• "This is especially true for Group P&C policies, through which the company or agent online only needs to deal with a small number of representatives at the policy holding company for most of the holder's concerns." (Study, p. 149).

    Datamonitor predicts "consumers are becoming more willing to not only purchase goods online but purchase high end goods online." Datamonitor believes that the industry can address consumer complaints of poor site organization and worries about privacy security with better design and increased education about existing security tools.

Demographics -- Opportunity and Risk
Pointing to the demographics of young, educated, computer-literate middle- and upper-class users who are increasingly engaging in online commerce, Datamonitor comments:

• "Insurance stands in an excellent position to take advantage of this rising curiousity with online commerce. As the market becomes increasingly saturated and growth rates eventually start to slow, insurance can position itself as the new line of online services. * * * If online commerce continues to grow as Datamonitor analysis believes it will, consumers will find the convenience and possible cost savings of selecting and even purchasing insurance on the Internet too large of an opportunity to pass, forcing insurance companies to continually upgrade and expand their Internet offerings." (Study, p. 50)

Auto, homeowners and term life insurance are suitable for marketing and sale on the Net, according to the study report, which says:"Commercial and group insurance products both in the long term and non-life sectors are inappropriate for selling on the Internet as they are also complex and require detailed analysis of the customer's requirements." (Study, p. 92) Datamonitor calculates an insurer selling on the Net will have a 7.6% cost advantage over a conventional direct insurer, and a 10.3% cost advantage over a an agency/broker system.

Established agency companies are in a strong position, according to Datamonitor. They can meld the convenience of the Net with the personal service of the agent, using the Net to perform many of the functions of telephone customer service representatives. The Net offers independent agents low cost, high profile marketing and advertising, says Datamonitor. Brokers stand to benefit the greatest from the sale of insurance over the Net, according to the study report, because of they can access the developing databases to compare companies' quotes and process applications online.

Intranet Tools Offer Special Advantages to Agency Companies
Agent/broker systems can use special tools and applications in a private, limited access network known as an intranet. These tools are especially beneficial to geographically dispersed intermediaries who need close contact with up-to-date home office resources. They can obtain quotes, complete and submit applications online in a private environment, and use group ware tools developed for the user-friendly Net interfaces under continuing development..

A new breed of insurance providers may gain the most from Net-based insurance transactions and support, according to Datamonitor's analysis. Banks' rapid adoption of electronic commerce tools affords them a potential as a new class of providers. Developing back-office service providers such as InsWeb and InsureMarket are addressing what Datamonitor sees as an enormous untapped market accessible by technology-driven new providers.

• "Electronic sales and marketing of insurance is expected to increase to $1.9 billion by 2001, according to the 1997 Datamonitor study. While carriers are working on accessing this market, on-line brokers, insurance malls as well as back office systems providers stand to grow the most. * * * [T]he Internet stands to become the lead provider of auto, term life and homeowners insurance * * * [O]nline brokers with quoting and application services can become the lead contact for interested policyholders, providing the insurance carriers with over 55% of future policyholders in these product lines." (Study, p. 76).

Net sales will not take over all consumer insurance sales, according to Datamonitor. Consumers still have the human desire get out of the house, see and feel the product or service site and interact with other humans in the "shopping experience." For business - to - business commerce, efficiency and convenience are much more important than cost and enjoyment, driving an increasing amount of business commerce to the Net, and creating both opportunity and challenge for the insurance industry.

• "As businesses increasingly move to the Internet and establish a presence, they raise the stakes for those businesses currently on the Internet to improve their site as well as for those without a presence to create one online. At this point, the Internet has become so widespread that this can not be avoided. * * * The current reality of the Internet is that, while a site may not be noticed in its presence, it will certainly be noticed in its absence." (Study, p. 135)

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Douglas Simpson