A Parting Shot

The insurance industry faces a stark question: will the explosive growth of e-commerce “disintermediate” the independent agent from the online distribution of insurance (a market projected to generate $4.1 billion by the year 2003).

As I see it, agents will become an endangered species within the next few years – unless they, and their carriers, replace their wait-and-see attitude with a proactive approach toward Web-based marketing. Let’s face it: in today’s technology-driven economy, businesses that don’t meet the demands of consumers to buy over the Internet simply won’t stay in business long.

Consider bookstores. Barnes and Noble became the premier bookseller in the United States. The Company had stores all over the nation. Management knew it knew how to sell books, make a profit and please shareholders. So when started marketing books over the Web, Barnes and Noble didn’t see any need to change course. Management took a hands-off attitude toward this online upstart…. and watched grab market share hand over fist. By the time Barnes and Noble got its online bookstore up and running, it found itself playing a long-haul game of catch-up with a powerful and ambitious competitor.

Unfortunately, the insurance industry continues to lag behind as a cybercompetitor. Says Forrester Research Analyst Bill Doyle; “Those guys (insurers) are so far behind that they’ve been lapped by other financial service providers.” A Forrester study found that two in five (40%) insurance companies surveyed were either unsure about their Internet strategy or did not see the Web as an important sales channel. On the agency side, less than one in three (32%) independent agencies with Web sites have independent sites, rather than those hosted by intermediaries such as the IIAA. By way of comparison, Forrester found that more than nine in ten (92%) of banks plan to sell insurance online within three years.

The Internet has become the great equalizer, dissolving traditional market barriers, revolutionizing distribution systems, and putting much more of the information traditionally guarded by intermediaries – insurance agents – into the hands of the consumer. In this hypercompetitive environment, the insurance industry will either change or go the way of the dinosaurs. Agents need to overcome the FUD factor (“fear, uncertainty and doubt”) by embracing “warp speed change”…. Or risk their own extinction!

Joe Tracy, cofounder of Virtual Strategy, Inc., a company that provides Web strategies for businesses seeking to maximize their e-commerce opportunities. He can be reached at (609) 786-6932 or his e-mail address is