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Is E-Commerce Right for Insurance?

The normalization of e-commerce has led insurers to invest heavily in it. But will the product ever be right for the channel?

Insurance industry players often talk about the "Amazon effect;" that is, the concept that consumers are so used to buying product online (sometimes with as little as one click) that the industry must get as close to that reality as possible. And, in some lines, such as personal auto, buying online is increasingly becoming the norm.

But insurance is a complicated product, and as some of the responses to Hurricane Sandy-related claims showed, the industry doesn't always do a great job of explaining quite how it works -- which creates animosity between insurers and insured.

With that, there's legitimate questions about whether pure e-commerce is right for the insurance industry, says Jeremy Bowler, senior director of the insurance practice at J.D. Power & Associates. While many insurance customers want to do the majority of the work on their policy online, that doesn't mean that they don't want to, at some point, talk to a live person to help them through the process.

"For the majority, the web is the first place they go, to create a market basket of brands they're going to choose from," Bowler says. "If you look at a typical insurer, for every 100 people that consider a brand, 59 will visit the company's website, 33 will solicit a quote but only 2.4 will bind on the website. One could say that the web doesn't perform at a high close rate, but there are hybrid or blended channel pathways that are kind of the full story."

Insurers must identify the middle ground between using the web to funnel leads to live agents, and finding other ways to interact with customers online, Bowler explains. Things like live chat are popular when prospects have questions about their coverage that they want answered. And, even though traditional e-mail can take multiple back-and-forths to resolve, it still has a high satisfaction rate among consumers who use it to get questions answered about insurance coverage.

"35% of site visitors who didn't get a quote online said they wanted to talk to a human being, but it's 'I want to go to the web, but I want to post questions to an agent through a website rather than through the phone or in person,'" Bowler says. "One of the tenets we feel is very important is understanding what the customer wants and giving them choices. Failing to have a transparent, easy-to-navigate website is going to cost you business."

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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User Rank: Apprentice
5/29/2013 | 2:14:39 PM
re: Is E-Commerce Right for Insurance?
Issue here is more psychological in nature. As the percetion is Insurance products are not as simple to understand. customers are not as comfortable as they are with other products they purchase online, Those they are able to relate more easily because they have seen those, touched those in past in stores, and can relate with the pictures. With insurance they are concerned with fine prints they think they can not understand. This requires bit of a reading with the material insurer can provide , however often people do not have patience to read through and hence look lot easier mode that is to talk to some one and ask question and get doubts whatsoever clarified. I guess it requires simplifying the jargon in general in the market place to get better success rate on this channel
User Rank: Apprentice
5/28/2013 | 9:00:01 PM
re: Is E-Commerce Right for Insurance?
Product complexity has very little to do with it, once you're beyond the systems issues - which are daunting enough in resource terms. At the end of the day, if there's a market for the product, the customer is comfortable buying online and it's easy to do - they'll do it. As you get beyond the major personal lines (auto) and household brands (with a known level of service), the challenge is the "comfort" aspect and that varies significantly by market/line. Sellers must be able to provide the information to encourage purchase, as well as the marketplace to compare (for competitive products) and the brand experience to ensure them they are making the right choice, particularly for higher-involvement products. Hence the phone call to close - there's some unmet need. If sellers can get over the trust and ease of use humps, there is no reason ecommerce shouldn't be a significant and cost-effective channel for insurers as well as a valued service experience for insureds.
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