Direct insurers say online information provides enough ‘advice’ for buying insurance products online

CORRECTION: The June 20 online edition of Canadian Underwriter incorrectly stated that CAFII supports “the idea that consumers should be able to access insurance intermediaries at all times during the online purchase process.” In fact, CAFII proposed the position to the CCIR that they not make it mandatory for insurers to provide access to insurance agents at all times during the online purchase process, but rather provide consumers choice. Canadian Underwriter apologizes for the error.

Canadian direct insurers and other associations are endorsing the notion that proper advice in online insurance sales can be provided to a consumer by “having the relevant information and advice available on the [insurance] provider’s website” — without a regulatory requirement that a broker participate in the online sale transaction.

The Canadian Council of Insurance Regulators (CCIR) presented three options in its January 2012 issues paper on regulation of online insurance purchases. The range of options turns on whether or not an intermediary’s role should be a regulatory requirement when purchasing insurance online.

The CCIR’s first option is to have a company’s online information play the role of providing advice to consumers. The second would require that consumers have access to an intermediary such as a broker at all times during the online purchase, while the third requires that online transactions include consultation with an intermediary.

The council posted industry stakeholder input on its website on June 14. No decision has been made.

Direct writers tended to support the first option. “Consumers should be offered information and advice across all modes of interaction and distribution channels,” a paper by the Canadian Association of Direct Relationship Insurers (CADRI) reads. “Online interaction is an effective way to provide that information and advice.”

Such online information is not static, CADRI notes further. “A consumer can be engaged through comparison charts, scenario building, simulations and reflective questions throughout the process. This type of information is very useful and is intended to help the consumer understand the product and their own needs.”

Requiring the involvement of an insurance intermediary in the online purchase of insurance can undermine the very feature that makes online insurance purchase attractive in the first place, suggests a submission by the Canadian Association of Financial Institutions in Insurance (CAFII).

“Requiring a licensed agent to review an application is particularly problematic as it would mean that clients may be delayed or prevented from completing their transaction in a timely fashion,” CAFII’s paper states. “Furthermore, if the product has been purchased without the involvement of a licensed intermediary, we question the added value of an intermediary to that specific purchase, and would point out the additional cost incurred by insurance companies and distributors that are required to maintain a force of licensed agents on standby for Internet purchases.”

Kanetix, an online quoting service, agrees that consumers should always be afforded access to an intermediary. “We believe that licensed agents and brokers will continue to have an important role to play in the insurance buying process,” Kanetix says in its submission to the CCIR.

“However, properly designed websites can substantially strengthen the consumer’s knowledge base vis-à-vis the industry — a desirable goal whether the insurance product is to be purchased from an intermediary or directly placed with an insurer,” Kanetix adds.