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Insurers Trail Online Competitors.

Despite significant improvements in their Web sites and greater integration of the Internet into their core processes, insurance companies still trail their bank and securities brokerage competitors in the race to provide online services to consumers.

The most recent survey from management consulting firm Booz-Allen & Hamilton shows a 1,150 percent increase in the number of visitors to insurance company Web sites between 1999 and 2000 and that insurers are offering a growing number of products and services online.

But in various crucial categories--including number of Web site visitors--time spent by consumers at insurance sites, products and services insurers offer and the time it takes to respond to customer inquiries over the Web, insurers don't measure up to their financial institution competitors.

"The next several years will be critical for insurers," the 2001 eInsurance Study concludes. "Though they have, fallen behind, the competition is not yet out of reach. They can find better ways to reach and serve clients or; they can leave this opportunity for banks, brokerages or other distributors that are aggressively seeking new revenue streams."

Among the findings of the study are:

* Unique monthly visitors to insurance company Web sites increased from about 500,000 in April 1999 to more than 5 million in April 2000.

* A growing number of carriers are selling online, which is expected to translate into online sales of $12 billion by 2005 or 1.5 percent of total net premiums written. Property and casualty products are expected to generate 88 percent of the $12 billion in sales.

* Perhaps even more important than sales, the Internet is becoming vitally important to consumers as a source for research, insurance education and advice, as an agent locator, and for various other purposes before and after the sale of insurance takes place.

* In addition to appealing to consumers directly, insurers will have to form online partnerships with third parties such as insurance brokers and agents and online intermediaries. Almost 90 percent of insurers plan to use multiple channels to increase visibility and broaden distribution.

Despite some of the positive gains, however, the insurance industry still lags far behind banks and securities brokers in attracting online traffic, according to the study. For example, although insurance sites registered more than 5 million visitors in April 2000, securities brokers drew more than 10 million and banks more than 18 million visitors during that month.

In addition, while the types of products offered by banks and securities brokerages may cause visitors to visit more often and stay longer than at insurance sites, the study found that some insurers discouraged customers from visiting their Web sites.

For example, a significant 54 percent of insurance companies didn't respond to email within one day, compared with 37 percent of banks and brokerages that did not respond within the same time period. Perhaps even more telling, 28 percent of insurers did not respond to online requests at all.

It is, says Gin Rao, a senior associate at New York-based Booz-Allen, "the worst thing possible," when companies set high expectations for their customers such as the availability of Internet usage for transactions, and then proceed to ignore them.

The study does note, however, that some insurers have been successful attracting customers. Specifically, Nationwide, USAA, and Prudential averaged more than three monthly visits per customer, while Progressive and Geico kept visitors an average of 13 minutes and 9 minutes per visit per month respectively--much higher than the industry average.

While insurers want to integrate across channels, a number of obstacles remain, according to the study. These include the need for insurers to update legacy systems, design customer interaction processes, and build technical capabilities across channels.

"Little by little, companies are beginning to figure that out," says Paul Lockmiller, a principal in Booz-Allen's insurance practice. The Booz-Allen study analyzed Internet usage from Neilsen/NetRatings, an Internet audience measurement and analysis firm, in addition to surveying p/c and life/ annuity carriers, and financial institutions.
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Publication:Risk & Insurance
Date:Oct 1, 2001
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