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RISKVUE ARCHIVE | FEATURE STORIES
Insurers Must Improve E-Commerce Capabilities
By James Bukowski
The relationship between insurance companies, agencies and customers is undergoing a quiet revolution.1 The agency system is not meeting the needs of a growing number of buyers. Direct marketing channels are capturing a larger share of the personal lines and business-to-business markets. Buyers can find significant price savings when they purchase policies from direct writers. Insurers are using multiple distribution channels, including telemarketing, direct mail, workplace and affinity group marketing, to reach their customers. Banks and other financial-service firms are offering increased competition to insurers.
Internet e-malls may be the most formidable competition of all. They create value by investing heavily in e-commerce site architecture, bringing together large numbers of buyers and sellers and driving down transaction costs. They can offer one-stop shopping, efficient markets and unbiased rankings of insurers’ products. Some critics say e-malls make purchasing insurance a commodity transaction and attract only bargain hunters. As their pricing efficiencies take hold and sites become better known, e-malls have the potential to control up to one quarter of insurance transactions.
Ways Insurers Can Improve Their Sites
Insurers still have higher name recognition and more ways to interact with consumers than e-malls. To meet such competition, insurance companies will probably have to develop more user-friendly sites and offer more e-commerce capabilities than they currently do. Some ways to improve the e-commerce capabilities and utility of insurers’ sites are:
(1) Keep the site’s content interesting. Insurance sites are necessarily information-heavy, but the customer’s viewpoint always should be kept in mind. Informative sites that provide up-to-date information in an attractive format will attract repeat visitors.
(2) Consider personalized content. The value of a human agent is personalized attention and understanding of the customer’s needs. The technology exists to customize the web site experience for every visitor and provide interactive advice. A site could be entirely in the Spanish language, if the visitor made that selection or fit the profile of a Hispanic customer.
(3) Provide easy tools to obtain quotations. The reason most people will visit an insurance site is to obtain price information. Make the application process as simple as possible, using the customer’s profile already stored from previous visits.
(4) Provide full disclosure. An insurance site that provides information from a variety of sources, including its competitors, can be more valuable than a single site that provides only its own or partial information. Some online customers will no doubt shop for the lowest price, but claims-paying reputation and financial security—the reason people need insurance in the first place—still can win over price.
(5) Make the purchase easy. Determine how the transaction will be closed—by online payment, check mailed to the insurer, visit to an agent’s office or other. Explaining clearly to buyers how they can cancel the policy and obtain a refund of the unearned premium can reduce the first-time purchase risk.
(6) Provide online policyholder services. Policyholders should be able to access their current account status and policy language as easily as their online bank statements. Putting policyholder information online is an appealing way for insurers to cut administrative costs, which account for nearly 20% of every insurance dollar. Allowing a customer to add a driver or vehicle to a personal automobile policy online reduces the need for insurer and agency support staff.
(7) Process claims online. This will reduce paperwork and speed up the processing time for this crucial activity. Nearly half the respondents in an IVANS survey2 said they were interested in submitting an insurance claim online.
(8) Provide an absolutely secure environment. The number-one fear of most people in e-commerce sites is that unauthorized people could obtain their credit card number, social security number or other personal information.
Conclusion
E-commerce is changing the business model for most industries. The industry faces several obstacles to implementing e-commerce, including reluctant customers, state regulations, complex products and the traditional agency distribution system. Competition from e-malls and other sources will drive insurers to add more e-commerce capabilities to their sites than they currently offer. 
Notes
1 “Shopping for Value: Insurance Distribution in the Information Age.” CPCU Journal, Vol. 52, No. 3 (Fall, 1999), pp. 140–152.
2 IVANS is a technology solutions provider for the insurance and healthcare industries.
ABOUT THE AUTHOR
James Bukowski is a Senior Consultant for Warren, McVeigh & Griffin, Inc. He is responsible for risk management studies and consulting to private and public entities. Mr. Bukowski is also a senior editor and frequent contributor to The Risk Management Letter.
riskVue | The webzine for risk management professionals
February 2000
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