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by Doug Simpson

Business
on the Net: 97
(10/97)
Business
on the Net: 96
Cyberlife
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Datamonitor's 1997 report provides a detailed
analysis of the insurance industry's present and
projected use of the Internet from the perspective of
an outside observer, based on information gathered from
inside the industry. The 192 page report includes
analysis of the results of a survey of IT and Marketing
executives from the insurance industry. It includes case
studies of ten enterprises representing a cross section
of those involved in insurance on the Net.
Respondents expect the Net to skyrocket as a
distribution method in the next several years. A
large percentage of responding companies, especially
among those with a direct marketing arm, expect to offer
interactive sites with actual online insurance sales by
the year 2001. The respondents expect the Net to result
in fewer independent agents, but more exclusive agents,
particularly those employed in direct marketing arms of
companies. They also expect to see fewer telephone
representatives as more and more of their functions are
done by consumers on the Net.
- "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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Executive Summary
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