Over the past four years, independent surveys that measure and project online insurance trends have delivered what's become a recurring diagnosis: When it comes to the functionality of their Web sites, carriers remain a step behind banks and brokerages.And while two new reports conclude that carriers have made strides in narrowing the Internet gap, the reports also highlight the industry's continued e-business shortcomings.

New York City-based Booz Allen & Hamilton's e-Insurance survey reveals that although direct insurance sales online aren't expected to grow beyond 2% of overall sales during the next four years, carriers must still provide both customers and agents with a greater level of electronic resources.

The Booz Allen report culled insights from what it calls the "top" U.S. property/casualty and life/health carriers. The survey also critiqued more than 200 Web sites operated by insurance companies, banks, brokerages and online intermediaries.

A separate study released in August by Boston-based Celent Communications, an e-business consulting firm, generally echoed Booz Allen's core conclusion: Carrier Web sites need to reach a higher function threshold even in the face of modestly anticipated direct online sales. Celent's survey, titled "U.S. Insurance & the Web: An Overview," gleaned data from the top 100 property/casualty and life/health carriers as well as the top 75 bank Web sites.

Internet inertia

In rationalizing why carriers may have been slow to deliver a more holistic Web experience for customers, the Celent report states that insurance customers have not "demanded as much efficiency as banking and brokerage customers."

It has also been determined that carriers are not "threatened by Web-based competitors in the ways that banks and brokerages are," the Celent report states.

Moreover, most projections indicate that direct sales of insurance online will peak at 5% to 10% of a carrier's overall premium volume. If customers aren't eager to buy online, this gives carriers less impetus to expand their Web functionality.

Indeed, both survey sponsors harbor modest growth projections for online insurance sales. Celent's study predicts that direct sales will continue to be limited to mainly term life and personal auto. Direct online sales may capture as much as 5% of the market by 2006-primarily reflecting term life and auto coverage, Celent states.

Booz Allen's outlook is less promising in that it predicts that the online insurance market is expected to account for 1.5% of total net premiums written by 2005. Property and casualty products are expected to drive this modest growth, representing 88% of the online market by 2005, Booz Allen states.

No Excuses

Despite low sales projections, carriers need to increase both the visibility and the functionality of their Web sites, the surveys conclude.

"The key to success on the Internet for insurance carriers is to provide the best possible customer experience at a variety of touch points," says Gil Irwin, a vice president who leads the e-business practice at Booz Allen.

"This means giving their products high visibility on sites where the most attractive customer segments spend the bulk of their time," he says.

For example, Booz Allen reveals that 86% of insurance customers want to self-administer their accounts, but only 25% of insurers support that function online.

And, although more than 9 of 10 insurers report that their customers have requested account review online, this capability has been implemented by fewer than 50% of the insurers surveyed.

Both surveys admonish carriers to place a greater emphasis on expanding the Web to interact with business affiliates. Celent believes using the Web to foster internal communications is essential, and that greater pressure will be exerted on carriers to refine Web-based agent extranet sites.

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