Online sales of personal property and casualty insurance totaled just $11 million in 1999, a miniscule slice of a $133 billion market. However, buoyed by technology improvements that will make it easier for consumers to apply for insurance, Internet-based property and casualty insurance sales will skyrocket to $14 billion by 2004.That's according to a recent report from IDC, a Framingham, Mass.-based technology research and consulting firm, which estimates that carriers garner more than $11 billion annually from consumers who shop for insurance online.

Although consumers are increasing their use of the Internet to search for the best prices, a small percentage of those consumers actually purchase policies online. Applying for insurance online is so convoluted, many consumers abandon the process, says Jennifer Blackmore, senior research analyst for IDC's eInsurance program and author of the report.

By 2004, approximately 63% of U.S. Web users will have shopped for insurance online. And, as brand-name carriers increase their e-commerce activities-and application forms become shorter and security improves-the number of online shoppers who abandon the process before purchasing insurance offline or online will decrease from approximately 62% of Internet insurance shoppers to 28% by 2004, IDC predicts.

Agents will benefit

In the short term, insurance agents will benefit from this shift in consumer behavior, Blackmore says. The number of people who shop for personal property/casualty insurance online but purchase offline will increase at a compound annual growth rate of 38% and drive $57 billion of Internet-assisted revenue to agents in 2004.

Brand matters

The top 20 personal P&C carriers underwrite approximately 80% of the total premium volume, and the top five write more than 62% of premiums, according to IDC. This is due to two factors: their ability to lock up distribution via a strong network of dedicated agents in key markets, and a strong brand.

Although the Internet gives small carriers the opportunity to go toe-to-toe with major carriers, when given a choice, the majority of consumers will purchase products online from brands they know and trust, Blackmore says.

By 2004, the top 20 insurance carriers will be selling insurance online, and more than 80 other carriers will be selling directly or indirectly via the Internet, IDC predicts.

"The main issue, especially for larger carriers, is to continue enhancing their brand," she adds. "They need to let people know they are enabling online shoppings, and they should look to their agents to start disseminating that information as well."

Carriers that do not implement e-commerce strategies will be at a disadvantage and will need to consider strategic partnerships, mergers and acquisitions, or other means to catch up and remain competitive, IDC predicts.

"The real need for insurers is to understand how the Internet is evolving and what role they want to play," Blackmore says. "Because with the financial modernization bill and electronic signatures, the industry is changing-whether they want to accept that or not."

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