By Tim Carpenter, Gomez Inc.
In January 2000, in tandem with the creation of its Internet Development program, Nationwide Insurance commenced a Web analytics initiative that is now yielding results that speak volumes relative to the role online offerings play in the insurer's overall business strategies and brand marketing.
The program was designed with a multitude of objectives: measure Web success and produce an ROI; calculate operational savings; determine the success of online and offline advertising that directs traffic to nationwideinsurance.com; track the popularity of different online programs and projects (and adjust placement); and, finally, determine the cost/quote and cost/sale to compare against call center and agent acquisition costs.
Investments in online technology have come under heavy scrutiny at many carriers, and while insurers are not by any means retreating from the notion that the channel can have positive effects on acquisition and servicing costs, they are requiring more than a persuasive elevator pitch to allocate more precious funds. That's not surprising, given Internet technology's lackluster track record.
For example, while firms such as Safeco and Progressive quickly rolled out quoting and purchasing functionality to the vast majority of US states where they write, other carriers, such as Prudential, have been far more reluctant, offering quoting to less than 20 percent of the states in which they are authorized to sell policies. State Farm has long offered widespread availability of quoting but provides online binding in only seven of its states, despite having rolled out the functionality nearly two years ago. Still, other major players have yet to offer quoting functionality, and online binding remains a component of a minority of the industry's online offerings.
This has left many carriers in a state of flux, offering top-notch functionality to a minority of their markets without a reliable indication of which road to travel with respect to online quoting and sales. Online quoting, designed to facilitate purchase via the more cost-effective online channel, has failed to deliver droves of online sales. As a result, carriers have been largely unable to quantify the contributions of online quoting investments to the bottom line. An analytics initiative such as Nationwide's, therefore, holds significance given carriers' lack of consensus and belief, in some quarters, that online quotes are a waste of resource.
Using analytics software, a 10-person Nationwide systems team compiled, filtered and cleaned data stored in a data warehouse specific to quoted and bound polices across all channels. Further, a five-person Nationwide electronic business intelligence (EBI) team analyzed the systems team's data reports to identify channel trends that could ultimately provide direction relative to strategic business decisions tied to online initiatives. EBI's findings were significant.
By matching specific quote data about individual customers from completed online quotes against similar data points for auto policies bound via any channel in the same states, the team was able to identify specific customers and determine an online quote to non-channel-specific close ratio for its online offering. Using this methodology, Nationwide ultimately arrived at a conversion rate that was highly competitive with other distribution channels--a considerable volume of business.
Sue McManus, Nationwide Insurance's director of internet strategy and development, believes this data makes a strong case for the role of the Web. The amount of new business generated from a quote on the Internet is about the same as the amount of new business produced by one of Nationwide's medium- to large-sized, established agency states. "That's pretty significant for us to tell the story that the Internet is a viable channel for selling insurance."
Of all people who get a quote and later bind via any channel, half do it within three weeks. The other half has a wider spread; in fact, many do not purchase until five months after receiving a quote. This reinforces the assertion that the online quoting process plays a key role in establishing a presence and competitive advantage with insurance shoppers, even when they do not act upon that specific quote in the short term.
McManus believes this project has proven that quoting is an important piece of Nationwide's business strategy, and asserts the carrier will continue to re-invest in online quoting and applications. Nationwide believes its Internet site serves as an extension of the local agency and has gone to lengths to integrate agents throughout the quoting process.
For example, several months ago the carrier added an agent follow-up to the quote process such that prospects can opt-in to receive follow-up phone calls. By separating warm leads from the tire kickers, Nationwide delivers to agents a pool of potential business with concentrated opportunity.
This is not to say that direct online sales cannot grow to be a significant distribution channel. McManus points towards consistent gains in traction of online sales. Last year saw an almost doubling of policies bound online vs. 2001, and early data from 2003 suggests the figure could double again.
However, most significant is the quantification of online quoting's influence on offline sales. Nationwide's metrics, in concert with statistics from other large carriers that show upwards of three-quarters of quote completions come from quick quotes (when available), make clear that many customers desire only to receive a ballpark estimate before taking the process offline.
As additional carriers quantify the success of their online quoting programs and are able to show that they can generate business in large scale at efficient costs that can later close offline, more will invest in services that enable the completion of quotes such as quick quoting, and those that enable the hand-off to offline sales channels.
Tim Carpenter is an analyst with Gomez, Inc., an Internet benchmarking and advisory services firm in Waltham, MA, www.gomez.com.