December 1, 1999 by By Lowell Conn
Marketing, distribution and technology are no longer separate components of the insurance business, delegates were told at the Institute for International Research’s recently held Distribution & Marketing in Property & Casualty Insurance conference. Multi-distribution channels including call centers and the Internet are becoming the standard by which the successful insurers will be measured. And, with direct writers now offering quotes on the Internet, and boasting soon-to-be-unveiled online purchasing mechanisms, the battle to attract technologically savvy consumers is on. Insurers, brokers, technology suppliers and even direct writers themselves warned conference delegates that the Internet could become the latest and possibly the last battlefield for insurance premiums.
The convergence of marketing, distribution and technology through call centers and the Internet is spawning greater competition for traditional property & casualty insurers, Linda Matthews, chief operating officer at Royal & SunAlliance Insurance Company, warned delegates at the recently held Distribution & Marketing in Property & Casualty Insurance conference in Toronto.
Banks remain a threat, she notes, but as consumers demand an easier and more accessible insurance service, “the industry’s customer base is vulnerable to new entrants…[such as] direct writers, more off-shore players, new brokerages and personal financial planners made stronger through consolidation and the convergence of financial services”.
Premium dollars are up for grabs by companies that are willing to speak to contemporary consumer needs, she says. Brokers and insurers must heed the sophistication of Canadian consumers who top the world in televisions and computer access per capita. “In 1997, Canadian property & casualty insurers with multi-channel distribution controlled 41% of the market. Insurers and brokers who are not using available technology to reach out to consumers and control their own inefficiencies are threatened.”
Matthews joins the growing list of industry leaders who believe insurance purchasing has been revolutionized by emerging technologies and a more sophisticated insured. “Consumers realize that the cost of electronic transactions are a fraction of the cost of traditional methods. They will expect to be able to use electronic transactions and they will expect savings to show up in their premiums.”
Matthews reeled off some revelatory figures. Call centers handle 50% of business transactions in North America. Royal & SunAlliance’s call centers handles over 10,000 calls per month. Internet prognosticators predict the Internet will account for 15% of all p&c business by 2003 and up to 30% by 2009. “Technology is gradually closing the door on the way customers once bought, and insurers and brokers once sold insurance. Successful companies will recognize this,” she warns.
This cautionary message set an appropriate tone for the conference, which featured speakers from all sectors of the industry warning delegates that all the talk of technology merging with marketing and distribution has come to fruition. Companies willing to walk the talk, speakers intoned, had better start doing so soon.
Writing on the wall
Industry statistics collaborate the notion that consumers’ insurance purchasing habits have evolved, Laird Laundy, vice president of mergers & acquisitions at network consolidator Equisure Financial Network Inc. told delegates. “We are not hypothesizing about a more demanding insured, the numbers back up the claim,” he says.
In 1993, direct writers owned 21.1% of the premium business in Canada, he notes, a number that jumped significantly to 31.1% in 1998. While there has been an 84% growth among direct writers’ business in that period, he adds, the number of employed brokers across Canada has risen only 9.5%. “These numbers do not speak to broker efforts, but to the interest of consumers in embracing multiple distribution channels to purchase insurance.”
With consolidation and the drive to find operational efficiencies — figures show there are 15% less insurers issuing p&c policies since 1993 despite a 10% rise in premium dollars — insurers and brokers must devise more focused methods to attract new consumers, while adding value and efficiency to the process, he adds.
Laundy predicts a dramatic transition to the face of the brokerage profession over the next 15 years with those who prosper integrating technology into their marketing and distribution. Insurers will benefit from a more consumer-focused broker distribution network, and efforts towards consumerism will be rewarded at the premium level. “There’s going to be big winners and big losers in the coming battle, and as an insurer, you better pick the right broker partners,” he warns.
The current premium battle is being waged on a technological front, he believes, and brokers — and broker-friendly insurers — must take advantage of telephony and Internet marketing before competitors — both within the industry and without — saturate the market. “There is no sense lagging behind the technology curve, especially when somebody else is going to jump in if there is money to be made.”
Internet ready for battle
While call center technology is where today’s premium wars would seem to concentrating, the insurer who profits in the multi-distribution future will be the company that sets the pace with Internet distribution, Ted Schmitz, chairman of technology supplier The Amberdon Group, told delegates. Call center technology is the here and now, and is being saturated by direct writers and some insurers, he says. E-commerce, though, is a rising market, and is expected to account for $1.5 trillion in worldwide business early into the next decade affording companies a leading edge opportunity to embrace techno-savvy insureds. “Whoever grabs the electronic business first will become the Charles Schwab of insurance,” he insists referring to the securities firm that has profited greatly from the medium.
Schmitz insists the Internet potential is more than just crystal ball gazing. He notes a recent study that found 69% of policyholders would like online quotations while 58% are interested in locating vital personal pricing information through the net. “Consumers are telling us that having pertinent information online is a business advantage. They are demanding an easier buying experience.”
He maintains the link between marketing and distribution has evolved from face-to-face purchasing, to the call centers and to the Internet. Returning to the Charles Schwab analogy, he notes the company’s pioneer standing as one of the earliest prominent online securities firms has helped the company to attain 30% of the industry marketshare. “Today it takes something special to gain consumer attention. The Internet is the first medium that allows both distribution and marketing to merge into one step. The company that successfully manages this merge will attract consumer notice. The company to earliest take advantage of this potential will realize many of the benefits enjoyed by other Internet pioneer companies,” he adds.
Direct writers moving forward
Direct writers, such as Belair Direct, have not lost sight of the Internet’s potential. Belair senior vice president David Lincoln says the company has impending plans to evolve their World Wide Web presence beyond providing quotes, to integrate online purchasing mechanisms. “The problem today is there is a reluctance to buy over the Internet. But that will change once more companies get involved,” he maintains.
Lincoln ran through a list of benchmarks Belair maintains, demonstrating to broker-friendly insurers exactly what they are up against. He says 80% of Belair call center inquires are answered by customer service representatives within 20 seconds of the first ring. The online quotation systems receives 1000 requests daily. Over 20% of first inquiries result in a sale, he estimates. The company’s premium volume has grown 50% over the past two years.
“Direct writers are here to stay. Of course, like the brok
er-based insurers, the fear within our segment is that new players can come in and buy new technology and immediately start at an advantage. That’s why we are always endeavoring to re-engineer our distribution, marketing and technology processes,” he says.
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