CHICAGO — As consolidations, shifts in the types of insurance people buy and the way insurance is sold promise to revolutionize the insurance industry, those willing to turn to direct marketing are likely to benefit.
Insurance direct marketing is expected to be a $100 billion industry by 2000, Don Jackson, chairman of the Jackson Consulting Group, Middletown, DE, told an audience at the International Business Communications conference on insurance direct marketing here last week.
That projection, which includes insurance sold through the mail, telephone or through insurance agents who use direct marketing as a prospecting technique, reflects an increase from an estimated $80 billion in 1998, Jackson said.
Jackson's firm based its projection on conversations with and estimates from insurance companies that have direct marketing components to their business, and the Direct Marketing Association arrived at a similar number.
Citing a WEFA study, Mike Faulkner, DMA vice president of councils and segment services, projected insurance direct marketing to reach $115 billion by 2002.
Faulkner said that a 15.27 percent compound annual growth rate of insurance direct marketing sales to businesses, makes insurance companies the fastest growing industry in business-to-business direct marketing. In consumer direct marketing, insurance is the 13th fastest growing industry, with a compound annual growth rate of 6 percent.
Conference speakers showed that several kinds of insurance were experiencing direct marketing growth.
Auto insurance direct marketers such as Geico have lower expenses while returning the same amount or more to their customers in claims paid, said Michael Auth, who has more than 30 years' experience marketing a variety of insurance products.
“In general, the direct marketers are presently positioned better for survival than the large agency companies and the auto companies,” said Auth, who is vice president of insurance and financial services for Amerin Guaranty Corp., Chicago.
Meanwhile, in life insurance, where typically 12 percent of the population buys an insurance policy each year, 1997 marked the first year that the amount of policies bought through face-to-face meetings and of those bought through alternative methods was evenly divided, said Stephen J. Brunetti, member relations director for LIMRA International, a trade association on life insurance marketing and research.
Although many agreed that direct marketing was growing in the insurance industry, several speakers offered different assessments of what obstacles lie ahead.
Faulkner said the shift to direct marketing will be the biggest issue the insurance industry has to deal with.
“Disintermediation, or the removal of the midperson from the equation, is the most important of all challenges facing the industry,” he said.
However, Jackson, citing the battle between AIG and Cendant for the American Bankers Insurance Group, said the maze of consolidations that is part of a growing trend in the industry would challenge the industry as it makes this transition.
