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Catching Up: Online Direct Sales in U.S. Personal Lines Insurance (Strategic Focus)

Datamonitor
September 25, 2008
7 Pages - SKU: DFMN1918968

Abstract Table of Contents Search inside this report Related Reports

Countries covered: United States

Introduction

The need to improve operations and meet customer needs is being met by two counterforces: a powerful agent force and a cumbersome regulatory system. In the long run, the driving forces will outweigh the counterforces and direct online insurance will prevail in the United States personal lines market.

Scope

This report looks at direct online insurance in the United States personal lines market
Auto insurance, which makes up the large majority of personal lines market, is often highlighted
The gamut of technologies that enable a direct online strategy are discussed

Highlights

A direct online sales strategy, which can lead to lower operating costs and greater customer control, can enable insurers to excel in today’s market. But more importantly, a direct strategy is what the consumer is coming to expect. Insurers that fail to react to consumer demands will lose market share - which will be costly to regain.

Premiums booked through the direct channel are growing at a 7.5% annual rate, which far outpaces both the independent and captive agent channels. Auto lines are the most promising; in 2007, 2.15 million policies were sold online in the United States, up 37% from the year before.

Agent forces can be a powerful deterrent to a direct sales strategy. But all deterrents can be overcome with the right plan. Insurers with existing agent channels can achieve a successful direct strategy if they properly transition their agent force.

Reasons to Purchase

Gain insight into the technology and strategic dynamics currently taking place within the insurance landscape
Gain market insight to assist in your strategic planning and go-to-market strategy

Overview
Catalyst
Summary: Key Messages; Market conditions and changing consumer tastes are driving the direct channel; The direct channel for personal lines is fast growing but lagging general ecommerce; Agent backlash and heavy regulations are powerful counterforces tempering adoption; Insurers with agents channels need a transition plan in order to go direct; Online insurance begins with the customer experience; Table of Contents; Table of figures
Market Opportunity : Demand Exists But Do Carriers Have The Will?: Market conditions are driving insurers to focus on efficiencies and the customer; Consumers are increasingly demanding internet sales and service; Yesterday's Consumer; Today's...and Tomorrow's Consumer; Insurers are responding but the road is full of impediments; Agent-based insurers are conscious not to antagonize producers; The United States regulatory regime makes expansion difficult; Elements of a Successful Web Offering; Online insurance begins with the customer experience; Security is a key concern of customers; Savings on commissions and efficiency is welcome, but insurers must also drive sales
Customer Impact: Direct sales can deliver better financial performance; Reducing commission costs; Enabling more policyholder self-service; Controlling the customer relationship; The Progressive example; Sales are not a typical core competency and aggregators can be ruinous; Core Competency; Aggregators; Insurers with agent channels need to design transition plans; Soft approach; Moderate approach; Hard approach; Greenfield; Go to Market; Understand the industry dilemma and realize that strategy trumps technology; Ensure that products are flexible enough to meet market opportunities and regulations; Never forget the policyholder; Recommendations; Find insurers with poor expense ratios, and highlight the financial and market opportunity of online sales; Present insurers with ways to manage the transition away from agents and toward direct sales
APPENDIX: Methodology; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Figures: Figure 1: North American non-life insurers' investment strategies in 2008; Figure 2: North American personal lines direct written premiums (2004 - 2006); Figure 3: Real wages in the United States for private non-farm workers, 1964-2004; Figure 4: Ecommerce, Internet Auto Insurance Market Share, 2007; Figure 5: Areas of investment for North American non-life insurers; Figure 6: Planned investment into IT solutions for non-life insurers; Figure 7: Progressive Corporation, personal lines; Figure 8: Progressive Corporation, net premiums written, personal lines; Figure 9: Personal auto market share, by distribution, 2006

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Catching Up: Online Direct Sales in U.S. Personal Lines Insurance (Strategic Focus)

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