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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.

Not anymore.

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 by 2005.

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.

Embraced 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 pays.

“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 quote
Online insurance quotes are available in two basic flavors: instant quotes and delayed quotes.

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 24 hours.

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 as
    NetQuote and
    QuickQuote that generate quotes from dozens of different carriers and across insurance types;
  • 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 doubt.”

Standard & 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.