A quote that grabbed me recently came from Mark Veverka at Barrons. He said: “If ever there was an old economy industry that should get blown to bits by a deconstructive internet business model, it is the arcane world of selling and underwriting insurance” (http://www.barrons.com, March 6 2000). We probably all take sides with the idea that the insurance world is arcane, but it is his sentiment about the importance of the internet that I agree with.
Buying insurance is often laborious and complex for the consumer. Recent figures from an independent research company show that 40% of people feel shopping around is the only way to get a good deal on insurance. Asked if they found it boring, 61% said yes – more than for any other task, including ironing. What they hated about the process was being put on hold and having to repeat the same details again and again. Finally, consumers were asked whether they would be interested in a commission-free service that let them shop around without having to call around, and 60 % said yes.
The internet can help the insurance industry to become much more user friendly. This was the whole premise of our – and, I suspect, that of most online intermediaries – business model. Consumers are able to get quotes from different providers in a matter of in seconds, and can buy online for immediate cover.
The time-saving benefits to the consumer are obvious, but is this a dangerous precedent for the insurance provider whose policy premium will be listed in a table next to his competitors? What will this do to prices and how will we differentiate premium products and brands?
The pitfalls
The best way to answer these concerns is to look at how almost 70 % of the population currently buy insurance. Using a directory such as the yellow pages, they call around or visit websites of three to four suppliers, scribble down the quote from each one, compare, select and then re-contact to purchase. For the insurance provider the pitfalls are obvious: will your brand fall at the first hurdle and not even be selected to contact for a quote? Will your quote be comparable, and will your brand add value to the purchasing decision? These are only a few of a whole host of technical and customer relationship management (CRM) issues.
It is the second point that critics of the electronic distribution channel make great play of. “If our policy quote is shown next to our competitors without qualification, we will be judged solely on price”, they say. Obviously this would be damaging not just for the provider, but for the industry as a whole. However, if we go back to how most people currently compare and buy insurance, the question surely should be whether price is in fact the only criterion upon which consumers make a purchasing decision.
The role of the intermediary
An online intermediary can help providers over the first hurdle of not being contacted at all, and assist in the second pitfall by creating a way for consumers to easily compare quotes that are not solely based on price.
The job of the intermediary is to create a brand that becomes a place consumers go to for all their insurance needs. In this way, providers have access to an audience they may not have previously reached through their own marketing activities.
In a model such as ours, the insurance provider pays a nominal marketing fee to receive qualified leads, rather than paying through the nose to develop and implement a campaign to simply drive traffic to their individual site.
In addition – and this is where price transparency comes in – the intermediary must ensure the consumer is presented with as many details as possible, to assist him in making an informed purchasing decision.
For example, on our site, the customer is presented with a table of quotes, including annual and monthly premium, excess, and a policy features option. The customer can buy from this screen or select the “product comparison” button to get an overview of different policy details. The internet is the ideal medium to bring this information together in one place, in a format that is quick and easy to understand.
Veverka ended his article by saying: “One thing is certain – insurance isn't boring anymore”, and, again, this is a sentiment I would agree with.
