Given the state of the U.S. economy, the competitive marketplace and ever-changing customer habits, U.S. insurers have begun to invest in online sales strategies.
A recent report by independent market analyst Datamonitor, London, concludes that by developing an online sales strategy, insurers are able to lower customer acquisition costs as well as gain control of the customer relationship. However, the report, "Catching Up: Online Direct Sales in US Personal Lines Insurance," asserts that the fragmented regulatory regime and the powerful agent forces in the United States will temper wide-scale adoption.
The combination of poor investment income and the soft pricing environment places great pressure on insurers' bottom lines. To bolster their competitive position, insurers must adopt cost-efficient sales and servicing strategies, as well as improve the customer relationship - both of which are possible with an online strategy, the report says.
As a result, Datamonitor believes customer acquisition costs can be dramatically reduced, due in part to low or no commissions. But even this strategy is fraught with concerns, as online direct sales require massive amounts of advertising, with the report offering GEICO and Progressive Corp. as prime examples.
Utilizing this new online strategy of selling direct to the consumer, says Datamonitor, insurers can conquer the policyholder relationship, which could lead to improved profitability.
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