Let us start to tackle this question by, first, comparing the two industries. The internet industry is quite simply the sexiest industry to be in – dotcom entrepreneurs now generate media coverage to rival pop or film stars.
OK, it is not the free-for-all that it was six months ago, but the internet industry is still very dynamic. Its hallmarks are change, innovation and progress. It is the fastest moving industry we have ever witnessed and an industry with influence that is unparalleled in recent times.
Insurance, on the other hand, must be one of the least dynamic industries to be in right now. It is burdened with the stereotype of the 80-year-old underwriter wearing a pinstripe suit, milk bottle glasses and hair combed craftily across head to cover any signs of the recession.
Our industry is caught in a seemingly endless soft market, with share prices tumbling over the last 12 months – particularly those of the Lloyd's vehicles. Insurance is an industry known for its resistance to change, but also for its solid, long-term performance.
So, the two industries appear completely at odds with one another. However, as ebusinesses seek to gain solid foundations within the turbulent dotcom sector, all this is about to change. Is it possible that the two industries may, in some way, align? In my view, we have to make this happen if the insurance industry wants to thrive alongside ecommerce.
To work towards this goal, it is first worth considering that there are two major factors halting the global expansion of ecommerce:
While there is little the insurance industry can do about the former, there is plenty it can do about the latter. Fraud is an obvious area of concern to ebusinesses, with recent surveys suggesting that about two-thirds of internet shoppers are unwilling to submit their credit card details over the internet. This is a frighteningly high figure, but one that presents the insurance industry with a multitude of possibilities.
Our industry has started making some inroads, with three main types of policy available to ebusinesses. These are cyberliability, business interruption insurance and “any other”. Cyberliability essentially covers ebusinesses against the unique risks of doing business on the web. It seems that the world and his wife are moving into this area of insurance, with many companies – and Lloyd's syndicates – developing new policies. These policies are expanding rapidly to allow for new exposures.
Business interruption insurance specifically aims to protect against hacking, tampering, virus, loss of power, server failure, routing error, software error or just plain lax security. Any business selling its wares via the net should consider buying this type of insurance – that is, as long as it is selling enough of its product to make it worthwhile. The “any other” category includes directors and officers liability, keyman personal accident policies, credit card fraud, auction house fraud, warranty, transit insurance, intellectual property and copyright infringement.
However, the insurances that interest me most are those that actually encourage use of the internet. Real-life examples include the Marbles credit card – reimbursing its cardholders if an item ordered online is lost or damaged in transit. What a great idea. EBay – an online marketplace – sells insurance protecting its users against fraud. This encourages usage.
These insurnaces provide a safety guarantee; peace of mind in an environment typified by lack of consumer confidence. New technology cannot, and never will, be able to guarantee 100% security. The only way an ebusiness can guarantee total security is by providing a guarantee. Insurance can warrant that guarantee, thus enabling companies to take the risk off their balance sheets.
The other area to focus on is market share. Ebusinesses will continue to trade regardless of whether or not they have liability insurance – the risk of not being on the net currently far outweighs the risk of doing business on it. However, what ebusinesses need is market share. They want to build a leading position in their market as quickly as possible and then stay there as long as possible. And with the average consumer more likely to use a website offering cover than one that does not, it is fair to say that insurance can increase a company's market share and help it stay ahead of rivals.
All in all, I believe that these are exciting times for the insurance industry. We have an unrivalled opportunity to stamp our mark on this fast-growing phenomenom. Our unique selling point is that only insurance can provide guarantees. The associated business message is that integration of policies will lead to increased market share. So it is time for us to grab the opportunity, leverage the business benefits and, generally, be more innovative. If we do not, we will quickly be left behind.
