These days, it seems almost everyone in insurance
wants to tap in to the much-lauded power of the
internet. But foregoing traditional sales channels in
favour of cyber technology can be a recipe for disaster.
Christine Seib reports.

Everyone is into Es: e-commerce, e-retail, e-training, e-economy, e-learning. The internet is the future of communication, of sales, of entertainment, of business, of music. Dotcom entrepreneurs are worshipped in the media and the stereotypical computer geek is the richest man in the world. We don't even need to leave our houses now the internet can bring us food, clothing and a virtual existence.

We're all well versed on the good things the internet can bring us and one of these is insurance. Multi-channel distribution is now firmly entrenched in insurance sales techniques - but does that mean the traditional distribution methods will be written off? Are we all going to be buying our insurance on the internet or via digital TV in ten or 20 years time? There are numerous specialist online insurers and plenty of press to go with the launch of every new internet, digital or WAP venture but, if the actions of some of the UK's biggest general insurers are anything to go by, don't believe all the hype.

To start with, insurers were slow to join the e-revolution. When things were hotting up in 1999, a survey by IT services group CMG showed that only 27% of insurance companies thought e-commerce was an issue that needed immediate attention. At the time, CMG's general insurance division director Martin Stott described the industry's apathy as "alarming".

"The figures show that the insurance sector has not grasped the urgency of the internet and intranets as a means of communication," he worried. And with good reason, considering that by early 2000, a Department of Trade and Industry study showed that 81% of UK businesses were online and 90% of people were employed by companies connected to the internet. It was pretty much available to everyone and insurers were missing a vital connection to customers.

Getting web-wise
By the beginning of this year, however, insurers were catching the web-surfing wave. A Chase Computer Services survey of insurance company directors in January revealed that 42% thought the internet would be the most influential factor in the industry's development over the coming five years. It also said that 41% of insurance company boards had taken direct responsibility for the company's e-business strategy.

A lot of this intense interest was because the industry was chasing the tail of the trend. A survey released in January by the Confederation of British Industry, in conjunction with Pricewaterhousecoopers (PWC), showed that, in most industries, the value of internet business increased by 27% over the last quarter of 2000, while in insurance it increased by 79%. PWC's John Hitchins attributed the rapid growth to the fact that the insurance industry had not gone online as quickly as other sectors.

The survey concluded that insurers appeared to be getting to grips with the internet, with the majority of large companies having established their own sites. It warned, however, that insurers needed to simplify the buying process, pointing out that leading US insurers had dropped the number of questions asked on their sales sites.

Indeed, some insurers have become so keen to get online that they're willing to get a little nasty. In March, Norwich Union (NU) failed in its efforts to force a Scottish businessman to give up his right to the domain name Irving Remocker registered the name over a year ago for a site dedicated to the worldwide appreciation of chess. Meanwhile, Norwich Union took out trademark applications on the words "your move" as the name of its estate agency division. NU offered Remocker £30,000 for the name, which he rejected. So NU complained to the World Intellection Property Organisation's Arbitration and Mediation Centre that Remocker's use of the name was in bad faith. The centre threw the complaint out and NU had to settle for

Too many hiccups
Unfortunately, being keen doesn't necessarily mean doing it well. Recently, the new online insurance intermediary Its4me emailed high-profile online insurers and providers such as Direct Line, Screentrade, Admiral, Inspop, Eagle Star Direct and NU Direct. Average response times to the emails, supposedly sent by customers eager to buy insurance, varied from 11 to 16 hours. The slowest response was 45 hours. In one email trial, three companies did not bother responding. Two of the companies did not acknowledge any of the emails sent to them.

International brand strategist Paul Temporal said of the survey: "Most players in the online insurance market are at risk of going out of business. They can be extremely unreliable and often demonstrate poor service quality plus an indifferent attitude to the consumer, which results in extreme dissatisfaction. Customer dissatisfaction and decreases in brand loyalty are directly linked."

Unfortunately, Temporal's theorising is backed up by consumer experience. A Mori poll for Screentrade earlier this year showed 21% of people had looked for car insurance on the internet in the previous six months, 47% planned to use it for motor quotes and 33% for household quotes in the future. But 22% said they had found the process slow or experienced technical problems and, even worse, 20% of shoppers had the site crash before their transaction was complete.

These are worrying figures if a Chartered Insurance Institute (CII) study is to be believed. The study, carried out with management consultancy PMI at the end of last year, said the balance of power would transfer from the insurance provider to the end consumer, with companies being forced to tailor their products to the individual. It stressed the need to continue to offer multi-channel distribution.

In all, the picture seems to be that consumers are going to get more demanding and, if they're going to buy their insurance on the internet as opposed to traditional means, they want to do it with fewer hiccups than they're currently experiencing on insurance sites. Until that happens, the old ways of buying insurance are still going to be available. While Prudential gives motor insurance quotes to Vodafone WAP phone users and Direct Line sinks £2m into marketing its website, insurance giants such as NU, Royal & Sunalliance (RSA) and Zurich are hanging on to their traditional sales channels as long their customers want to use them.

Right to choose
NU's marketing and underwriting director Briget McIntyre says the company, which describes itself as a multi-channel provider, sells through corporate partnerships, brokers and intermediaries and direct retail via television, telephone and the internet. Its biggest channel is intermediaries and she believes: "The ability for the customer to buy in the way they want is the future" - not just the internet.

"Some want advice and go to intermediaries or specialists for that, some want to make their own choices so go direct. My argument is that the decision to buy insurance is not straightforward for everyone," McIntyre says.

Even customers who buy on the internet have not totally got rid of their desire for face-to-face or at least voice contact: "They still want to talk to a customer relations person, too," she says.

RSA spokeswoman Suzanne Sullivan says the company is "fully committed to multi-channel distribution" and sells through call centres, independent financial advisers and its sales force, plus brokers and intermediaries.

"We've seen the growing importance of emerging technologies and they're by no means replacing the traditional methods but are providing wider choice for customers to access products and services," she says.

Sullivan says insurers that give customers the chance to pick and mix communication channels are the ones that will be successful in the future. "We recognise that while some people will be happy to deal entirely online, others may prefer to conduct research via the internet, then buy the product or service over the telephone or face-to-face," she says.

That's also the line Zurich is taking. Spokesman James Hart says the company, which sells through its internet presence Eagle Star, plus brokers and call centres, is led by what its customers want. "Some are happy to go through brokers and some like to deal direct through the internet, so what they want, we'll continue to supply," he says.

Predicting the future
Is this cautious approach the right one? With such a fast-developing medium, even the experts are reluctant to fortune-tell.

An actuarial profession working party produced a paper on distribution channels of the 21st century for the General Insurance Conference last year. It said the fact that consumers could use the internet to rapidly compare quotes from different companies would mean companies had to differentiate products and use brand names that caught the public's eye. Insurers could also pass on the savings made through greater automation to the consumer, which may lead to the setting up of virtual insurers by venture capitalists and affinity groups.

The paper stated that the actuarial profession would need to become more forward-looking as the associated data collection becomes increasingly sophisticated.

All good to know, but is technology really the future of selling insurance? Even the working party says: "For the answers to these questions, we will need to wait and see."