Driving Web Strategies

If there's a product segment in the insurance industry that has fulfilled the fantasy of direct online sales in any measure, it's auto insurance. Fifteen percent of auto insurance consumers now purchase insurance over the Internet compared to 20 percent over the phone, according to Celent's (Boston) Online Auto Insurance Survey, and Internet sales are likely to increase over time as a demographic range of Internet users broadens.

That doesn't mean the sky's the limit, however. Though younger consumers currently dominate online auto insurance sales, it's less because of their proclivity to use the Internet than their interest in low-cost insurance. "The people who are most likely to buy online are probably the least loyal and most price-sensitive," says Craig Weber, senior analyst with Celent's insurance practice and author of the study. "The younger generation is more inclined to be online, and they have less money, so they are more attuned to price."

Personality also affects online purchasing behavior, according to Weber. Some people prefer to take control of the insurance research and purchasing process, and are more comfortable with an entirely online experience. Others prefer the mediation of a "trusted adviser," Weber says. "But that's a luxury that many young people can't afford."

Sophisticated Underwriting

Progressive Insurance (Mayfield, Ohio; $1.4 billion in premium revenue) stakes out its territory through a mix of sophisticated underwriting and smart marketing. Because Progressive segments its prospects more effectively than competitors, it can "quote other companies' prices with impunity," Weber explains. The reality behind the carrier's apparent candor is, if they're not priced aggressively in that segment, it means they don't want it, he adds. "They can position it as, 'We want to make this easier for the customer.' But on a corporate level, they want to make it easy for unprofitable customers to go to other carriers."

Progressive's strategy may work, but Weber cautions against overestimating the factor of price in online auto insurance sales and marketing. "In any given market segment there will be at least three carriers who will be roughly equivalent on price. So even though price is important, it's not the exclusive driver of the decision," Weber asserts. "Claim services and purchase convenience are other possible factors that could relate to an online presence."

Further, the value of the quoting process itself should not be thought of as purely a matter of price, advises Tim Carpenter, a Waltham, Mass.-based senior analyst with Keynote WebExcellence (San Mateo, Calif.). "Whether a consumer receives a successful quote in a decent amount of time has a huge effect on whether they become a customer—regardless of what channel they choose to purchase through."

That market reality is not lost on Rick Becker, director of auto insurance product management for the San Francisco-based California State Automobile Association (CSAA; $2.3 billion in 2004 direct written premium). Owing to its agent-oriented distribution strategy, CSAA has chosen not to allow customers to bind policies online. "Our strategy has been to allow them to get a quote, and if they're interested, they can submit for an immediate callback [from an agent] or a callback within 48 hours," Becker says, adding, "We're taking the Internet very seriously; it's now one of our three core distribution channels."

CSAA has concentrated on improving the flow of the online transaction to ensure a satisfactory customer experience, according to Becker. "One of the reasons we chose [Santa Barbara, Calif.-based] SteelCard's [Apogee processing platform] was that its user interface is aesthetically pleasing and user-friendly," he explains. The system has features that ease the task of completing a quote, such as fields that can "read" multiple versions of date entries and automatically reformat them. "Simple things like that make the transaction very streamlined," Becker adds.

CSAA already enables customers to pay bills online and has plans to offer Web-based service transactions, including policy changes (such as adding drivers, changing coverages and adding vehicles) and ID card requests. "We see the Internet as a a viable way to interact with our customers, and we believe what's of greatest value to them at this point is to be able to manage and service their business with us through the Web," Becker says.

Los Angeles-based Farmers Insurance ($2.8 billion in annual revenue) currently offers similar online customer self-service capabilities, according to Riko Metzroth, VP, e-business. After requesting changes, customers receive e-mails informing them that a Farmers agent will be in contact. "Simultaneously, an alert goes to our agents via our Agency Dashboard portal," Metzroth explains.

Today, Farmers' billing and self-service capabilities require separate log-ins. But, "This year we plan to link those to services with a single sign-on," Metzroth says.

Through its online "FastQuote," Farmers boasts the ability to provide auto quote service for three states—California, Nevada and Colorado—in less than five minutes. When the quote is complete, consumers are offered the option to receive a call from an agent. This year, the carrier will begin to extend quoting to the remaining 40 states in which it does business; it will follow up by offering online quoting for homeowners insurance.

Farmers customers already are able to report claims online, but online claim status tracking is limited to notifying customers whether a claim is "open" or "closed," according to Barry Perkins, Farmers' VP of applications and development. However, "We're looking to provide customers the ability to log in and be able to see exactly where in the process they are," he adds.

Perkins affirms the importance of providing effective quoting service to consumers but emphasizes another side of online development for carriers focusing on the traditional distribution channel. "We never forget that our primary contact in the marketplace is the agent, so we make sure that whatever the customer sees online, the agent sees as well," he says. "That integrated experience is key to our success."

News AnalysisFifteen percent of consumers surveyed by Celent reported completing their most recent purchase of automobile insurance online.

Celent www.celent.com
Farmers Insurance www.farmers.com
California State Automobile Association www.csaa.com

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio