The Insurance Business on the Net

It wasn't all that long ago that we were reading articles about how the insurance aggregators, such as Insweb, would take over the insurance world. The idea was that they would come in and people would be attracted by low price and comparative pricing, and move toward the lowest-price provider.

That hasn't happened for a variety of reasons, and one of the most basic is that not everyone is a pure-price shopper. Weâll cover that more when we talk about human nature, but what's important to look at is who, actually, is out there buying insurance on the Web and how is the insurance business using the Web and the Net to improve productivity and profitability.

Here we need to make a critical distinction between researching about insurance or dealing with policy concerns and actually buying a policy. By-and-large, the folks who are buying insurance on the Web fall into two groups.

The first group is a group of people who have traditionally been mail order insurance customers. Mostly, they are looking for low cost, making them a variant of the pure-price shopper, and the brand of insurance is not their primary concern. They tend to buy things which seem fairly straightforward, commodity-like, and which they believe they can do reasonable price comparisons on. That makes them customers primarily for things like term life insurance and supplemental medical insurance.

They also tend to buy auto insurance. In fact, my research tells me that auto insurance is the type of insurance most frequently purchased on the Net. Some of the people buying it are in our direct response group above, but there's another group that's important as well.

Another group, which is buying insurance on the Web, is people who are buying things like non-standard auto. The folks seeking this kind of coverage are less concerned with price issues than with just being able to get coverage at all. Some kinds of earthquake, flood, and hurricane insurance fall in this group as well. These are folks whose primary goal is to get coverage and whose history tells them they're likely to be turned down.

They find the Net attractive for two reasons. The first one is that they're able to do a certain amount of price comparison. The second is that they're able to avoid the embarrassment of the face-to-face or mail or phone turndown. The impersonal Net is a whole lot easier to take bad news from.

If the people that fall in the above descriptions are people in your market, then selling to them on the Web is something you should consider. This doesn't have to be a super-expensive proposition. In fact, there are some people selling things like non-standard auto and earthquake insurance that are using decidedly simple and low-cost Web sites to get the job done.

On the other hand, we're far enough along the adoption curve of the Net and the Web that we should be realizing that the Net and Web are not as much a new distribution channel as they are a way to find entrŽe to and support for the agency system. Let's look at the things that the Web is exceptionally good at.

The Web is excellent at providing lots of information to help people understand what their insurance options are. This can be done on your own Web site or on multiple Web sites; but the array of information and tools, such as configurators and comparators can help them understand issues.

The Web is excellent at helping people sort out options. This gets the most press when we talk about comparing prices across companies, but there is another very important way.

Let's say that I have a son rapidly approaching the age of sixteen and his driver's license. I know that's going to have an impact on my insurance. I need to figure out how to handle it with my boy. The Web site can help me sort out what some of those options may be. They can also help me sort out other kinds of options.

Now, will this replace the phone call to the agency? The answer is an emphatic "yes and no.%

It won't replace the call to the agency if the issue comes up during normal working hours and it's comfortable to make the call. But it will replace the call to the agency at times when the agency doors aren't open. A major strength of the Web is that the Web is open twenty-four hours-a-day, seven days-a-week.

The usage patterns that we see on all kinds of sites are that the majority of activity tends to pick up in the evening, usually around 8 p.m. or so, and to begin tailing off again around ten or eleven. On the weekends, the activity picks up on Saturday afternoon usually around one or two, runs through ten or eleven in the evening, picks up again on Sunday, and runs until Sunday night.

During those times, people are more and more accustomed to looking for information and options on the Web. If you're there, they can look with you. If you're not, theyâll go elsewhere.

That ties into the other thing that the Web is particularly good at. It's good for handling those situations where people want to make a straight transaction. There are times when all of us are in this group.

I want to make a basic change to coverage on my policy by adding a vehicle. I really don't need to call somebody up and have them read a set of questions to me that I read back to them and they type in. A better alternative for me is to go on the Web site, click the button that lets me add a vehicle to my coverage, fill in the information, and hit "send.%

If you remember comparisons and options, lots of information, and twenty-four by seven, youâll have a handle on good ways that you can use the Web.

If your agency makes it easy for me to do the stuff that I need to do, if you provide me with information that I can get to when I need it, and if you make it all easy, Iâll stay with you over time. Allied has already given you many of the tools to make that happen, but a lot of it is up to you.

Before we leave this discussion of insurance on the Net, let's try to dispel a little bit of the mist that's around the experience people have buying insurance on the Web, particularly using aggregators like Insweb.

In August, 2001, Ara Trembly, a writer for National Underwriter studied the experience of buying auto insurance online. Here's his experience. For all the spots he visited, he asked for a quote based on the same vehicle, mileage and coverages.

He went to a couple of the aggregators, starting with InsWeb. He only got one instant quote, for a rate of $630 for six months. Two other quotes were supposed to come via email. Only one did. It was for $408.

A visit to insurance.com yielded four quotes. Three came in at $529, $548, and $1057. A fourth quote as for $453, but a note said that "two or more coverage items" were different. No explanation or detail was included. There was a toll free number that could be called for assistance.

Next came Esurance. Here our reporter got through the process faster since there were fewer questions but couldn't enter amounts for limits or deductibles. Three quotes: $595, $594, and $902. The quote for $595 was from the same company whose Insweb quote was $548.

With this wonderful experience behind him, our reporter headed off to insurance company sites. For two companies from whom he'd already received quotes via aggregators, the amounts were different. Three other company sites did not provide a quote or said they could not provide coverage.

Now for a couple of summary stats. In a broader survey of online auto quotes, the difference between the highest and lowest varied by almost $750 for the same risk. This is less that the results of a prior survey, six months earlier, where the range as over $1000. There were far more sites providing quotes in the earlier survey.

Can we sum up this entire section? The Net and the Web are becoming more and more important as a part of everyday life for people. Across the United States, folks are researching major purchases and doing routine transactions regularly on the Net. Both the number of Net users and the amount of usage that individual people have on the Net are increasing and will continue for some time. Thus far, the experience of buying an insurance policy or managing the details related to a current policy, is not a good one.

That covers lots of stuff about the web, about things that have changed. How do the things you've learned over the years fit into this? Good news! The fundamentals still apply.

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