It's all about distribution.

Reaching consumers where they are most receptive and ready to engage increasingly means having multiple channels for distribution, including robust online-sales capabilities.

Let's take a quick look at some communications statistics.

• Wireless penetration in the United States has increased from 34 percent in 2000 to 93 percent in 2010, according to CTIA, an association for the wireless industry.

• Use of phones is changing, too, according to Nielsen, which says U.S. mobile subscribers exchange an average of 357 text messages per month while talking on only 204 phone calls.

• The younger the individual, the more likely they are to text rather than call.

These statistics probably do not come as a surprise.

Lines of communication are changing. In addition to using mobile devices, a growing number of adults, and particularly the next generation of homeowners, are conducting their personal business online. Regardless of the industry, a robust online presence is a must.

Certain industries made the transition long ago. Stock trading, for example, moved online in the 1990s and created an entirely new consumer base of individual traders. In the last few years, as online banking became the norm for many consumers, full-service websites presented myriad options for depositors to expand their relationship with their banks.

While insurers have had an online presence for years, the offerings have been somewhat limited. And the concept of a website enabling consumers to easily compare homeowner policies and premiums online is in its infancy.

Insurers' websites generally provide information on the types of policies available and how to file a claim. Some sites lead the homeowner through the quoting process, but few actually deliver a binding quote upon its completion. Even the most popular insurance websites are designed for lead generation and do not allow the consumer to comparison shop or bind and purchase a homeowners policy online.

According to the Wall Street Journal, 92 percent of retail shoppers surveyed have more confidence in information obtained online than from an individual or other source (see Jan. 8, 2009 WSJ article titled “New Info Shoppers.”) We should expect no different from homeowners contemplating an insurance policy purchase.

For most homeowners, the insurance that protects what is likely their largest single investment is currently a mysterious product.

Most homeowners don't understand how to select appropriate coverages or even what their current policies cover. As homeowners shift to making most purchases online, they will look for websites that enable them to more knowledgeably comparison shop for insurance and they will become more sophisticated consumers of the product.

A growing number of insurers are realizing the value and necessity of utilizing robust online distribution systems to satisfy today's consumers and to generate sales and growth. While improving one's own website helps, homeowners do not want to enter a lot of personal information into multiple insurance company websites in order to comparison shop. An online insurance agency enables easier comparison shopping along with educating homeowners on important coverages they might not have purchased in the past.

For example, online distribution can help homeowners understand the importance of fully insuring their homes and possessions, and it encourages purchasing enough Coverage A to fully replace destroyed homes in the event of a disaster.

The problem of underinsurance has been rampant in the industry for over a decade. Marshall & Swift/Boeckh still estimates that more than 60 percent of homeowners do not have enough insurance to fully replace their homes.

Homeowners can be educated on better ways to control premiums, such as increasing deductibles rather than skimping on their Coverage A amounts. They can also be educated on additional coverages they may want to purchase that do not cost too much and can give them further peace of mind.

By partnering with an online agency, insurers can access a valuable demographic of knowledgeable homeowners who want to fully insure their homes and possessions and who will therefore be more satisfied and profitable policyholders. Sites exist today that inform homeowners on the value of proper insurance and enable them to compare quotes, customize a policy to fit their needs, and even purchase a policy and obtain an insurance binder.

Use of an online agency distribution system offers a number of other benefits for insurers:

• More accurate data

Applying for a policy online at their convenience, a potential policyholder can access information needed to complete a policy application more accurately. Home and policyholder details can be easily stored and delivered to partner insurers in a format suitable for catastrophe and predictive modeling.

• Lower reinsurance costs

Along with underwriting and rating rules, today's insurers need to monitor catastrophe exposure and where they are writing business geographically. Online distribution enables geographical portfolio management rules to be automatically implemented for partner insurers so they can control exposure and reinsurance costs.

• More sales

There is no question that online sales will continue to increase for all products, including insurance. Insurers that harness the capabilities of the Web to make it easy for consumers to understand, compare and buy their products are likely to see more sales along with higher premiums per policy.

• Higher retention

Online distribution can enhance the insurance buying experience for homeowners and the communication between insurers and policyholders. Satisfied customers can easily renew policies year after year, remaining loyal to their insurer.

• Higher profits

Faster growth, lower reinsurance costs and higher retention all lead to higher profits for insurance companies.

As noted, homeowners insurance is not sufficiently valued or understood by most consumers. Partnerships between insurers and online agencies can help change that and greatly enhance the homeowner's insurance experience. An online platform brings together a number of disparate, but essential, tools for policyholders and is the next step for consumers looking to make informed insurance buying decisions.

As online purchasing continues to grow, so too does interest among both direct writers and independent agency companies in bolstering online sales. Increasingly, insurers are realizing they need to be agnostic with respect to product distribution, and they need to reach out to consumers in multiple ways.

Enhanced online communication creates a more cohesive and efficient network of insurers and policyholders, providing innovative insurers with a competitive advantage and helping them build more profitable books of business.

Special Reports /

Insurers Urged To Harness Web To Grow Profitable HO Biz

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