BOOZ-ALLEN SURVEY REVEALS GAP BETWEEN INTERNET INSURANCE OFFERINGS AND CUSTOMER NEEDS

2001 eInsurance survey shows explosive growth in online traffic, with high
interest in property and casualty products
However, many insurance sites do not measure up to other financial services firms in providing interactive
services

NEW YORK, NY – August 22, 2001 –Despite explosive growth in traffic,
many insurance Internet sites fail to measure up to competing bank and brokerage sites,
according to a recent eInsurance study by Booz�Allen & Hamilton, one of the
world’s leading management and technology consulting firms. Insurance company sites
do not draw as many customers to their sites or offer the extensive product mix or suite
of services as their non-insurance competitors. However, insurance companies are moving
quickly to forge distribution partnerships and expand their online offerings.

The 2001 eInsurance Study analyzes Internet usage data from
Neilsen/NetRatings, the Internet audience measurement and analysis firm, to determine how
consumers use insurance sites, comparing them both against one another and against bank
and brokerage sites. As in past years, Booz�Allen also surveyed top insurance carriers,
including Property & Casualty and Life/Annuity providers as well as top financial
institutions and financial intermediaries, and reviewed over 200 Web sites belonging to
insurance companies, banks, brokerages and online intermediaries.

According to the Booz�Allen survey, the online insurance market is expected to account
for 1.5% of total net premiums written by 2005. Property and casualty products are
expected to drive eInsurance growth, representing 88% of the online market by 2005.

Although visitors to insurance sites increased by 1,150% between 2000 and the prior
year, insurance companies still attract far fewer visitors to their sites than other
financial institutions. The top 10 insurance sites were visited by 5 million unique users
in April 2000, compared to 18.2 million unique monthly visitors in April 2000 for the top
10 bank sites, and 11.5 million unique users for the top 10 brokerage sites. Furthermore,
consumers spent less time at insurance sites – under 13 minutes per month, compared
to 22 minutes per month at bank sites and 35 minutes per month at brokerage sites.

The Booz�Allen survey shows that insurance companies need to aggressively upgrade
functionality. While insurers have made plans to add capabilities such as problem
resolution, claims tracking, self-administration of policies, online account viewing and
bill payment, many have not yet done so. For instance, 86% of insurance customers want to
self-administer their accounts, but only 25% of insurers allow that, although two thirds
say they plan to implement it. While more than 9 out of 10 insurers report that their
customers have requested the ability to view their accounts online, this capability has
been implemented by fewer than half of the insurers surveyed.

Response time also needs to be improved in many cases. In an email response test of 50
randomly selected insurance sites, 54% of the companies did not respond to an email
question within one day. Although this result is actually slightly better than a similar
test last year, a sample email sent to over 50 brokerages and banks elicited a response of
63% within one day.

In addition, the survey found that customers will visit more often and spend more time
on insurance sites that have a wider breadth of financial products and service features.
For example, Nationwide, USAA and Prudential – all of which offer an extensive array
of products that can be bought online – average three visits per customer each month,
as opposed to one monthly visit per user to sites with narrower offerings.

Finally, insurers need to ensure that the consumer online experience is as convenient
as possible and easy to navigate. The study showed that the average visit to insurance
sites lasts 6 to 7 minutes – which means that insurers have a very short time in
which to impress the consumer with the value of their site before they move on.

Gil Irwin, a vice president who leads the eBusiness insurance practice at Booz�Allen,
said: “Insurance is a unique segment within financial services. At first glance, it
appears that banks and brokerage firms have a significant advantage over insurance
carriers as they rush to enter the insurance market. Yet, some carriers have managed to
beat the banks at their own game by offering non-insurance financial products. Therefore,
designing a flexible, convenient and innovative product offering is integral to site
‘stickiness’ – keeping visitors at their site.”

Alliances can Provide Critically-Important Shelf Space

Booz�Allen believes insurance companies should claim prime “shelf space” on
high-visibility sites run by banks, brokerages, account aggregators, and
comparison-shopping marketplaces such as Insweb. The survey found that 45% of consumers
are less likely to use their insurance carrier’s site if products and services such
as financial aggregation are provided elsewhere. Many insurers acknowledge this: 47% of
respondents expect to ally with online intermediaries and aggregators, while 43% will ally
with banks and wirehouses.

Paul Lockmiller, a principal in Booz�Allen’s insurance practice, said: “The key
to success on the Internet for insurance companies is to provide the best possible
customer experience at a variety of touch points. This means giving their products high
visibility on sites where the most attractive customer segments spend the bulk of their
time. Alliances with other financial service providers can also drive traffic to insurance
sites by making mutual funds, annuities and other products available on their own sites.”

Click, Call, or Come In

Booz�Allen’s research suggests the move toward independent agents will continue.
Executives surveyed expect to get at least 48% of their premiums through independent
brokers/agents by 2003. The study results showed consumers prefer to buy insurance through
both online research and in-person meetings, and the more complex the policy, the more
customers want to speak to someone before purchasing. A healthy 88% of insurers maintain multiple channels.

“Integration, or the ability to provide a consistent service experience across all
channels, is the holy grail of eInsurance, and the industry needs to embrace it,”
said Mr. Irwin. “The primary drivers of integration are the need to satisfy the
customer and the need to close the sale. There are numerous potential channel combinations
for providing information, advice, sales and service – insurers need to understand
what their target customers want and make sure they can deliver it economically. If not,
the most attractive customers will find other institutions to meet their needs. For
example, some customers want to establish a relationship in person communicate mainly by
email and return to a face-to-face channel for certain high-anxiety topics – all
without having to repeat any information or learn a new menu or password. This is by no
means easy, but it may be the only way for insurers to not only catch up, but actually win.”

An article about the survey is available electronically as an e-news bulletin on the Web site
of strategy+business, the quarterly business journal published by Booz�Allen & Hamilton. The bulletin
can be accessed here.
strategy+business alerted key subscribers to the posting of this e-news bulletin via an e-mail notice.
The company’s insurance survey can be obtained by e-mailing Mary Beth Sasso at
[email protected].

About Booz�Allen & Hamilton

Booz�Allen & Hamilton combines strategy with technology and insight with action,
working with clients to deliver results today that endure tomorrow.

Booz�Allen has been at the forefront of management consulting for more than 80 years.
The firm’s experience in developing insights and driving action within both governments
and businesses generates sales over $2 billion. With an international staff of more than
10,000 employees located in 110 offices worldwide, Booz�Allen’s consultants work in
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Booz�Allen provides services in strategy, systems, operations and technology to a
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as well as major institutions and governmental organizations around the world, including
most departments and agencies of the United States government.

To learn more about the firm, visit the Booz�Allen Web site at
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in business, visit www.strategy-business.com,
the Web site for strategy+business, a quarterly journal sponsored by Booz�Allen.

Contact:

Karen Guterl
212.551.6516
[email protected]