Cyberspace and Insurance

Insurance agents seem to fall into two polarized camps with respect to the Internet. One camp is spending thousands and tens of thousands of dollars developing web sites to tell their customers and prospects all about their agencies while the other camp is steadfastly ignoring the issue. Agency Consulting Group, Inc. has been privately counseling many agencies with respect to the future and their use of the Internet and would like to use this forum to explore the pros and cons of Cyberspace as a vehicle for agency image development and sales.

First, the tortoises may actually beat the hares in the case of advancing toward Cyberspace -but only the smart tortoises. Those agencies who developed beautiful, slick, professional looking web sites found that these sites cost between five thousand and twenty thousand dollars and have been generally disappointed with the results so far. They can boost their egos by glancing at their own 3-dimensional, moving graphics but they, their competitors and a few of their carriers may be the only ones looking at these sites. The intentions of creating web sites in the last few years has been to establish a presence in the Internet, presumably to attract information-gathering prospects who can learn the facts about your agency 24 hours a day. Unfortunately, prospects don’t seem to be buying insurance this way. Those who do access the web sites, do so only after they have become acquainted with the agency, its personnel and its products. They use the web site to confirm the image that was transmitted to them by the agency producers.

On the other hand, the cost of establishing web sites is coming down on an almost monthly basis. So the intelligent tortoises who are watching and waiting when and if they decide to enter the world of the Internet. Now the question is, “We know the Internet is out there, but so is nuclear fission. I’m not sure that either is a subject that is of interest to me as a small businessman.”

Let me lay this misconception aside. Whether tortoise or hare, having a presence on the Internet will be as necessary as having telephone lines. But their initial primary use has nothing to do with informing the public about the departments, people and programs of your agency. The primary reason for being on the Internet and maintaining a cyber-presence is for e-mail.

Many agencies are already speaking to their underwriters through e-mail over the Internet. It is faster and more reliable than standard mail, and it is delivered to the target’s desktop as opposed to fax mail which is often centralized and delivered to the addressee occasionally during the day. Fax has been so abused that it has pretty much lost its sense of urgency. Some e-mail programs will even bounce a message back to the sender confirming that the e-mail was received and when it was opened by the recipient. This lays a lot of excuses aside, doesn’t it?

But do you need a web-site in order to have e-mail? The answer is no! You can sign up with a local or national service and have e-mail for all of your employees at a cost between a few hundred dollars a month for large organizations and free for small organizations. These providers can afford to provide free e-mail service because, when used, advertisements flash across your screen. Those advertisers pay for the service. The only cost the agency must absorb is the cost of an Internet service provider (ISP) and the incidental hardware and software costs associated with the additional telephone lines needed to access the net.

While web-sites are not needed to get the use of the Internet for e-mail purposes, we do feel that some agencies will have an extremely useful future use of web sites. Again, they will not be used to advertise the agency. We feel that the eventual use of the web sites on the Internet will be to permit personal lines and small commercial lines customers to interactively rate standardized products through your agency with no intervention necessary by agency staff until buying decisions had been made. This has already been done in the simplest of insurance rating devices, life insurance. Multiple rating systems have been designed and purchased by agencies to test and offer rates on hundreds of insurance companies. The prospect can actually enter their own information and rate their own policies accordingly. This does not stop the full underwriting effort (signed applications and verification of information) when a buying decision has been made, but it cuts out those nagging shoppers who call your agency to get a quote simply to compare it against their existing policy. Right now we do all of the effort for very little return. Imagine if the effort were expended by the customer (in the evening or night-time hours when he has time) and all of the agency’s efforts are expended on real buyers only.

Will this educate customers? No. Will it insure them that they have the right coverage? No. Will it explain the differences between the different carriers products? No. But it WILL perform the function that the customer wants – a general comparison quote against coverage he already has or that he thinks that he needs. This form of commodity driven insurance is generational in nature. The younger generations will find it more comfortable to do business this way than older generations. These types of transactions must be commodity driven. They will work for auto, homeowners and BOP policies. They will not work for complex risks and the customer will be referred to a phone number to contact the agency at a more convenient time. Larger agencies, like larger companies in other industries, will have a 24 hour chat availability to permit prospects and customers to speak to someone on line and address their concerns and questions at any time.

What are we doing with Cyberspace and web sites for on-line quoting systems and commodity sales of insurance? We are addressing the way consumers are driving the insurance market rather than trying to force them into the 200 year old mold that we have been use to in the agency business. If we use the Internet and Cyberspace to change the way agencies operate, we stand an excellent chance of competing with both traditional companies and with direct writers who are attracting the simpler business away from the independent agency ranks.

How are agencies attacking this issue before the advent of on-line multiple-company, multiple-tier quoting systems? They are offering on-line applications for various lines of business with the guarantee of a full range of quotes e-mailed back to the customer within 24 hours. While this still takes personnel time within the agency, it opens a new realm of pseudo-Cyberspace customers who would otherwise never be available to the independent agent.