In spite of the collapse of new technology stocks over the last year, no one would deny that internet usage generally, and purchases via the web, will increase over the coming years. In fact, the recent fall in the FTSE seems to represent a consolidation towards the players that have the brand and the systems in place to deliver their promises, whether it is cheap flights, CDs and books, or financial products. Where required, many of these players have continued to attract extra funding through venture capital or internal investment to expand their operations further.
For insurers and brokers considering how to exploit new channels, a number of challenges lie ahead: What needs to be put in place behind the scenes? How should marketing be conducted? What to be aware of? What to avoid?
The first step is to evaluate the size of the potential market. Supposedly, around 1% of all insurance purchased is now bought over the internet. Of this, around three-quarters is motor insurance. Irrespective of how much this might grow and at what speed, there are currently very few potential customers being fought over by the major players. To evaluate the market, new classifications are constantly evolving to attempt to categorise people on whether:
they like to see someone face-to-face to buy insurance or whether they are happy to buy over the phone
they use the internet to acquire insurance quotes but are not comfortable yet giving their credit card details
they might use the internet, but only if it was made more convenient for them, perhaps via digital TV.Once the decision to sell insurance over the internet has been made, a long shopping list unfolds:
Name and address verification: If customers come to you remotely, you need to be able to check that the personal details they supply exist. As well as checking the validity of these details, they can be used to make some initial assumptions about how to deal with this potential client. For example, if the person using the site is a valuable existing customer it should be possible to reference their existing policy details to treat them accordingly. Alternatively, if the person is a new customer or “prospect”, then it should be possible to gain at least an initial impression of how valuable they are likely to be, based upon the performance of existing customers with the same characteristics.As an example, Ethel, who lives with Albert (who has the same surname) and has been living at the same address for thirty years, should probably be treated differently to Jason, whose partner Debbie has a different surname and who have been at that address less than a year. This information needs to be stored somewhere, so that it can be seen immediately and used to create a strategy of how to deal with this enquiry.
To create a strategy from information about the customer/prospect, statistical analysis needs to be undertaken, typically using data mining software. It may be that being an existing customer of one product tends to increase likelihood of purchase of another, or that being a young, new customer means a greater likelihood to be attracted by a competitive quote.
As well bringing forward data about the individual's name and address, it is now possible to bring forward information on the applicant's credit history, the full specification of the vehicle (if it's a motor quote) from the DVLA and previous claims history from the Claims Underwriting Engine to make a more measured decision about the quote being offered.
Using third-party data may make it possible to offer an initial quote before asking for several questions to be completed for a definitive quote. Many insurers have gone down this route, although one large direct insurer remains frustrated by many potential policyholders who do not realise that the product can be bought online, and instead phone the call centre number, still expecting the internet discount that they have just been offered. n As well as price, the rules generated from the statistical modelling should be used to vary the script on the website, the script being used in each email correspondence and the script being used on the phone (if it is used).
Rules should also be devised to set out a contact strategy for when and how to communicate with existing customers. It may only be necessary to contact some each year at the time of renewal, whereas it might be profitable to contact others more regularly with offers for other products.So, while volume is key, it is picking the best sites to sit behind that is producing good returns for some insurers. Only a view of the big direct writers can generate the economies of scale derived from the high number of visits to their sites, others are being shrewder by ensuring representation behind other successful sites such as Fish4.
Marc Farr is a consultant within Experian Micromarketing's Financial Services Team and is a member of the Chartered Institute of Marketing.
