Internet Sale Forecast: Slow Growth

By E.E. Mazier

NU Online News Service, June 18, 3:06 EST?Don'texpect any spikes in the sale of insurance products over theInternet, an insurance industry consultant who has studied Internetcommerce advises.

That forecast came from Ted Devine, a principal of the NewYork-based management-consulting firm McKinsey & Company in aninterview with National Underwriter. He said that pureInternet sales of insurance will grow gradually but steadily, likethe sale of insurance through call centers.

His firm provides consulting services on marketing, logistics,product development and other areas to clients such as insurancecompanies and life insurance brokerage firms.

In survey results reported last year on the online buying habitsof more than 1,000 randomly selected U.S. consumers, McKinsey foundthat the impact of the Internet varies according to the line ofinsurance.

Even today, the lines most likely to be sold purely over theInternet without an agent are automobile and term life insurance,Mr. Devine stated.

The more complicated lines, such as homeowners insurance andwhole life insurance, are being sold through agents, even ifcustomers use the Web for their initial research.

While insurance company Web sites get thousands of consumer hitsa day, the insurers most likely to gain a competitive advantage arethose that use technology methodically and thoughtfully, ratherthan aggressively, to more effectively deliver their businessmodel, he suggested.

"What you're seeing is most insurance companies setting up somevehicle where the consumer can get information and in manyinstances agent and rating information on the Internet," Mr. Devinesaid.

He added that "the better companies are providing aself-directed mechanism" that allows consumers to decide how theywant to make the purchase.

As an example, he cited Progressive Insurance Co.'s successfulleveraging of Internet technology and call centers in both personaland small commercial lines. Mr. Devine also noted that TheHartford, Travelers and Zurich have managed to gain an advantage onthe small commercial lines side by leveraging technology.

Mr. Devine places the current percentage of the population thatactually purchase online without the help of an agent or callcenter at 1 percent to 2 percent.

He doubts that figure will rise to 15 percent in the next fiveyears, as predicted in some quarters. "That would be more than thedirect-response ?[percentage] after 25 years of call centers beingan effective means to deliver insurance," he noted.

Mr. Devine believes that what is more prevalent than selling viathe Internet is that the more astute insurers are leveragingInternet technology "to better squeeze costs out," --such as byreducing interaction expenses --and "to enhance customer servicedelivery."

Mr. Devine said he thought that the people who three years agosaid that the Internet would "take over the world" were wrong then.But those who in the face of the recent "dot.com implosion" aresaying that the Internet is "completely dead" are wrong now, hesaid.

For those insurers who use the dot.com implosion as an excuse tonot take advantage of Internet technology, this is "probably notthe smartest long-term answer," Mr. Devine said.