The changing face of online distribution: internet insurance marketing has evolved from being aggregator-driven to being carrier-driven.

In the past eight or so years, the insurance industry has witnessed some interesting changes in the way the Internet market is evolving. In the late 1990s, the market was overwhelmingly aggregator-driven. Internet start-ups dominated. The online channel was widely viewed as a new sales model. Captive agents feared disintermediation. Traditional compensation models were disregarded, and carriers were charged fees for participation in online insurance markets.

Today the industry has evolved toward a carrier-driven marketplace. Major insurance carriers are deploying online solutions, and tele-agents have been successfully integrated into Web sales strategies. Consumer adoption of the Web as a financial services tool has increased, and online media costs have been drastically reduced.

Why the new interest in a carrier-rather than aggregator-driven focus? Many believe the aggregator model doesn't work.

Some insurance companies have been disappointed that the aggregator model offers not enough volume and little or no control. The model also targets self-directed consumers and encourages "shopping around" and multiple simultaneous applications from consumers looking for the best deal. The consumer often is delegated to act as his or her own agent to select a carrier and a product. As direct marketers have learned over the years, offering the consumer a multitude of choices can lead to the consumer making no choice at all.

The Approach That Works

What does work in online insurance sales is the more recent creation of a carrier-driven marketplace. And this infrastructure is built upon a strong foundation known as direct marketing. The Internet is not a new sales model. It is a direct distribution channel--such as mail, print, television and call centers--and produces successful results only when treated as such.

The first step in establishing a direct marketing approach is to know the mission. Is the goal to sell insurance or generate leads? Is the objective education or marketing? If it is a carrier's goal to sell insurance online, then its Web site needs to be designed to do that and that only. An insurance-selling Web site cannot be a continuing professional-education course or a consumer service.

Successful online insurance marketers also market products that are simple. If a product is complex by nature, or if the consumer insists upon choices and options, then the product is best sold by driving quoted leads to a licensed call center, and not by attempting to complete the sale online.

Carriers selling insurance online also will track media spending obsessively--as any good direct marketer. Unlike other direct marketing channels, the Internet provides instantaneous results, and online media tracking opportunities are exceptional. The Internet allows marketers to manage media costs, but analysis and media modifications must be performed daily, at minimum, to ensure maximum return on investment.

A direct marketing approach also means Web technology can be used to support multiple marketing channels, including agent sales and call centers. Offline and online direct marketing methods can be leveraged to target prospects and drive them to the site. These methods include direct mail, search engines, e-mails, and crosssell/down-sell efforts. Integrating the Web with other channels not only helps increase the chances for success, but it leverages the initial investment. In selling insurance online, a winning philosophy is to "build once, use many"

A Bright Future

Selling insurance on the Internet has a bright future. Direct marketers see the Web-to-phone business model as one that will grow because the Web has proven to be an efficient lead generator. Companies will become better at meeting consumer needs in a call center environment. Ultimately, the Web will support the process, not he the process.

Also, more and better customer-centric products will be developed. The Internet will be the vehicle to match consumers' expectations about speed with product quality.

The Web will be used more effectively for customer remarketing. E-mail addresses will be collected on applications, helping carriers reach customers to make appropriate cross- and up-sell offers to them. What's more, online and offline direct marketing will become more integrated. Consumers tend not to see online and offline as different; to them it's all "advertising."

Those carriers that hold fast to market-proven direct marketing best practices continue to plan launches in 2006, and others will become more aggressive as they see their competitors advance.

Those that will succeed will establish their own online infrastructure. They will offer single products on single sites. They will commit themselves to the direct marketing formula. They will leverage the database building abilities of the Web to better meet consumer needs.

While the Web currently produces lower volumes, it has the potential to deliver higher margins. When it is respected and used as the direct marketing channel it is, the Internet can and will continue to deliver profits for insurance carriers.

Keypoints

* The Internet should be recognized as a direct distribution channel, not a new sales model.

* Successful online insurance marketers focus on simple products.

* The Web has proven to be an efficient lead generator.

Contributor Kevin McKenna is chief executive officer of The Credo Group, a Warminster, Pa.-based digital insurance agency. This article is based on a presentation he made at E-Fusion 2005, A.M. Best's Insurance and Technology Conference.

Globe Life and Accident Insurance Co. A.M. Best Company # 06462 Distribution: Direct, independent agents

Mutual of Omaha Insurance Co. A.M. Best Company # 07369 Distribution: Direct, independent agents and brokerage channels

RBC Insurance Group A.M. Best Company # 87083 (RBC General Insurance Co.) Distribution: Direct

For ratings and other financial strength information about these companies, visit www.ambest.com

RELATED ARTICLE: Successful online sellers.

Globe Life and Accident Insurance Co. was one of the first insurers to commit to selling life insurance online in the late 1990s. Today, a substantial percentage of its total business is sold via the Internet. Globe uses multiple implementations of Web technology, including selling the Globe brand online through co-branding in conjunction with call center sales. Its online products include children's life and accidental death and dismemberment.

RBC Insurance has successfully launched two products in as many years using the Internet: a niche term life product developed for smokers, and a simplified issue life product. RBC Insurance uses Web technology to broaden its distribution using flexible branding and by integrating call center tools and agent management tools into the mix.

Mutual of Omaha Insurance Co. currently sells multiple products online and is beginning to have success selling to the senior market--an online market which most companies have ignored.

What these insurance companies have in common is that they are direct marketers. Their products--simplified and guaranteed issue--can actually be sold online. They have the infrastructure to support the volume. And perhaps most importantly, they keep the online buying process and technology simple.

In addition to these winning players, other insurance companies are working on online efforts, but are not quite there yet. Many of their obstacles stem from confusing implementations, such as attempting to offer multiple products on one site and/or providing too much information. They also tend not to be where they need to be with regard to e-signatures. For most insurers, it's still a lead generation world, and getting over the hump can be a challenge.