The life insurance industry recognizes the Internet will be a valuable tool to help it compete in the future. But there is still a long road to travel before life carriers can become true e-businesses.That's the conclusion of a recent study conducted by the American Council of Life Insurers, Washington, D.C. The study, "Life Insurance and Electronic Commerce: Present and Future," examines several key issues related to the Internet, such as electronic signatures and cyber security. The focus was primarily on insurer-to-consumer initiatives.

Eighty percent of survey participants say their company has a long-term Internet/electronic commerce strategy in place. Although the survey illustrates that the industry is thinking about e-commerce, the companies are having problems implementing these strategies.

"The findings were along the lines of what we would have expected," says David Leifer, ACLI's senior counsel.

Internet hurdles

The survey concludes that there are three reasons for life insurers' difficulties moving on-line: high financial costs, information security, and fraud issues.

Most of the cost issues, Leifer says, stem from the latter two concerns. Insurers need to know the identity of those to whom they are selling their policies. Laws have been passed governing electronic signatures, but they have not yet had a significant impact on the life insurance industry (see "E-Signatures Get A Slow Start," page 1).

"There's still a fundamental legal uncertainty," says Leifer. "Even though we have laws that allow us to do things, our industry is very high dollar with the policies involved. There's still a fear of doing something wrong."

The life insurance industry is playing the waiting game to see if it will receive more assurances from the legal and regulatory side before fully committing to complicated Internet endeavors.

Related to e-signatures is the authentication technology itself. Biometrics and smart cards are costly, especially when they need to be so broadly implemented. Personal identification numbers and passwords are probably the most common forms of user validation, but they are not necessarily the most secure. Life carriers want an industry-standard authentication system to emerge.

However, cost and fraud are less important reasons for the poor state of online life insurance than leadership, says Todd Eyler, a senior analyst with Cambridge, Mass.-based Forrester Research. There is a cultural problem in the industry where the leadership "doesn't really understand the need to invest in direct channels," he explains.

Eyler does not foresee much progress toward truly Web-enabling the life insurance industry until senior insurance executives become more willing to embrace this technology.

If any money is being spent on the Internet, Eyler says it is on agent portals, not direct to consumer sites. A few carriers, such as MetLife and John Hancock, have invested in consumer-focused projects, Eyler notes. However, agents receive most of the attention.


A key finding uncovered in the ACLI research is that the life insurance industry realizes it lags online behind other financial services industries-even behind other sectors of the insurance industry.

A major reason for this perceived foot-dragging is: With few exceptions, the types of products life insurers sell are too complicated for the Internet. Policies can consist of countless nuances that may be better handled by a person, not a computer. Property and casualty insurers can do more with their products on the Web because their policies are comparatively straightforward. It is just the nature of the products.

"If you want to use a P&C insurer's Web site, car or home insurance policies don't require you to take a medical exam," comments Keith Golembiewski, a research analyst with the ACLI who helped spearhead the survey.

Term life and fixed annuities were favored by the respondents to be the life insurance products most suited to the Internet. "These are simpler products. Other life insurance products have lots of options for consumers to choose from or have a cash value," Leifer says.

For those life carriers that have their own Web sites, most functions are informational, research shows. Enabling consumers to execute simple commands, such as address or beneficiary changes, are on the to-do lists of most progressive insurers. Also, some offer downloadable forms on their Web sites. These self-service options save time and money.

Agent extranets

Forrester's Eyler says it is important to look at the life insurance industry's Web initiatives as a whole before calling this sector a laggard. "I don't think they're further behind (P&C companies) overall except in direct-to-consumer initiatives," he explains. "But when you look at agent extranets, what you get from a New York Life is a lot more compelling than what a P&C company may offer."

Maria Bruno-Britz is a freelance writer based in St. Marys, Ga.

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