Direct Line's announcement last week that it had captured 30% of the nascent online insurance market – 100,000 policies in the first year – could sound the death-knell for those cybersites that have emerged recently.
Analysts doubt these cyberinsurance entrepreneurs will share the same success enjoyed in other retail markets.
A familar pattern is emerging in the insurance market. Brand name and money is winning against innovation and boldness.
Peregrine Riviere, an internet financial services analyst with Morgan Stanley Dean Witter, says: “They can't possibly all survive.
“I think that brand will become important.
“The point about the internet is that anyone can find the cheapest quote. Companies will have to be the cheapest or have the best customer service. A lot of that will be associated with brand.”
He warns that new sites have to be wary of putting too much into marketing at the expense of making their sites more user-friendly.
“It may not necessarily be those sites that spend the most on marketing that do well,” he adds.
“Customers will become frustrated by sites that don't give them a quote because of some fact in their case and by sites that take details and don't bother to give quotes.
“Very often your details exclude you from getting online quotes and you can't find out what is preventing you from getting a quote without phoning someone.”
Ross Hall of Garol, a company that designs, launches and establishes corporate websites, also believes there will be casualties. He says that too many sites are badly thought out and not designed with the customer in mind.
Garol sees attention as the key to success in online insurance. So the bancassurers, which already have people looking at their sites to check their bank details, will have an advantage.
No doubt, the potential of the internet market is huge, and is already taking shape in the US where insurer Allstate has taken the bold step of restructuring its sales force based on predictions for online buying.
In the UK, there is an increasing online audience – with the one-film wonder ET trying to resurrect his career encouraging people to use the internet at home, and at work.
So what do the online insurers think they have that will mean they will be one of the survivors?
Directline.com has the Direct Line brand to build on. Its claim of securing 30% of the market says Mark Godfrey, director of marketing, comes from a combination of figures from analysts.
Godfrey thinks there is room for both direct selling and intermediaries on the web as they have different attributes. “There is room for both models. Our end to end process is very quick,” he says.
Godfrey stresses the importance of building up the brand image and promoting the site once it has total functionality. The first adverts for directline.com appeared in January this year, four months after the site was launched.
Getting the brand and site functionality right was also important to Egg before it launched its motor insurance intermediary service with Prudential last month.
Egg's director for strategic alliances, Mark Taylor acknowledges that the company has had problems with traffic flow. “We have been criticised in the past for not being able to address the levels of traffic,” he says. But he says the scope and speed of the site has been constantly expanded.
Egg chose motor insurance first, as Taylor says: “It has greater appeal to consumers. It is the one that causes the most grief in getting a quote and getting insured.”
Egg is already looking to expand its service, with home contents insurance to be launched next, probably by late November. It is also looking at other areas of insurance. Godfrey will not reveal customer targets, but says “Egg aims to be one of the top distributors within the next three years.”
The importance of getting the site right before launch is illustrated by Inspop.com. It ploughed £5m into promoting its site, with lavish television advertising. Unfortunately, the timing of the campaign and full functionality of the site did not coincide, leading to complaints to the ITC that the adverts were misleading.
Mix of selling
From an initial two insurers, the Inspop site now has six insurance partners, Prudential, CGU, RIAS, GoSure.com, Hiscox and Budget, with six more due to come on board by the end of the year. Insurance companies pay a flat fee for sales leads.
Mark Garratt, Inspop.com's head of marketing, says the site has had 100,000 hits.
And as well as ensuring that customers can access all parts of the site, the site itself has to appeal to both new and existing customers, according to Charles Crawford, Churchill's technical services director. Sites need to offer a mix of selling to potential new customers and policy servicing to existing customers.
Churchill.com was launched in October last year, offering motor and home insurance. As with other sites, not all customers can buy policies online. Those with non-standard risks still have to be referred to a call centre. “The internet will never replace the call centre,” Crawford says.
CGNU customers can access motor and household quotes from its site, with travel insurance to be added next month. People buying policies online get a 10% discount. Around 300,000 quotes have been given online this year.
Cornhill customers can only protect their pets online at the moment. All other policies go through brokers. The company is looking at extending its interactive television service, which can give quotes on the screen.
As well as predictable problems, companies setting up online operations may also find computer-based problems that they had not anticipated. In some cases, the most logical name for the website will already be owned by someone else. Cornhill.com is owned by someone in Australia, while Churchill had to buy churchill.com from a company in the US.
Stuart Mort, associate director of online security company, Control Risks, suggests that the company name is trademarked to give a stronger case if ownership of a website address gets as far as a court case.
Mort also warns of the need for sites to be set up with sufficient security checks to ensure that customer details stay the property of the site.
Another factor that companies often get wrong, Mort says, is managing the peak traffic flow on the site. Peak traffic for insurance sales sites is at nine in the morning, lunchtime and early evening, suggesting that people tend to use the sites from work rather than at home.
Godfrey, of directline.com, says that calls tail off rapidly after 11pm, although there are a trickle of calls at three and four in the morning.
Directline.com receives 40% of its hits when its call centre is closed. And the customer profile is similar to those buying by telephone. Godfrey says people buying online “tend to include more men, be slightly younger and slightly more southeast and London-based.”