Unlike other products, insurance is perfect for internet sale – the ultimate ‘virtual' product. If insurers play it right and offer transparency and shared information in the claims process, they will reap the benefits, says Barry Whyte….
The recent collapse of Letsbuyit.com, Boo.com and Clickmango has tended to suggest not only that dotcoms are dodgy but that ecommerce is itself fundamentally flawed. So, is the internet express about to run into the buffers?
In the case of insurance the answer is no. A medium that has proved disastrous for the promotion, sale and distribution of perfumes and similar highly tangible, highly priced, but unrecognised brand products is, quite frankly, a godsend to insurance. How else was the industry going to be able to bring new products to the market place quickly and economically?
While the telephone takes a lot of beating for flexibility and interaction, the benefits gained from persuading customers to, literally, complete a large element of their own data-base entry and, effectively, sell to themselves – 24 hours a day, 365 days per year – taxes even the direct telephone sellers' capabilities.
The web is by no means perfect, being subject to irritating delays while downloading and occasionally to communication disruption, but the fact remains that as a medium the internet is perfect for insurance.
Insurance is the ultimate “virtual” product – you can't see it, feel it or easily check the quality. As a customer, you sure as hell don't want to ever have to use it (with a few exceptions) but you definitely have to have it.
There is one area of weakness in the armoury of the current online insurers, however, and that is a total concentration on selling. Where is the claim fulfilment mechanism to sit alongside the underwriting and policy administration angles? Well, in most cases it isn't there yet but the signs are that it is on its way. It is increasingly likely that insurers will accelerate into this area as the realisation dawns upon them that the policyholder, who both sought his quotation and bought his policy over the web, certainly doesn't expect to be abandoned to conventional media or surface mail at the point of claim.
A powerful tool
In fact, as an information and processing channel, the power of the web is obvious. One of the key strengths of the internet, and ecommerce in general, is the particular ability that all parties engaged in any given transaction have to access common shared information. But, transparency must be the name of the game. Where insurers insist on obscuring processes that don't need to be concealed and continue to fail to keep their customers in the picture then the benefits of the web cannot be fully appreciated. But, where insurers are prepared to commit to a transparent process, the benefits become exceptionally clear.
In the context of claims in particular, it is immediately apparent that the modern process, which involves an insurer, probably a loss adjuster and an outsourced claims administration company, almost certainly a supplier of replacement goods and, finally, perhaps an approved contractor, is precisely a process in which it is essential that all parties should be able to keep their eye on the ball.
Is it really beyond the wit of man to ensure that the policyholder knows what each of these individual parties is doing with his or her particular claim at any moment in time? Would it not be better if the policyholder were fully informed? Still, I hear you cry, that this is fine for personal lines cases such as motor, travel or household, but, surely, the intricacies and complications, not to say the vested interests, involved in the handling of more complex commercial claims is such that ecommerce is simply not up to it. Certainly, it is true to say that the problems are greater, but it is equally true that the “early adopters” of ecommerce, those who first apply the processes to simple lines of business will quickly feel the need to extend this approach to all areas.
The bare facts
Of course, there are huge implications for the traditional composite insurer and these should not be treated lightly, but the bare facts are that whether the business is sold via a new entrant “supermarket” retailer or a traditional insurer or underwriter, the choice is stark. Those who bite the bullet hardest will almost certainly achieve the greatest gain. Arguably indeed, the upside is greatest for the traditional composite, where the operational cost savings could well resuscitate an otherwise flagging account.
For brokers, the internet represents more of a mixed blessing. On the one hand it provides a bridgehead for the brand extenders, which threatens the brokers' very existence. On the other hand, it can enable a small ambitious local broker to attack the national market, particularly with niche products, and thereby reinforce any telephone-based offerings they promote.
For loss adjusters and claims handling operations in general, the web represents a massive challenge combined with opportunity. For too long, loss adjusters have been perceived, often unfairly, as possessing adversarial qualities, which can intrude unhappily between the insurer and his policyholder. The lack of transparency is one of the primary causes of suspicion. But imagine a world where every step of the process is recorded and clearly accessible to the policyholder, his broker or affinity group as well as to the insurers. Not only will the self-imposed pressure to do precisely “what you say you are going to do”, ultimately produce better service, but insurers will take great comfort from the knowledge that adjusters' movements are always “visible”. A removal of obstacles and the introduction of openness into in the relationship must result in greater trust on all sides, but, be warned – with greater visibility comes greater accountability.
There is more than sufficient upside remaining in the ecommerce world for the insurance community, all it needs to do is go for it. But never forget that the claims will follow.
