High-Tech High-Touch

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)

Nov. 16, 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.

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