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Analysis from Gomez: Brokerage Firms Take Stock of Insurance Products

Given extended market volatility--and lingering uncertainty stemming from the events of September 11 and the Enron debacle--investment firms, as well as their affiliated financial advisors, must reevaluate the role insurance/protection products play in providing financial security for their customers.

By Greg Davies, Gomez Inc.

Earlier this year, the mainstream media pounced on Citigroup's move to spin off its property and casualty insurance arm, Travelers Insurance. Commentary centered on Citi's difficulty cross-promoting P&C products to its core bank customers as further evidence that the financial services modernization legislation, passed in late 1999, has yet to result in a large brokerage firm or top-tier bank successfully integrating a leading insurance underwriter into its operations.

However, lost in the headlines was Citigroup chairman and CEO Sandy Weill's decision to retain Travelers' life and annuity business. Although small in comparison to the company's P&C operations, Citigroup has reportedly achieved a measure of success in selling that unit's life insurance and investment products through its banking and brokerage businesses.

Given extended market volatility—and lingering uncertainty stemming from the events of September 11 and the Enron debacle—investment firms, as well as their affiliated financial advisors, must reevaluate the role protection products play in providing financial security for their customers.

As indicated in a recent Gomez consumer research report, "Advisory Clients and the Internet," the Web represents a powerful tool for advisor-based investment firms to educate clients and strengthen customer relationships.

Nevertheless, a recent analysis of leading online offerings on Gomez's Full-Service Brokerage Scorecard reveals that surprisingly few firms offer even the most basic information online, regarding protection products, to their customers.

Here's an overview of what's available.

BROCHURE-WARE REMAINS THE NAME OF THE GAME. Only four Full-Service Broker Scorecard firms surveyed by Gomez provide information or functionality for protection products: Wells Fargo, Piper Jaffray, Prudential, and McDonald Investments. Additionally, only two out of 10 offer an online form for requesting rate information—Wells Fargo (through partnerships with Securian Financial Network/Minnesota Mutual for homeowners insurance, AIG for auto, and Insurance Central for life) and McDonald Investments (also via a partnership with Securian/MN Mutual).

Given the enormous product and technical complexities associated with most cash value life insurance products, combined with full-service brokers' and their individual investment reps' perspectives with respect to insurance (i.e., insurance as a component of a holistic financial plan, and not a simple stand-alone product sell), it comes as little surprise that online quotes are not more widely available. However, the growing availability of robust needs-assessment tools and online quotes for whole, variable and universal policies on online offerings from insurers such as Prudential and John Hancock provide best-practice examples for full-service brokerages looking to enhance their insurance-related capabilities.

"ACCOUNT LOOK-UPS" CONTAINING PROTECTION PRODUCT INFORMATION ARE THE EXCEPTION, NOT THE RULE. Only two offerings surveyed by Gomez, Merrill Lynch Online and UBS PaineWebber, allow brokerage customers who log onto their account management areas to view information on insurance policies they have purchased directly or indirectly through their investment advisors.

Beyond Merrill and UBS PaineWebber, we find a number of brokerage offerings supplying information on protection product holdings through contracts with third-party account aggregation services. Legg Mason, for example, through a contract with uMonitor, supports online access to policies issued by roughly 100 major insurance companies including Safeco, Nationwide, Prudential Life, MassMutual and John Hancock, as well as direct-auto writers such as GEICO.

POOR INTEGRATION LIMITS ONLINE CROSS-PROMOTION OPPORTUNITIES. Although Wells Fargo, McDonald Investments, Piper Jaffray, and Prudential all provide educational content and-except for Piper Jaffray-quoting capabilities on their public sites, none of the four effectively tie this information into the secure customer log-in area. Individuals seeking strategies for wealth preservation and estate planning must log out of their accounts and navigate to the public areas of the sites (which may not happen regularly if users bookmark their log-in pages) to find insurance information. Clearly, this limits the effectiveness of even the most passive cross-promotion strategies.

By comparison, firms such as DB Alex. Brown, UBS PaineWebber, and Merrill Lynch integrate insurance information into the account management area. Enhanced educational resources (regarding the role insurance plays in a comprehensive financial plan), providing clear paths to access this information, and more tightly integrating the advisor into the online process represent opportunities to improve the cross-promotional and relationship-building potential of the Web.

Advisors and full-service brokers, as they seek to utilize the Internet as a tool for extending and strengthening relationships with their clients, must not overlook how protection products can help achieve these goals. Given the essential role insurance plays in investors' long-term planning, firms wishing to provide a more comprehensive picture of their clients' assets may wish to consider the costs and benefits of more tightly integrating protection products into their client interfaces.

Greg Davies is a senior analyst covering the online insurance industry for Gomez, Inc., a Waltham, MA Internet quality market research and advisory services firm. He can be reached at [email protected].

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