Savvy traditional insurers are turning to the potential of Web-based marketing
tools and developing hybrid distribution strategies.

By Leslie Hetherington

(Reprinted with permission from ci Canadian Insurance Magazine, October 2001)

As businesses embrace e-commerce, marketers both benefit
and are challenged by the high speed, extensive reach and interactive capabilities of the
Internet. These challenges are intensified in the insurance sector, which markets an
intangible product that often comes with a high price tag and the potential for
significant losses to customers if a poor product or feature is selected.

The insurance industry lags behind other sectors in
implementing e-commerce strategies, which are measured by the actual sales closed online,
by the end customer. Forrester Research projects only three per cent of (U.S.) life
insurance policies will be sold online by 2003. E-commerce growth will be more rapid for
property & casualty insurance, which is projected to rise in average percentage of
revenues from less than two per cent in 2000 to 16 per cent in 2005, according to a global
2000 survey conducted by the Economist Intelligence Unit, in cooperation with PricewaterhouseCoopers.

One reason for this slow adoption is the complexity of all
forms of insurance, particularly life, and traditional ‘offline’ legalities,
such as medical underwriting, credit bureau clearance and paper-based signatures. Other
areas such as commercial insurance have resisted the “commodification” trend.
And many people still prefer to purchase insurance through personal contact with a trusted advisor.

Additional obstacles that deter many ‘brick and
mortar’ insurers from offering full end-to-end online service include potential
alienation of brokers and uncontrolled price competition.

Clarica Life Insurance Company addressed these challenges
with an integrated strategy that gives customers a choice between face-to-face
transactions, call centre and Internet channels for their insurance transactions. They can
now purchase the company’s personal health insurance products through an end-to-end online
process, which includes quote, application, credit card payment, electronic signature,
online underwriting and immediate approval for a clean case.

This insurer has also taken steps to mitigate potential
conflicts between distribution channels. “We are web-enabling our 3,100 career sales
force agents, giving them their own Web page and encouraging them to refer their customers
to buy online, when it makes sense,” explains Diana Deverall-Ross, vice president of
e-business at Clarica. These agents share the commission to compensate them for referrals,
when a customer initiates a purchase through their online page.”

‘Click and Mortar’ Trend

E-commerce figures for online insurance can be deceiving
because they fail to measure the time a consumer or business invests in online product
research through a provider’s website, before they complete the transaction offline,
through a broker or call centre.

BELAIRdirect finds online marketing cost-efficient.
“For every eight sales started on our company Web site, seven are concluded through
the call centre at a significantly reduced time per call,” says Pierre Angers,
Director, E-Commerce, BELAIRdirect. “Many customers like to research options
in advance, without feeling pressured to respond immediately to a live person.”

Given this ‘click and mortar’ trend and potential
savings, it is hard to deny the value of directing customers, and in some cases prospects,
to a company Web site and giving them the information, advice and service they need to
make an informed decision.

Uncovering Life Events

Using Web site strategies to uncover a customer or
prospect’s life events is an emerging tactic that gives brokers or agents a powerful
edge in the marketplace. When brokers can use the Web to draw out information about a
visitor’s life events like births or significant decisions, such as a home purchase,
they arm themselves with a powerful sales tool. These strategies are of particular value
to urban brokers, responsible for expansive territories.

An integral part of Clarica’s prospecting strategy is
an exclusive marketing alliance with ‘LifeServ’ Corporation, a Chicago-based
interactive technology company that uses Web-based planning software and CD-ROMs to help
customers going through various life experiences to interact with companies that can
assist them. Clarica distributes these planning tools, through its website and other
channels, to prospects across Canada. At about 50 strategic points on each CD,
Clarica’s products are profiled, its planning tools featured or a hyperlink to the
company Web site or the appropriate agent’s home page is embedded.

Another way to use the company Web site to uncover life
events is with “Web Sales Center” software. A good example is EloquaNow from
Eloqua Corporation, a Toronto-based technology company. This suite of hosted, real-time
applications enhances customer relationships and develops qualified prospects, by
leveraging email, wireless devices and the company Web site.

EloquaNow tracks and aggregates behavioral data
together with customer relationship and policy data to create a holistic profile of each
Web site visitor. Agents and brokers can use these profiles to make more informed sales
calls and marketers can use them to develop segmented email lists and implement
personalized email newsletter campaigns.

Web Sales Centre applications can also include tools that
allow brokers to identify, qualify and build relationships with online visitors, when they
are most receptive. When a customer or ‘hot’ prospect clicks the link to the
brokerage’s Web site and is detected online, the most appropriate broker is notified
through their desktop or WAP-enabled wireless device, if they are off site. Using their
wireless device or a browser, brokers can chat with prospects, help them complete forms,
and push down multimedia brochures to move them nearer to closing.

“Each email response reveals a need and empowers the
broker to effectively sell, when the prospect’s interest is at its peak,”
explains Mark Organ, CEO of Eloqua Corporation. “After several encounters, the broker
can build an unprecedented profile of the customer or prospect for long-term marketing initiatives.”

Indeed, this could become an opportune vehicle for reaching
specific targets, such as the Internet savvy audience in the errors and omissions market.
To facilitate this process, relevant professional associations could include links on
their Web site to preferred E&O provider sites.

One of the concerns about e-commerce for insurance is the
quantity of ‘price shoppers’ who buy online and create a high turnover on
renewals, in comparison to broker-written business. “The real online opportunities in
insurance sales lie in e-influenced transactions, not necessarily in direct e-commerce. In
insurance and analogous businesses, hybrid high-tech/high-touch models are winning over
online pure-plays and businesses that haven’t embraced the Internet as a sales tool,” says Organ.

Increasing Web Traffic

EloquaNow and other applications can also be used
for general permission-based email campaigns, an increasingly popular tactic for
attracting customers, or in some cases prospects, to a company Web site.

Doug Grant, principal of Insurance-Canada.ca, believes
“e-mail is a huge marketing tool both for customer retention and potentially new
business prospecting, if it is used judiciously, carefully and appropriately.” In
contrast to paper-based newsletters or other collaterals, email is inexpensive to produce
and disseminate, provides immediate results, offers incomparable targeting and can trigger
a high click-through response.

Once a customer or prospect arrives at the Web site, the
broker can simulate ‘face-to-face’ interaction by using a comprehensive
interactive solution or several applications for online conversations, browser
manipulation, video conferencing and presentations to build a relationship with the
customer or prospect in real-time.

Jim Ball, CEO of Vancouver-based Reliance Insurance
Agencies Ltd. and a past president of the Insurance Brokers Association of Canada,
recognizes the benefits of such applications. “To me the power would be when someone
can be online, see something, have a question and instantaneously talk to somebody online.
That is the best combination – their convenience and our advice,” he says.

Many insurance sector Web sites further support e-commerce
and enhance customer convenience by offering electronic application forms, online quotes
and in some cases, online approvals.

“We are offering added value to our customers by
building a password-protected section to our website that gives them the option to pay
premiums, change policies, look-up details or terms online,” explains Jim Ball.

B2B Versus E-commerce Adoption

In contrast to e-commerce growth, numerous carriers have
implemented business-to-business (B2B) strategies to improve efficiencies and reduce costs
incurred through channels between the insurer and its brokers and reinsurers.
Browser-based interfaces are used by numerous companies, such as Zurich Insurance Company
and Royal & SunAlliance, to give brokers access to a variety of transactions.

Zurich Insurance Company is focusing its Internet
investment on accelerating and simplifying transactions for brokers. Currently, brokers
submit 40 per cent of the company’s policy endorsements over the web. Brokers can even
submit new personal property business online. According to Alister Campbell, Zurich’s
president of personal insurance: “It’s easy, accurate and fast. Brokers can use the
time they save to build their business.”

Ease of doing business is the focus for Zurich Commercial
Insurance as well. Brokers in Ontario can now rate, quote and issue new small business
policies over the Web — a capability that is being rolled out nationally.

Future Net Premium

As ‘brick and mortar’ insurance companies forge
new territories in e-business and virtual direct underwriters provide additional
competition, the surging quantity of information on the Internet will make the public more
knowledgeable – particularly when the ‘Web generation’ comes of age. This
increased understanding will facilitate and promote online purchasing. A Sigma report by
Swiss Re estimates that, in the long term, e-business will help US personal lines insurers
decrease their expenditure on sales, administration, claims settlement and claims payments
by up to US$ 15 billion, or 12 per cent.

Although the investment costs may seem high today as we
move into a hardening market, visionaries predict that insurers of the future will move
with ease into a hybrid distribution strategy that attracts customers with bricks — or clicks.

Leslie Hetherington is a freelance writer based in Toronto.