Online Insurance Purchasing

by Catherine Kargas

(Jan. 14, 2013) – Canadians are spending a significant number of hours online: a whopping average of 44 hours per month! That number is significantly higher than the US, UK, French, German or any other national average.

While they are online, in addition to checking their bank accounts and email, watching the latest videos on YouTube and visiting various social media platforms, Canadians shop online. In fact, approximately half of Canadian Internet users ordered goods and services online in 2010. They placed nearly 114 million orders and spent over $15 billion.

Average hours spent online

As presented in the accompanying table, Canadians’ online purchases are generally travel and entertainment related.

Insurance-related purchases do not even show up in the table (less than 3% of online purchases).

Canadian Electronic Commerce, Types of Products Ordered

A study undertaken in February 2012 by Secor and Opinion Search among Canadians in Quebec, Ontario and Alberta revealed that while a relatively strong percentage of Canadians undertake insurance-related research online (QC: 22%, ONT: 26%, AB: 19%), this generally does not translate into an online insurance purchase.

This same study revealed that in all three provinces, insurance professionals and friends/family are considered to be the top sources consulted for the purchase of automobile insurance. Interestingly, consumers from Ontario tend to consult the Internet significantly more than their counterparts in Quebec and Alberta for automobile insurance purchases.

Sources of Information Consulted: automobile insurance (% of respondents)

How does this translate into the probability of concluding the purchase of automobile insurance over the Internet? According to this study, telephone and in-person represent the most probable channels used to purchase automobile insurance. Purchasing automobile insurance over the Internet is identified as “probable” by 7% of Quebeckers, 9% of Ontarians and 6% of Albertans.

Probability of concluding the purchase of automobile insurance by channel (% of respondents)

The fact is that consumers generally consider the purchase of insurance as “complicated”, and this despite the fact that they normally purchase this product annually. For this reason, Canadians prefer to consult an insurance professional prior to concluding the purchase. Even when purchasing insurance through the direct channel, the large majority of Canadian consumers prefer to speak to someone over the phone before binding. This conversation is essential to providing much-needed reassurance to the consumer regarding liability, endorsements, etc.

The following graph illustrates that for both auto and home insurance purchases, consulting an insurance professional is considered to be preferable or essential for more than 90% of Quebeckers, Ontarians and Albertans.

Importance of consulting an insurance professional prior to purchase (% of respondents)

Brokers should be the natural “go-to” professionals for insurance-related advice. Often times, however, the relative lack of availability or accessibility of brokers compared to direct channel representatives tilts the scales in favour of the latter.

The top reasons identified for purchasing auto insurance over the Internet is convenience, the ability to compare prices, lower premiums, speed of the transaction and availability or accessibility.

Perceived advantages of purchasing auto isurance online

Brokers need to consider how, moving forward, they can incorporate some of these perceived “online” advantages into their business models. With today’s technologies, can brokerages be more “available” / “accessible” and provide a more “convenient” experience for consumers? What aspects of the business model will need to be changed in order to compete more effectively for personal lines business? Can a pooling / sharing of services between several brokerages be a feasible solution?

About the Author

Catherine Kargas is Vice President at MARCON, a management-consulting firm serving the financial services, energy and alternative propulsion technology transportation industries. Catherine has 24 years of consulting experience in market intelligence and business strategy and is a satisfaction evaluation specialist. In the area of insurance, she has worked with P&C, life and group insurance providers.