Insurance companies served fewer than 10,000 customers over the Internet in 1997 compared with millions of customers served online by the banking and brokerage industries, according to new research.
A study of 140 insurance companies, released this month by management consulting firm Booz Allen and Hamilton, New York, found that although insurance companies still trail their financial services competitors, they are making progress in terms of Internet capabilities.
Eighty-six percent of insurance Web sites offer product information vs. 67 percent a year ago. Sixty-one percent of sites offer an agent locator service vs. 36 percent last year. Forty-three percent of companies have developed Internet strategies that are linked to corporate strategies vs. 24 percent one year ago.
But less than 20 percent of insurance sites offer sales or customer service that would enable customers to receive a quote or purchase a policy online, despite the fact that two-thirds of the companies reported that their customers requested these capabilities, according to the study.
“The insurance industry cannot ignore the Internet, which presents both an opportunity and a threat,” said Michael Pollack, a principal at Booz Allen and Hamilton.
Pollack said the Internet can help agents find qualified leads and service existing customers as well as serve lower-income customers profitably. For example, the cost of distribution per $100 premium is less than $50 through the Internet compared with $139 via a general agent. Those economics mean agents cannot make money selling to customer with incomes below $50,000, Pollack said.
“At the same time, the Internet poses a threat to the insurance industry, because it facilitates comparison price shopping, which will intensify price competition,” he said.
Booz Allen and Hamilton advises insurance companies delving into Internet marketing to clearly define customer segments they would like to target, design educational sites for customers and leverage the Internet to capture customer data.