Although a majority of property/casualty insurance companies will offer real-time policy quotes on their Web sites by the end of the year, carriers' Web initiatives aren't being primary driven by the desire to cut costs or put agents out of business. Instead, fear of losing customers is the primary motive influencing property/casualty insurers' Web initiatives.Those findings are among the results of a recent survey of 40 property/casualty executives conducted by Forrester Research Inc., a Cambridge, Mass.-based technology research and consulting firm. Of those carriers polled, 60% plan to offer real-time quotes by December; all will offer auto quotes, while 69% will offer quotes for home owners' coverage. Among multiline insurance carriers, 92% say they'll offer real-time quotes for term life coverage, but only 8% plan to do so for whole life policies.

Revolutionary changes

Based on the survey results, many insurance executives do not fully grasp how the Internet will revolutionize the industry, says Todd Eyler, a Forrester senior research analyst and author of the report, "P&C Insurance Death Spiral."

"Most insurers really are thinking of the Internet as a way of extending their existing business, not as the catalyst that, I believe, will turn the industry upside down," he says.

For example, 50% of survey respondents believe that product coverages and features are a major obstacle to offering insurance products on the Web. But Eyler notes that, for example, AnnuityNet's Web site,, uses simple language to explain the features of variable annuities.

"In most cases, the product can be simplified, and there are many advantages that can accrue such as customer convenience and the ability to shop objectively for insurance," Eyler says.

Despite the fact that many carriers believe that online insurance marketplaces are commoditizing their products, insurers increasingly are understanding that these e-marketplaces are an important component of their distribution strategies. "But carriers seem to be paralyzed by two fears, that e-marketplaces can create a channel conflict with their agents, and that they are accelerating the commoditization of insurance," Eyler explains.

Future of agents

Carriers for the most part do understand that the Internet will change the role that agents have with consumers. Only 15% of surveyed executives believe that agents will be phased out over time.

"The assumption is that agents are needed to close the deal," Eyler says. "There is not a lot of belief that the Internet will drastically change the day-to-day activities or the role of agents."

However, Eyler believes that within five years, insurers will have spent most of the excess capital that they have accumulated and will be faced with significant bottom-line pressure to reduce expenses. The erosion of their profit margins will force insurance carriers to convert captive agents to independent status, and most independent agencies will fade away, he explains.

By 2004, Forrester estimates that the value of personal lines property/casualty policies purchased online will more than $13.5 billion, or nearly 10% of all personal policies. Auto policies will account for $11.8 billion in annual sales, or 90% of that total. In this environment, Eyler says, the so-called e-marketplaces will become direct competitors to carriers, forcing insurers to compete on service, not price.

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