E-Commerce Niches for Small/Mid-Size P&C Insurers

by Gary Gilbert

For small/mid-size property and casualty insurers, e-commerce offers huge potential. But before entering, it's important to visualize how your company will function in the new electronic marketplace—and how it can best benefit. Indeed leveraging the Internet to your company's best advantage requires careful planning, expertise that likely needs to be outsourced, and realistic expectations.

Let's start with expectations: There are those who would have us believe that small/mid-size property and casualty insurers can prosper by marketing direct to new customers via the Internet. The reality is that they almost certainly cannot.

While the technology readily exists to permit such commerce, the marketing investment needed to drive customers to a website for direct sales is far beyond almost any small/mid-size insurer's means. The many advertising expenses necessary to generate brand awareness and website traffic not only constitute a major initial investment, but require continuing funding to remain effective. All the while you'll be competing with industry giants which, by comparison, have unlimited resources for promotional activities.

So how can smaller players benefit from e-commerce? In a few very key ways, each of which will facilitate cost control, business efficiency and, ultimately, growth.

Let your agents e-call home
Perhaps the most beneficial use of the net for small/mid-size insurers is agent/insurer electronic communication. By way of the net and a properly constructed web site, you can let your agents obtain quotes, submit applications and check on policy status. Adjusters can report information to the home office direct from an accident site.

More complex e-business is doable, too. You can have an intelligent underwriting application on your site—or a hot-link to your business's management system's intelligent underwriting application—which automates policy approval or rejection, or makes a policy subject to review. If the application has the necessary information, your system could even supply agents with pre-approval for a policy over the net.

All of this strengthens your company's business efficiency and yields internal cost savings. For example, it can be less expensive to install an html rating system on a website than it is to replicate and distribute demo disks to hundreds of agents. Such efficiencies can help reduce expenses and help to keep your company competitive and profitable.

Perhaps more important, insurer/agent e-communication simplifies your agents' work processes. It's far easier to obtain quotes from an insurance company via the Internet than it is to initiate a remote dial up or run a rating disk. You can expect that such services will be appreciated by your existing agent network--and attractive to agent prospects.

Interact with existing customers
Although selling insurance direct to the market at large via the Internet is not economically feasible for small/mid-size insurers, there is one select audience with which you can productively interact—your existing customer base.

A customer-centric website would permit those with security access codes to pay their premium…verify that payments have been posted ...enter a claim...and even check on the status of a claim.

Another technique for interacting with your customers is good old fashion e-mail. Some examples: Send your property and casualty customers information about related insurance products, like auto insurance. Or, have them complete an annual survey updating the status of their insured property. If they've made improvements to the property, that information could be helpful when you review their policy.

Outsourcing
Establishing electronic means for interacting with agents and your existing customer base will require time, experience and very specialized expertise. Accordingly, it's best to rethink those inevitable impulses to purchase software from the corner computer store and have internal tech personnel "redo the web site for e-commerce." Most often it's far better to hire a firm whose business it is to care for the creative and technical sides of e-commerce, and keep internal resources concentrated on running your insurance business.

Further, remember that you are revolutionizing important parts of your business, so when evaluating outside resources look for high skill levels and proven capabilities. There are ways to use color and typefaces and white space and graphic that good people know about. There are ways to simplify site navigation. There are techniques that can make your site a pleasant place to be. These are the areas where superior site producers excel both artistically and technically.

Insurance industry knowledge can be a valuable supplier credential; at minimum, your vendor should have business-to-business e-commerce experience. Good producers will have references from very satisfied customers and a degree of business success that suggests they will be around to service your site long after initial installation.

Website hosting is another outsourcing service to consider. Does your company have the hardware, human resources and the inclination to maintain a site internally, 7 days a week, 24 hours a day? What you want to be concerned with is running your business, not tending to a crashing server.

One option is for your website developer to host the site. If that is not an option, a quick net search for "website hosting" will turn up many alternatives. Insurance technology management companies like IDP, which offer both site development and site hosting capabilities, provide the added benefit of sole-source accountability for site performance.

The human side of e-commerce
Most companies that are successfully using their web site for interactive business transactions have provided a way for humans to enter the process. The current technology that permits this is called VOIP-Voice Over Internet Protocol, and it should be provided for by any insurance company preparing a web site for e-commerce.

Briefly, VOIP can permit agents or consumers to connect with a human being at your insurance company immediately, with the click a button. The capability is critical in that it enables personal assistance if the person interacting with your site gets stuck or perhaps needs to discuss an issue that your site does not directly address.

Because both parties are communicating verbally in real time, personal interaction via VOIP has most of the advantages of an in-person meeting, but only a fraction of the cost. Plus, its ease of use and "immediate gratification" appeal invites return visits to the site. VOIP technology is not expensive, but you will need to assign staff to field incoming calls.

IDP estimates that during the next 12 months VOIP will be a standard insurance industry e-commerce tool. From the earliest stages of your web site design, plan for it to be an integral part of your business workflow.

A word about training
Although good e-commerce web sites are designed for intuitive use, training can be a valuable part of a site's introduction to your agent network. Ask your web designer about developing an agent-user's "short course," perhaps on CD-ROM that can be mailed to agents or distributed during your next in-person meeting.

An overview of what information is on the site, how to reach that information and how to use the site's functionality can help facilitate faster and more frequent site use.

Gary Gilbert is president and CEO of Insurance Data Processing, Inc. (IDP), based in Wyncote, PA.