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Six Keys to B2C E-Commerce Success

How can insurers capture business from the e-consumer? Firms that have achieved B2C success focus on getting a head start, knowing the customers and giving them the Web tools they need.

By: Johannah Rogers

Although insurance companies have embraced the operational, educational and informational opportunities generated by B2B e-commerce, the industry has been slower to adopt the Web as a platform for consumer transactions—specifically, sales. Lately, however—despite (or perhaps because of) the ongoing dot-com shakeout—a growing number of insurers are putting aside their fears of disintermediation and recognizing the potential benefits of Internet technology for serving customers.

While actual online sales of insurance products are still quite small, a growing volume of B2C transactions are taking place online, and a hardy core of pioneering companies are trying to get a head start on gaining business from people who are open to handling financial transactions—whether purchasing insurance, conducting a stock trade or balancing a checking account—online.

But who is the e-consumer? What do insurance companies need to do to capture their business and loyalty? Recent studies indicate that, while the online insurance market is small (but growing), the Internet is important as a medium both for researching and purchasing insurance. In its March 2000 report, "Insurance's Researched Future," Forrester Research (Cambridge, MA) estimated that of the 28 million households that made online purchases in 2000, fewer than 700,000r—or less than 1 percent of all US householdsr—purchased insurance online. But these numbers don't tell the whole story. Nine percent of the insurance-owning population researched their insurance purchases online in 2000. By 2004, according to the Forrester study, 10 percent of households will research $42 billion and purchase $14 billion of insurance online.

As for demographics, early competitors in B2C online insurance report that e-consumers are typically under 35; brand is important to them; and insurance products that are most easily understood and price sensitive are purchased most often.

A survey published in 2000 by IVANS (Greenwich, CT) found that 42 percent of consumers would consider shopping for auto insurance online, 23 percent would consider shopping for life insurance, 21 percent for homeowners insurance and 13 percent for health insurance. Auto insurance sales have dominated the online insurance market, accounting for more than 70 percent of online insurance revenue in 2000, according to Forrester Research.

Toby Alfred, Internet site manager, Progressive Insurance (Mayfield Village, OH; $6.2 billion net premiums), has found that "the type of consumer shopping online has not changed significantly over the last few years." At the same time, she comments, "people are getting more comfortable on the Web. There is not as much reluctance to buy online as there may have been in the past."

Perhaps more significantly, insurers also have learned that the Internet is an enhancement, not a competitor, to existing service and distribution channels. "There has been a marked shift over the last 12 months from a focus solely on e-commerce functions to the importance of customer service functions," according to Kimberly Harris, senior research analyst, Stamford, CT-based Gartner Group, who adds, "in the beginning, service was a second priority. Now it is definitely a shared priority."

However, Harris adds a caveat: "In order for growth in online insurance to continue, security needs to become more robust." She believes digital certificates and public key infrastructure still need to be incorporated into insurance Web sites before the binding of insurance online can be made widely available.

Greg Davies, lead insurance analyst with Waltham, MA-based Gomez, Inc., an Internet consulting and quality measurement firm, agrees with this assessment. "The Internet is fundamentally changing the customer relationship dynamic between insurers and consumers," he says. "Consumers are beginning to relate to insurers on a one-to-one level, which means that insurance companies themselves, not just agents, are now part of the service business."

The experiences of some of the industry leaders bear out this analysis. "From day one, it was clicks and mortar; we have always made the Internet part of a synergistic approach," comments Bob Reiner, manager, enterprise Internet system, State Farm Insurance (Bloomington, IL; $78 billion total assets).

At Allstate Insurance (Northbrook, IL; $104.8 billion total assets), which has been developing a multi-channel distribution approach since late 1999, Rich Heneberry, assistant vice president, direct distribution/Internet channel, believes "focusing on the synergy of all three channels Internet, agent, call center is the true reading of our success or failure."

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