A few years ago, most insurance companies entering the brave new world of Internet business development subscribed to the axiom, "If we build it, they will come."The strategy appeared to be fail-safe at the time, but as many industry experts now concur, this approach-both indiscriminate and self-serving-has outlived its usefulness. Carriers that want the Web to be a more integral part of their business no longer can afford to implement an Internet strategy based on blind ambition.
Instead, insurance carriers on the leading edge of Web site development have begun to incorporate an Internet strategy with much greater reliance on market research techniques, pulsed by the generation of relevant data to identify who the typical online consumer is.
These techniques include consumer focus group sessions, e-mail surveys, the creation of internal market research teams and development of partnerships with market research firms under an outsourcing arrangement. The objective: to assess the strengths and weaknesses of both the technology and the insurance components of the Web sites.
Born of necessity
Placing an emphasis on market research to identify specifications of the online consumer has become a necessity for many carriers. As more insurers integrate the Web within their corporate business plans, industry observers say the online segment can no longer be a secondary or tertiary revenue and profit source, but instead must step up its contribution level.
"Two to three years ago, you could get away with not having an e-business strategy. It was a novelty investment," says Christoph Ritterson, vice president and strategic marketing manager for personal lines insurance for Chubb Group of Insurance Cos., based in Warren, N.J. "Today, you have to have a world-class Web site. And, it's almost impossible for a company not to have their Internet plan integrated into the main business plan."
A new breed
Another factor is that the Internet has created a new breed of consumers, motivating insurance carriers to rethink their marketing strategies.
Demographically, these consumers are part of a constituency that's mainstream and middle-class, and no longer are they novices on the 'Net.
"There's no doubt that consumers have raised the bar on their expectations with the Internet. Through experience, they have been exposed to things such as price transparency on the Web. They see more, know more and expect more," says Thomas Tynan, a partner with Andersen Consulting, Northbrook, Ill., which -effective in January-will change its name to Accenture.
Industry experts believe that rising consumer expectations, combined with intuition, will make it difficult for carriers or marketplace sites to hide behind information on the Web.
"I think consumers believe that old-guard insurance companies hide behind information," says one observer who declined to be identified.
As consumers become more confident performing tasks online, carrier Web sites have to be ready to adapt as this learning curve flattens, says Alan Bauer, Internet project leader for Progressive Insurance Co., Mayfield Village, Ohio. "About 60% of adults now have established some degree of Internet skill development," Bauer relates.
Ascertaining relevant data on active Internet users enables many carriers to better narrow the focus of their Web strategies and thus better attract and retain online customers. However, there are still many gaps in their Web-based market research programs, industry observers believe.
There's still a great deal of dig-below-the-surface market research extraction that needs to be performed by both carriers and third-party marketplace sites, the latter of whom have been criticized for their lack of qualitative market research, experts say. Carriers, on the other hand, have been slow to parlay their traditional market research programs and leverage them to the Web.
Several questions that loom large about the breadth and depth of investments for online market research, include:
* Whether, and to what degree, insurance companies have developed the educational and research tools to determine specific profiles of their online audience.
* To what degree carriers need to reconfigure or modify their sites in response to the changing needs of online consumers.
* The average percentage of the corporate budget that carriers should devote to market research.
As insurance companies attempt to make the Web an integral part of the overall business, all these issues must be addressed. "If a carrier has an aggressive market research program, they should be able to apply that to the Web," says Mark Trencher, vice president of insurance research for the Conning Group, an insurance industry research firm in Hartford, Conn. "At many companies, however, you have pockets of research that sit in different departments. It's not centralized."
Carriers such as Nationwide, MetLife, Chubb and Providian have been given high marks by insurance experts for their ability to fuse traditional market research to their Web programs, Trencher says. Progressive Insurance, which launched its Web-based selling initiative in 1996, also is adept at keeping its Web site fluid based on changing consumer tendencies.
These companies have drawn some basic conclusions about online consumers, such as a majority still prefer to shop for insurance online and complete the process offline. To date, only 10% of property/casualty sales are done in an end-to-end fashion on the Internet, reports Forrester Research, Cambridge, Mass.
What online consumers value most from an insurance Web site are branded products, educational tools, self-service functions, access to multiple products at one site, connectivity with an agent, security, navigational ease and instant quotes.
Web sites that fail to provide instant quotes will suffer the consequences with consumers. Internet marketplace sites built their businesses based on providing instant quotes.
Proprietary sites of many carriers have been slow to offer instant quotes, and activating this function will be vital going forward.
"The one thing a consumer visiting the Web wants most is an instant quote," says Robert Bland, president of Quotesmith.com, a Darien, Ill.-based insurance Internet exchange that provides instant auto, life, health and dental quotes from more than 300 leading companies. "If they spend 10 minutes entering personal data online and then are informed that an agent will contact them later to give them a quote, they're furious."
Price, service required
Internet-savvy consumers also feel a sense of autonomy; thus, self-service functions, such as the ability to check on the status of a claim or even check on the balance of an annuity, has become another priority.
Jon Kelly, vice president of product development for eCoverage, San Francisco-based agency marketplace site, says the key to success on the Web will be to "empower the consumer like the online brokerages have done by giving them the tools they never had before."
Online consumers are also motivated by price. It's not that consumers buying insurance offline are not price-conscious, but industry observers note that the advent of the Web has fostered consumer expectations of bargain hunting.
"Discount brokerage firms such as Charles Schwab built their business as low-cost providers of online stocks, and this could have given rise to low-cost insurance products as well," says Ken Porrello, director of insurance market operations for Deloitte Consulting, Chicago.
Following on the heels of the online brokerages were carriers that launched consumer-direct Web sites. "Geico Direct made its mark by aggressively advertising the fact that a consumer could save 15% off an auto insurance policy," says Todd Eyler, a senior research analyst with Cambridge, Mass.-based the Forrester Research Inc.
But as more carriers build their book of business on the Web, many have discovered that low-cost insurance is not the be-all and end-all to the average consumer.
"What most consumers want first and foremost is a competitive price accompanied by a guarantee of service," Eyler says. "I believe that the price factor will eventually return to an equilibrium by providers like Geico Direct, and service will become a priority. And while competitive prices help build volume, offering low prices on a policy has other ramifications. Carriers find that advertising on low price often only gets them bad business."
It's obvious that carriers have a great deal to digest to determine a crystallized profile of their online consumer, and then proceed to meld that profile into what eventually becomes an effective Web program.
Some carriers are finding that the process involves implementing appropriate research techniques that assess the strengths and weaknesses of the technology and insurance components of their Web sites.
Progressive Insurance, which attracts 28,000 unique visitors a month to its Web site, www.progressive.com, for several years has been gathering data on the company's core online customers.
Since its 1996 inception, Progressive's Web site has a core of online customers who are men in their 20s seeking competitively priced auto insurance. That profile still consists of young males, but the mean age has increased about 18 months over the course of three years, Bauer says.
By identifying that its typical Web user is now older and more mature, Progressive modified its site to include additional self-service functions. "We found that consumers wanted to be able to log on to the site to make additions or deletions to policies," he states.
To resonate better with mature consumers, Progressive reengineered the site. For example, the use of trendy verbiage, such as "snail mail," has been eliminated, because visitors regarded it pass.
In response to the changing desires of its consumer base, Progressive recently discontinued an interactive quiz on its home page that was a takeoff of the "hangman" stick-figure game. In Progressive's version, the quiz theme centered on driving and auto insurance. But Progressive discontinued the quiz because it concluded that time-pressed consumers didn't have time to play games online.
At one time, Progressive also enabled Web visitors to "skin" their browsers, an application that lets them download a graphic from the company's Web site. Progressive determined that "skinning" was a function that many current Web users don't value, and discontinued offering it.
Progressive didn't stumble upon these revelations accidentally. The company has assembled a market research team that consists of what Bauer calls programmers and "experience" developers.
"The experience developers determine the Web site's presentational features. They can take an idea, impart that to a Web programmer, who then physically implements the feature," Bauer says. "All the people who work for me are inveterate Web surfers, which enables them to stay on the leading-edge of what makes a Web site contemporary."
Progressive occasionally hires market research firms to help the company mine for consumer data that Progressive can't gather on its own. But the most organic approach the company takes to unearth consumer data comes from customers themselves-via live focus group and e-mail feedback.
The e-mail strategy is an ongoing process that encourages Web visitors to submit comments and transmit them to the company. The critiques may be as basic as correcting a typographical error on a Web page, but it can also consist of comments about the creative quality of the Web site.
Consumer focus groups, which are held four times a year, end up providing Progressive with "what I call `good negatives' about a Web content issue or an insurance program. These insights allow us to turn a program off before it gets going," Bauer explains.
Progressive has to scout for individuals who have Internet experience and can shed light on insurance. The combination of the two attributes has been challenging. "It's become easier, but a couple years ago it was hard finding consumers who had depth of knowledge about the Internet," Bauer explains.
Extracting pearls of wisdom from consumers about insurance has proven difficult because "insurance is not a positive topic for most consumers. Many feel that the products are complex and they don't really get it. This has made it hard to get relevant data from consumers," he adds.
Bauer declined to discuss the expenses Progressive incurs to execute any of the market research initiatives it undertakes.
One step ahead
Other carriers have also recognized a need to remain on the cusp of market research. For example, Chubb plans to offer its customers access to an extranet site to interact with the company after conducting a great deal of research on the issue.
Chubb concluded that customers recognized an extranet as possessing greater security features than the Web, explains Chubb's Ritterson. An extranet proved meaningful to the company's customer base since most insurance products that Chubb markets-including home, auto and watercraft policies-cover assets of $1 million and above.
Many of them are luxury items such as jewelry and rare art. As a result, the assurance of a secure Web site is paramount.
Chubb's accumulation of consumer insights came through substantial research, Ritterson says. Chubb conducted phone surveys and e-mail campaigns to determine Internet usage patterns of upscale consumers.
It examined other Web sites that upscale customers would frequent to get a flavor of the Web content. "We looked at hundreds of other Web sites that our clientele would have a tendency to visit within the financial services arena, and tried to determine what the site visitor's minimum expectations were," Ritterson explains. "We asked if there was anything that our site could provide to fill a need that was lacking at those sites."
The first major improvement that Chubb opted to make with its Web strategy was to develop more interactive features to its Web site.
The company also realized that its customers would give the Web site higher marks-and perhaps increase their frequency of visits-if the company provided Web content not geared soley to selling insurance.
"We put up a hyperlink to the Web site for the American Association of Appraisers," Ritterson explains. "Knowing that they often obtain appraisals for an art or coin collection, we listed the directory to help them more easily find an appraiser."
Taking the next step
As carriers begin crafting their Web site strategies, analysts say that the next step will be to remain fluid. This begins by understanding that the Web consumer of 2001 is sure to yield to a new type of user in three to five years.
Subtle shifts in tendencies will force carriers to ascertain what tomorrow's online audience wants before they-consumers-know they want it.
Along these lines, carriers will have to branch out and think about forming more alliances with those companies that have an indirect impact on the insurance business.
"It's all a part of embracing event-driven marketing," says Jeffrey Lewis, vice president of new initiatives for Allstate Insurance Co., Northbrook, Ill.
"If a consumer goes on www.autobytel.com to conduct research on buying a car, Allstate, as a provider of auto coverage, should be a part of that buying tapestry," he adds. "We definitely need to look at more aggregator affiliations that will drive consumers to www.allstate.com. We need to play in this environment and we intend to."
From a technology standpoint, companies such as Progressive have gotten in on the ground floor of wireless Internet application development-so that they have the technology in place to interface with the new cell phones that are being equipped with Web browsers.
"There will be more integration between wireless applications and the Web," says Progressive's Bauer. "We're just getting started, but the thing you can't fall prey to is restricting your vision of what the wireless Internet will consist of in three years based on what it consists of today."
Connecting with the online consumer is still a work in progress though. "There has been no wakeup call for this industry to force it to develop sophisticated consumer programs," says Brad Adrian, a research analyst for Durham, N.C.-based Gartner Financial Services.
"Until they do a better job in this area, it will be hard to deliver on many promises. There is no evidence that a Web site attracts new customers, and-at the very most-it may only retain existing customers.
The lack of knowledge of the online consumer means that many financial services providers are building Web sites blindly."
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