, none said they were interested in selling life policies directly on the Internet soon. “Carriers’ [use of the Internet is] focused more on workflow between company and agent,” Mr. Eyler reported.
One barrier to growth of sales is the fact that insurers do not want to be seen as abandoning their traditional channel, the agent, noted Mr. Eyler.
Another hurdle is the medical exam required for new policies. That could change ultimately, he noted, if consumers accept the notion of storing their health records with an online medical information bureau. This would enable life insurers to check the information, with a customer’s permission, then issue a policy online.
“But that’s not going to happen near-term,” Mr. Eyler stated. “Consumers are reluctant to allow access to their medical records. This makes it difficult to switch carriers or to have a large amount of life sales online.”
Forrester’s study also predicted that about 30 percent of total variable annuity sales would take place online within 10 years. The study did not attempt to forecast long-term sales volume trends in actual dollars, however, because of the difficulty of predicting conditions in the capital markets, Mr. Eyler said.
Another recent study of financial service companies came up with a stronger forecast for online sales of life insurance and related products. That survey was released last week by Andersen Consulting, New York City, and the Life Office Management Association, Inc., Atlanta.
The survey of more than 200 financial service executives worldwide projected that the Internet will influence distribution channels, customer servicing and pricing.
Among the key findings of the research report, “The Asset Accumulation and Wealth Protection Market Place: Winning in the e-Economy,” were these:
- Executives in the industry expect that, within five years, online sales of protection products (term life, whole life and variable/universal life) will reach 17 percent of total sales of these products. Sales of asset accumulation products (mutual funds) will reach 19 percent; retirement products (annuities and IRAs) will reach 17 percent; and health-related products (disability and long-term care insurance) will reach 16 percent.
- Roughly half of executives expect their companies to offer online quotes and application submissions within two years.
- The vast majority of respondents believe that online distribution will improve the efficiency of traditional agent, broker and financial advisor channels, thereby reducing distribution costs over the next five years.
- Three-quarters think the Internet will be an effective tool to better reach and serve the mass market.
- Two-thirds expect Internet-sold products to be less expensive than products sold in traditional channels.
“Industry efforts to sell and service protection products online have been sluggish to date, due to product complexity and infrequent customer interaction,” noted Thomas P. Donaldson, LOMA’s president and CEO. “But the survey results indicate that the Internet will grow in importance in the insurance arena as customers become more experienced with online banking and Internet sales of other financial and consumer products.”
In a statement, Andersen said the research shows that companies have a head start in e-commerce if they have some or all of the following characteristics:
- Frequent customer contact;
- Minimal channel conflict such as conflict between Internet sales and agents;
- Early-mover advantages from being among the first to offer insurance on the Internet;
- The ability to leverage Internet experience in other financial services markets; and
- A well-recognized brand name.
“One of the big surprises of the study was that about half of companies expect the Internet to have an important impact on sales of relatively high-value, complex products within five years,” said Barry L. Rupert, the Andersen Consulting Financial Services partner who led the research project.
Mr. Rupert said that companies that do well in Internet selling will have the following capabilities:
- Straight-through processing in the form of one-stop, one-touch self-service via computer as demonstrated by easy use of the company’s Web page and direct access to the insurer;
- Speed to market, for both Internet capability and new products;
- Internet sales and service that is integrated with traditional channels, to allow for maximum customer choice;
- Customer insights that can be leveraged effectively into sales activities; and
- Scalable operations to meet peak demand and rapidly growing traffic.
Reproduced from National Underwriter Life & Health/Financial Services Edition, March 27, 2000. Copyright 2000 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.