In the third in a series of articles by Andersen Consulting, Graham Kennedy and Melanie Kneale outline how ecommerce allows insurers to reach customers in new ways...

The majority of insurers are either already using the internet, or planning to take advantage of the opportunities of ecommerce soon. But should an insurer's first move into ecommerce be to set up a new, stand-alone ebusiness? Or should they instead approach the emerging channels of the web, digital television and advanced mobile telephony as a new means of reaching customers in ways that complement existing channels?

Most major European insurers now have some form of commercial website, but only a minority of them allow customers to purchase policies on-line. Many early websites that supported purchase transactions were launched as stand-alone start-up businesses, without the back up of agents. One such company is Lloyd 1885 which was established by the Allianz Group to penetrate the Italian market by selling directly to customers through call centres and the internet.

This model enabled unencumbered new businesses to sell products in new markets. But over time, the market matures and other players enter. Consumers can compare similar products easily and, in a world where consumers have more choices, simple stand-alone websites face an uphill struggle.

For the incumbent insurer, these stand-alone businesses fail to maximise customer value. They leave cross-selling opportunities on the table. And they fail to leverage the sales and service infrastructure across a broader set of products. They also fail to recognise and capitalise on key customer expectations. For example, a customer may make the initial purchase of an endowment or life policy over the web.

Understand customers
But, over time, customers' needs change. They may well expect to be able to use a call centre, or even have a face-to-face session with an advisor to address these growing needs.

Most insurers face immense challenges, in providing consistent service to the customer regardless of the channel they choose to use, and in understanding a customer's intentions and offering ways to help meet these.

A traditional agent-based, product-oriented organisation simply does not have the infrastructure to add complementary new channels, or to be able to properly service customers coming from another channel with new products or services that complement the original ones. Pricing, for example, can be a major challenge. How do you price a product that may be sold over the internet, but which allows customers to access call centres and agents at the customer's discretion? And how do you pay commission in such instances?

The key is to design the business around the customer and to understand the customer's needs and habits. When are they likely to use a call centre, the internet or digital television? What types of products should each channel be able to service? How can the channels complement each other in clear, specific and well-defined ways?

The challenge for insurers is to develop their service channels and offerings to match their customers' intentions. This includes extending their electronic channels to interact real-time with customers, and making sure that up-to-the-minute information about the customer is available regardless of the channel that a customer chooses to use. A flexible solution is required to allow the organisation to integrate new channels as they are developed.

Major change
Thus in moving to the web, an insurer is taking the first step to providing better access to its products and services to its customers, through a network that incorporates both direct channels and middlemen. But providing for all of a customer's needs and habits through one seamless, emerging distribution network requires major change to the traditional insurance organisation.