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Not long ago, the typical American
family purchased its insurance at the kitchen table, where the agent smiled
and dutifully handed them the pen.
While many brick-to-click
industries continue to stumble in the online environment, the American insurance
industry has successfully embraced and leveraged the speed and convenience of
the Internet as its next logical evolutionary step.
This electronic convergence of policies, rates and carriers
can save consumers money, as long as they shop online as carefully as they do
in the offline world.
According to projections by International Data Corp., a
Massachusetts-based research firm, the Internet will influence more than one
in three insurance purchases by 2004. A.M. Best, the insurance rating agency,
predicts that online quotes will influence $10 billion in auto premiums alone
Note that key word: influence.
Much of the success of online insurance has
been due to its soft-sell approach; you can obtain all the quotes you want free
and easily from a wide
variety of Internet marketplaces and insurance agency and carrier sites
without the slightest pressure to actually purchase a policy online. Should
you choose to, of course, most sites also furnish handy direct links or at least
agent contact information to help you buy.
by brokers and buyers
Insurance brokers and agents who once feared that online insurance sites would
put them out of business now gladly pay those same marketplaces for their steady
stream of potential customers.
"Initially when the Internet first came to
prominence there was this back-of-mind concern that this could be the future
for insurance delivery and sales, but that has not borne itself out," says Jeffrey
Myers, spokesman for the Independent
Insurance Agents and Brokers of America.
"What agents have done is embrace the Internet
to put their services online. Our own research shows that more than 85 percent
of people will go online to research but won't purchase there; they want the
expertise of an insurance agent."
Consumers, too, love the convenience. They
can shop virtually, where and when they want, without an overbearing agent hovering,
pen and policy in hand.
By spending five minutes inputting personal
data and search criteria into online forms, you can obtain dozens, even hundreds,
of insurance quotes at the click of a mouse. Still confused about your insurance
needs? Several sites offer extensive online libraries that explain the finer
points of insurance. Some even provide a toll-free number where you can bounce
a question or two off of a live agent.
"It does de-cloak some of the mysteries surrounding
insurance and the insurance industry," Myers says. "An informed consumer is
definitely a much better consumer. The Internet has definitely served its purpose
for the insurance industry in helping reach more customers, educate more customers
and let them know there are options."
Jaimie Pickles, executive vice president of
InsWeb, a leading online insurance marketplace, says the steady growth of online
insurance underscores a basic marketplace truth: comparison shopping usually
"If you do your homework and do enough shopping,"
says Pickles, "you are guaranteed one of two things: You're either going to
get the same coverage for a little lower price or you're going to get more coverage
for what you're paying today."
Anatomy of an online
Online insurance quotes are available in two basic flavors: instant quotes and
On an instant-quote site, the quote engine
electronically matches your application form criteria with the underwriting
parameters of participating carriers and generates within seconds a list of
quotes based on best matches and usually best rates.
With delayed quotes, your electronic application
is sent as an active lead to participating carriers or agents who then contact
you directly via e-mail, fax or telephone with their quotes, usually within
You can navigate to major online insurance
quote sites in a number of ways:
- By clicking on the insurance feature of an Internet portal
such as Quicken, MSN, AOL or Yahoo, which generally partners with an insurance
marketplace site to generate quotes;
- By logging directly onto an insurance marketplace such
that generate quotes from dozens of different carriers and across insurance
- By an affiliate site (such as Bankrate's
insurance page) that links to an online insurance quote generator; or
- By searching by insurance type, agency or carrier brand.
Agencies and insurance carriers generally will only offer quotes on their
insurance products, although some brand sites (most notably auto insurer Progressive)
have gotten extensive mileage out of offering quotes from competing companies.
InsWeb receives most of its traffic via the major portals.
Pickles says that's been key to earning the trust of the growing online audience.
"Shopping for insurance online can be pretty personal, especially
in products such as term life, and consumers are just now getting a comfort
zone concerning the privacy of their information," he says. "Brand plays a big
role in where consumers go and certainly placement with a Yahoo or MSN or Quicken
gives anybody credibility. If I'm a big user of Yahoo, I trust Yahoo with who
they've picked to be on their insurance center."
The human problem
One chink in the online quote system is a predictable
one: human error, or more accurately, human avarice.
"One of the things that we wish more consumers
would be educated on is not trying to trick the system," Pickles says. "We see
consumers put in a clean driving history, but once you go to buy the policy
offline by phone or with an agent, they're not going to be able to buy a policy
based on false information. Our hope is that we soon
will be able to validate more and more information that the consumer provides
us in real-time. What happens is, if a consumer puts in inaccurate information,
they are wasting everyone's time, including their own.
"The company's going to find out, the
rate's going to change and they probably won't buy because of that. I
think data validation is the next boost we're going to see from technology."
Before you buy
Once you've made your site visits and narrowed the field even more, it's time
to check the ratings on your finalists. Remember, you want
a sound company that's going to be around when the time comes to pay off, especially
on life, home and long-term care policies.
"The lowest price doesn't always equal the
best coverage options," says Myers. "Are you protected thoroughly? Most people
won't know that online. They go to an agent to learn the fine points of their
coverage. They want that peace of mind. Online, there's always that nagging
& Poor's and A.M.
Best Co. rate life, home and health insurers.
You also may want to clear your finalists with
your state insurance commission to make sure they are licensed to sell the insurance
you need. The American
Council of Life Insurers has a list of list of state insurance departments.
And it wouldn't hurt to visit your state's chapter of the National
Association of Insurance and Financial Advisors to check credentials.
Jay MacDonald is a contributing editor
based in Mississippi.
-- Posted: April 6, 2004