Those who succeed have much to gain. Web-savvy companies use efficiencies gained via Internet technology as a competitive weapon. For example, through its online offering InsurePoint, Atlantic Mutual, in Madison, N.J., took a cumbersome paper-based applicattion process that typically was taking a month to complete and turned it into an electronic process that churns out quotes in as fast as two business days. And by adopting a Web-based system, eCoverage, an online-only insurance player in San Francisco, has empowered its in-house users to update the computerized systems that oversee the processing of applications, rather than forcing them to depend on IT to make the changes. The upshot: quick response in a notoriously slow-reacting industry.
By connecting to their insurance companies online, Web fans say that consumers can obtain information that was once held out of reach in agents' file cabinets and insurance companies' proprietary computer systems. And as competitors leverage the Web, consumers will more readily be able to compare insurance offerings, shop around-the-clock, and request services, observers predict.
Forrester Research, in Cambridge, Mass., estimates that $4 billion in auto, homeowner's, and simple life insurance products will be sold via the Internet by 2003. Although small relative to an industry whose total revenues reach into the hundreds of billions, the figure is impressive considering that today's Internet sales only reach the hundreds of millions of dollars, says Todd Eyler, an analyst at Forrester.
As a result, Eyler says, it's likely that pricing will become more competitive and new products will be introduced. Like similar upheavals in the banking and brokerage industries, new players will arise and old players will stumble.
Old dog, new tricks
In terms of embracing e-commerce, the insurance industry has been the slow-moving child of the financial services world, says Gil Irwin, a partner at Booz-Allen & Hamilton, a technology consulting company in New York.
In a study Booz-Allen released last year, just 37 percent of the insurance companies said they believed that their Internet strategy is directly linked to their corporate strategy. Now Irwin says, "You can't talk to an insurance executive today without them saying 'I'm going to be out there selling on the Internet'," although it may not be their main sales channel.
But with good reason, insurance companies haven't made the quick leap into the deep end because of organizational and implementation hurdles inherent in this industry.
Three obstacle stand between Web dreams and reality: channel conflict, or concerns that companies that sell insurance via the Internet will alienate their agents; regulation, meaning the state-by-state restrictions on products that add to their complexity; and systems, or building or updating an infrastructure capable of supporting these efforts.