How the Net Changes the Insurance Marketplace

The Net and Web have three characteristics that dramatically change the dynamics of any marketplace that they touch. Insurance is no exception.

The three characteristics of the Net are its reach, transparency, and speed.

Reach is the characteristic of the Net and the Web that allows people to expand the geographical area in which they choose to do business, or increase the number of possible companies that they deal with, or increase the time when they can carry on business functions.

What does reach do? First of all, reach increases competition. When I'm sitting in my house at ten oāclock at night, thinking about my auto insurance coverage, I now have more places that I can look for information and options. That means that you have more competitors than you did a few years ago, even though the number of companies out there may not have changed.

Reach also increases the amount of information available to me. Some of that information is good and some of it is bad. Your challenge is to try to get me to have as much good information as you can.

Reach increases the importance of convenience and relationship. If you make it easy for me to stay, Iāll stay. We said that human nature hasn't changed much; and, guess what, people tend not to change unless they're pushed into it or feel like they're pushed into it. If I have a relationship with you and you continue to make things easy for me, Iāll stay. In the Digital World, I have many more options where I can go, so making that relationship an anchor is far more important.

Convenience is part of how you give me a good experience, and give me the experience that I'm motivated to stay. When we do surveys of why people use the Net and the Web for business functions, the most frequent reason that comes back is the convenience of it all. It doesn't have to be fun to deal with you, as some writers have suggested, but it does have to be easy. As a customer, I expect you to be knowledgeable, helpful, and friendly.

What does this mean to you in terms of your agency in the Digital Age? It means that you should pay attention to developing your Web site for those times when I'm in need of service, but when it's easiest for me to pick a time when you're not open. It means that you should develop that site in ways that provide me lots of information and make that information easy to find and use. It means that you should develop your Web and your electronic presence in ways that let me opt for relationship or transactions, depending on what I need at the moment.

The second characteristic of the Net that changes the marketplace is transparency. There is transparency of price and transparency of process and transparency of information. For the people who shop primarily on the basis of price, this is a great boon. They can compare prices across a variety of vendors and possibilities. They can spend hours drilling down through various travel Web sites to save ten bucks on an air fare. They can find out what the invoice cost is on the car that they want to buy.

Transparency increases price competition and shifts bargaining power to buyers.

What should you be doing in your agency to deal with transparency? First, forget about having the lowest price or dealing with the price comparators. You probably don't compete on the basis of price, anyway, and most people don't buy on the basis of price alone. Use your site to reinforce the strengths that you have and your relationships so that people understand what the alternatives are to price alone.

Second, understand that people will be coming to you with more options investigated than they have before. Be prepared for that. Be able to make the case for what and how you sell so that it's clear why you are charging more than the price that they might be able to get on the Web.

The third characteristic of the Net that changes the insurance marketplace is speed. Speed, indeed, is one of the characteristics of our age, and the Net has made it more prominent. In fact, I'm betting that if you know the name of a single neurotransmitter, that neurotransmitter is adrenaline.

Speed does not have an effect by itself. What speed does is multiply the effects of reach and transparency.

In today's marketplace, the speed of response that folks expect is the one that's set by leading commercial Web sites. If they can send an inquiry to Amazon and get an answer back almost instantaneously, that's what people will expect.

What should you do about this? First, make as much information immediately available as possible. A great technique for doing that is something called an autoresponder, which sends information out automatically in response to a request.

Second, make sure you get back to people on the things, which require a bit of human attention. Manage your e-mail, perhaps using a program like Cosmotracker to get an idea of what inquiries are in and what needs to be answered.

Find a way to use the incredible power of the Net to identify when people are looking to set up a response mechanism.

The overall effect of the Net on the marketplace is to increase competition, especially price competition, and shift value toward sellers. For pure price shoppers, it also increases volatility and switching. Your challenge as a quality agency is to use the same technology the price cutters use to tell your story and make it easy and beneficial for your customers to keep doing business with you.

Let's look next at your Digital Age Toolbox.

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