Throughout these pioneer days of e-commerce, the greatest challenge facing the industry has been creating and sustaining consumer need.
Do consumers need to buy houses, cars and groceries on the Internet? If not now, will they need to do so in the future? Possibly.
However, we have learned that not every industry does well when moving from brick-and-mortar to the Net. Chief among those that might not make the cut? The insurance industry.
In concept, it seemed like a great idea to sell and manage insurance policies via the Internet. After all, think of the paperwork that could be eliminated, the man-hours saved and the convenience for the customer. How could it fail?
It has not failed yet, but only because it cannot seem to get off the ground. Indications are that consumers are not knocking themselves out to find insurance on the Internet.
How Convenient
It was the convenience factor that insurance companies were counting on to attract consumers to their online operations.
I gave it a try when searching for less expensive car insurance. I had been with the same company for about 15 years and decided to do some comparison shopping. The result? I gave up after being asked way too many questions and being required to offer too much personal information just to get a quote.
If I have to jump through this many hoops just to compare prices, I wondered what more I would have to experience in order to buy a policy. I never got that far.
Slow Going
I am in a clear majority of Americans who have not moved my auto insurance business online. Between customer frustration and regulatory challenges facing the sellers, creating a viable online auto insurance industry is light years away.
Health insurance sellers are not faring any better. In the year 2000, it is estimated that less than 1 percent of small business owners bought insurance policies for their employees via the Internet.
The health insurance market in this country is estimated to be worth about US$440 billion. The need for the product already exists. Creating a need for a new channel through which to buy it appears to be the stumbling block.
Cruise Control
Wisely, a number of online insurance brokers have opted to cozy up to major corporations, hoping the reach of established companies would rub off. For example, one insurance marketplace,eHealthInsurance partnered earlier this year with GE Financial Network. In additon, eHealthInsurance is making headway in striking deals with banking giants such as Bank One.
The goal is to reach small business owners through the financial institutions with which they are already associated. One might say the online insurance industry is riding the coattails of established brick-and-mortar conglomerates, but so be it.
The U.S. government, still skeptical of pure-play Internet insurance sellers, has imposed a number of restrictions on what they can and cannot offer. Chief among the prohibitions stifling the growth of the industry are state regulations that do not allow any type of discounts on policies.
For price-conscious American consumers in a questionable economy, that could be the deal breaker.
Staying Alive
Meanwhile, the online life insurance industry is suffering its own set of woes. Earlier this month the Consumer Federation of America made public its findings that 75 percent of insurance sites it studied were not showing the lowest priced coverage available.
For an already skeptical consumer base, news like this is apt to further discourage online insurance buying. Whether consumers will take the time to study the market, shop around, visit multiple Web sites and then purchase life insurance online is debatable. After all, why not just enlist the services of a real live agent to do all that legwork?
It appears the life insurance industry has yet to create a unique selling proposition worthy of widespread consumer attention.
Bad Timing?
It may be that the insurance industry is trying too hard. With restrictive regulations hampering its ability to compete and a public that can’t find a reason to change its method of buying insurance, the timing seems wrong for the industry to make its mark online.
Look for insurance shopping bots to emerge that will search the Internet for best coverage and pricing. That, coupled with more widespread acceptance and use of digital signatures, might give the industry a boost.
Until then, consumers are sending a clear message that they don’t really need the Internet to buy insurance.
What do you think? Let’s talk about it.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.
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interesting story. but…
The number of insurers that pursued a narrow e-commerce model of selling online was funny. Insurance is not bought; it is sold. Instead of offering graphics-intensive marketing sites, insurance companies need to model themselves after financial portals–fast and functional. Customers come to insurers’ sites not to purchase but to get fast, efficient service, and meeting this expectation will improve the brand image and reinforce sales efforts. The Internet can also be put to good use strengthening relationships within traditional sales channels–between the company, its agents/brokers, and the consumer. Insurance companies that think outside the box and concentrate on the needs of customers (consumers, agents, brokers, etc.) will be rewarded.
Paul, OF COURSE you’re going to be asked personal questions when you try to get insurance online. That’s the only way the insurance companies can give you a different rate than your neighbor. They need to know your name, age, address, driving record, vehicles, etc., etc.
But guess what? These are the same types of questions you’d be asked if you went to a traditional agent. You can’t get a quote from them either, unless you provide that information.
As far as the statistic provided by the Consumer Federation of America, they reported that only 6 of 24 sites tested provided a quote from CNA Insurance, which was supposedly the lowest company for the hypothetical customer.
This doesn’t mean that, on average, 75% of sites fail to show the lowest price all the time. It just means that for that particular example, 75% of the sites did not have a relationship with CNA. If the hypothetical customer had been a 50-year-old female, the results may have been very different, with a different “lowest” price insurance carrier, and a different percentage of companies who represented that carrier.
You’ll find the same thing in the offline world. Contact 24 independent insurance agents for life insurance quotes, and you’ll find that they all represent different sets of companies, and there will only be a certain percentage that represent the “lowest price” carrier.
Of course no one wants to buy insurance over the internet, insurance forms are the hardest to fill out next to IRS forms! What a customer can do though is use the internet for other insurance needs. We sell business insurance through an internet based platform that ties the carrier in with the agent and the customer. The internet then provides faster quoting and online account access for the customer. Let the agent help with the buying process and let the internet do the rest!