- Where Insurance & Technology Meet

Websites or Agents? Why Not Both!

An old debate has resurfaced with the rise of social media … Is this a new channel that replaces agents and brokers?  As with most good things, the answer is both yes and no.  New US research suggests smart insurers and agents/brokers would do well to exploit the middle ground.

Since the beginning of the commercial internet, in roughly 1995, we have found ourselves in conversations with insurers who look at the possibility of using web sites as alternative to agents for the marketing and sale of insurance.  With notable exceptions, experiments in this area have resulted in spectacular failure.  The reason is simple, for all but the simplest risks, consumers need and want help with selecting insurance products and purchasing the appropriate coverages.

As reported recently in Insurance & Technology, in  the 2011 J.D. Power and Associates US Insurance Shopping Study found that insurance shoppers are increasingly using insurer’s websites for research on products.  Significantly, 54% report getting quotes.  However, in the actual buying process, the consumer still turns to an agent to complete the transaction.

This research was reinforced by an Accenture study, reported in Insurance Networking News, which found that overall, consumers still prefer completing the transaction with agents.  Event in the 24-34 year old demographic, 59% of respondents prefer buying from agents.

However, this is not to say that agents and insurers can minimize the importance of the internet generally or social media specifically.  Both studies emphasized the importance of referrals from trusted sources as a significant factor in the buying decision.  Erik Sandquist, a senior executive in Accenture’s Insurance practice, was quoted as saying. “Before buying, more and more consumers perform their own research online, compare options and seek recommendations from others, using social media sites or referral sources.”

And the need for such referrals is becoming more important.  The J.D.  Power study found that churn is increasing, reaching the 2008 levels.  This they attribute the the aggressive marketing efforts of insurers.  According to Jeremy Bowler, senior director of the global insurance practice at J.D. Power and Associates, “In 2010, the (US) insurance industry spent $5 billion on marketing and advertising, with the top four companies alone spending more than $2.6 billion.”