Insurance companies are well behind banks, brokerages and other financial services in using the Internet to sell their products, according to a survey released last week by Booz-Allen & Hamilton, New York.
Only a few of the larger insurance companies, such as Fidelity and GEICO, are making online offerings, according to results of the study.
While more companies believe the Internet to be part of their corporate strategy, the majority spend less than $500,000 per year on Web capabilities. Most of this money is spent on marketing and customer service rather than on Internet sales.
More than 60 percent of the companies surveyed said they do not plan to sell insurance on the Web in the next two years and 67 percent said they would never sell annuity online.
Channel conflict is the reason why many insurance companies are reluctant to go online, said Gil Irwin, partner at Booz-Allen & Hamilton.
“Agents in the insurance industry are powerful. Companies fear that disenfranchising them by using the Internet will act as a disincentive, encouraging them to move to other companies,” he said.
The insurance agency is plagued by old systems, some of which are more than 30 years old. To adapt these to the Internet is expensive and provides little short-term gain.
“At the moment, a customer service agent can pull up more than five systems on a screen. It is costly to develop an Internet capability to match this. The consumer doesn't want half the story, so it's a case of putting all or nothing on the Internet,” he said.
The complexities of some policies and regulations also are holding insurance companies back.
But the potential for selling insurance on the Internet is huge, said Irwin. “To ignore this sector means companies will be walking away from what is a growing chunk of business.”