Although the technology is in place to sell insurance via the Net, consumers aren’t giving up the one night a year when they sit in their living rooms and listen to their agent pontificate about the advantages of "Plan A" versus "Plan B."
This dynamic might be changing. Insurers have cleared a huge hurdle for online sales — the need for a customer signature — either by using credit cards to bind coverage until the policy can be issued or by legalizing electronic signatures. Despite this advance, a very low percentage of insurance transactions are being handled online.
ATTENTION, ONLINE INSURANCE SHOPPERS!
Even though insurance buying has barely gained a foothold in cyberspace, insurance shopping certainly has. A number of "aggregators" have emerged as technological hand-holders in the consumer’s quest for online insurance quotes.
The most prominent is InsWeb, a service that searches for competitive rates on Health, Life, Auto, Motorcycle, Watercraft, Homeowners, Motor Home, Renters, and Condominium coverages from such major carriers as State Farm and Nationwide. Insweb also provides live customer service, interactive tools, and independent research.
Participating insurers pay InsWeb a fee in exchange for steering business their way.
Online powerhouse Intuit has gotten in on the action with QuickenInsurance, which offers quotes on bread-and-butter Personal Lines and Term Life products.
LOWER, FASTER, AND EASIER
The driving force behind online insurance sales operations is the potential to slash sales overhead, speed up delivery, and offer buyers "shop at home" convenience. Just as online banks are reducing operating costs by eliminating brick-and-mortar locations, Internet insurance aggregators have streamlined sales operations and cut delivery costs, passing the savings along to consumers.
At a time when consumers are expressing a greater comfort level with online credit card usage, online insurance aggregators are well positioned to reap the benefits of this trust.
A REGULATOR’S DREAM — OR NIGHTMARE?
Regulation could become a wild card in the Internet insurance sales equation. Unlike consumer goods Web sites, the industry is highly regulated on a state-by-state level. However, regulatory loopholes could make online insurance selling a virtual world unto itself. For example, consumers are allowed to buy insurance from anyone they want in their own homes. If the insurer were headquartered in one state or outside the United States, could regulators in another state prevent consumers from buying insurance online from that company?
This issue could keep regulators busy for months to come.
A LOOK AHEAD
Online insurance sales (as opposed to quote shopping) will keep growing for the foreseeable future. One company that seems to be benefiting is GEICO Direct.
There’s been a backlash from independent agents, who aren’t thrilled by the prospect of losing sales to Web-based competitors. I can almost see the television ads attacking faceless, nameless insurers who supposedly won’t be there when they’re really needed. However, more and more carriers (independent Agency System companies and direct writers alike) are making agents an integral part of their online marketing strategy — a new variation on the "high tech-high touch" approach.
What’s more, passage of the Gramm-Leach-Bliley Act has opened the door for banks and other financial institutions to extend their distribution of insurance products into cyberspace.
When push comes to shove, consumers are likely to remain in "good hands" for their insurance … but with more and more of those hands becoming electronic.
The goal of the CompleteMarkets editor is to bring valuable content to the CompleteMarkets members. Providing content to insurance professionals to enhance their sales process, increase revenue streams, understand their clients and provide value to their agency.