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

Published by: Datamonitor

Published: Sep. 25, 2008 - 7 Pages


Table of Contents


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

Abstract

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


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