Lagging behind in e-commerce has now become the number one fear for household insurers, according to a new report from Bacon & Woodrow.

In the survey of 35 Bacon & Woodrow client insurers, electronic distribution was the main issue of concern to household insurers with the expectation of it becoming even more important in the future.

The firm's annual household insurance report claims that providers must establish an e-business strategy so they can react swiftly enough to a volatile trading environment.

It also claims that as volumes on the internet are expected to stay low in the short term, low-cost operations still have time to become major internet brands.

Bacon & Woodrow senior consultant Mike Wilkinson, said: "Short-term sales projections belie the importance of investing in an internet strategy now. Insurers which have been experimenting with the internet as a new business tool have been right to do so – not because it can win them significant levels of new business in the short term, but to develop familiarity with the technology, its effects on customer behaviour and potential integration issues.

"The internet is rapidly opening up beyond the early adopter market and further experimentation is now dangerous unless carefully planned. We are yet to see a ground-breaking internet proposition in this market but time is running out for insurers to test and practise their systems.

"If existing players in the insurance market are to have a future, they must consider where they can fit into the e-business value chain and how the opportunities can be grasped. To be in a position to take advantage, they need to be addressing the expense, branding and integration issues now, as real benefits may take time to achieve."