‘The cheapest premium was £236 and the average was £389,' reads your new text message. Who sent it? An online search engine, explains Manjit Rana....
The internet is making insurance intermediary channels more complex. Consumers only need to search online for the words “motor insurance” to be presented with the names and sites of thousands of companies. While many insurers see this as a great chance to increase their market presence, just as many that see it as a serious threat.
In the online world, branding is the key to attracting people to your home page, which is why sites such as directline.com do so well. High street brokers with a good reputation locally find themselves fighting with thousands of other sites, such as admiral.uk.com, theaa.com and eaglestardirect.co.uk.
Consumers looking to buy insurance are faced with a vast array of choices. Each site requires that they type in the same personal information before it produces a single quote. With each search taking an average 15 minutes to complete, this soon becomes a slow, dreary and mundane task.
This is the sort of hard slog that it is better to get someone else to do for you. An intermediary perhaps? One who will trawl the internet and find you the cheapest quote. But who would want a job filling in forms on a screen with the same information, 24 hours a day, seven days a week, 365 days of the year?
Let me introduce you to the IA – a software- based intelligent agent. The IA does not speak, although it could if we wanted it to. It does not take breaks or get fed up. It does not complain of being bored by giving out quotes all day, and it does not need to be paid, fed or given holidays.
Here is how it works. A consumer looking for a motor policy goes to a site powered by an IA. They enter their details on a form that checks the data is in the correct format to be used by other sites.
The consumer then sets the IA to work and logs off the system… to do whatever it was we all did before the internet's advent. An hour later, they receive a text message on their mobile phone saying that the cheapest quote found by IA was £236, the highest was £689 and the average was £389.
While it sounds fantastically convenient, this technology will not only reap benefits for the insurance industry. It will certainly drive down premiums, too, as no one will have a chance to quote on anything but the price. Therefore, service and cover will suffer.
The insurance market probably only has room for three or four IAs, and this could lead to virtual monopolies. The first significant player will probably licence the technology to other sites.
The bigger insurance companies will have the capital to invest in better technology, so that their sites will be able to cope with the increase in traffic without crashing, like their smaller competitors' might.
On the other hand, intelligent agent technology might facilitate an increase in the number of virtual intermediaries.
An online intermediary could be set up easily without spending a fortune on marketing and brand creation. The resources normally funnelled into those activities would instead be focused on building relationships with the IA sites, and in ensuring that the site interfaces efficiently with the IA.
As competition builds, the IA sites could charge a participation fee to the online intermediaries and it might eventually become the norm for commission to be split between the two.
However, technology is only part of the solution. No matter how clever the software might be, you still need a very solid and credible commercial model to generate profitable revenue from the use of this technology.
The big question is whether consumers will pay an IA site to discover where they can save money? If the IA has already told them the cheapest quote, it is still possible for them to go and do their own investigations and then make a decision on whether they are prepared to pay £10 to save £80.
I would imagine that consumers would only be comfortable paying such a fee for information to a trusted brand such as Aol, Beeb.com, Yahoo! or Which? Online.
The technology could create a new breed of “infomediaries” – businesses that charge consumers for finding information. Possible candidates include Easyeverything, the chain of cybercafes that charges customers by the hour to use the internet. Because Easyeverything has a physical presence, it can collect cash from the consumer easily. Utility and telecommunications companies such as BT, Centrica or Vodafone could also provide an IA service and include the fee on the customer's next bill.
IA technology is not restricted to finding the cheapest quote for insurance, and there are already sites providing this service for the purchase of electrical goods. Is there a market for the high street “infomediary” that charges a fee to find you the cheapest fridge, flight, or household insurance policy?
An increasing number of people are paying others to complete the chores they hate or do not have time for. Will searching for things on the internet become one of these time-consuming chores that we might eventually want to pay someone else to do for us?
As new technologies appear they create a host of interesting businesses opportunities, as well as potential new competitors who we would never have expected to see in this space a couple of years ago. Just think, Vodafone may well be listed in the Top 50 intermediaries list in a couple of years.