Up to now, the financial services business has made use of the Internet primarily as an information and marketing tool. However, experts predict substantial growth in the purchasing of insurance and other financial products over the Internet. Many of these experts think personal lines is the area of the business which has the strongest potential for Internet sales growth. But some say that even complex reinsurance arrangements can be conducted via the Internet.
Even as the debate continues over the potential for Internet insurance sales, there are indications that the Internet itself, as we know it today, could soon become obsolete. It sounds strange because the Internet is really in its infancy, but some technology experts are looking at new high-speed "digital" services that could eliminate the need to "log on" to the Internet for the information they require. A recent article in The New York Times, for example, examines the activities of a San Francisco-based firm called Northpoint Communications Group, which had designed a new technology called digital subscriber line, or DSL, that, if widely accepted by computer users, could do away with the dial-up modem access offered by the leading Internet service providers.
According to The Times, DSL is "shaping up as the telephone network's main weapon against the cable television industry's mounting campaign to offer high-speed Internet access."
What all this means is that Internet access soon will be open to the masses, not just computer devotees. In time, in states where gambling is legal, the owner of a television set may be able to place bets in horse racing or other sporting events. So, why not buy insurance as well?
An interesting scenario is taking place in England in this regard. The primary cable network in most of England is "Sky" television. There are "Sky" sports, "Sky" news and "Sky" business, among other units. Recently, "Sky" business was said to have revealed a new venture by insurance companies into the medium of interactive digital television. And a major insurer, as yet unnamed, is said to be having talks with "Sky" about beginning a new closed user service aimed at both direct insurance companies and brokers using digital broadcast. The service will act as a two-way real time communication tool between the insurer, its staff and brokers providing information on products and, probably, quotes.
"Sky" business itself is a relatively new addition to the cable network. Its audience consists of retailers, banks, financial services and hotels. The story of this potential new service was reported in London by the Insurance Times, a weekly publication based there. According to Insurance Times, the new "Sky" insurance service is expected to be welcomed by insurance brokers because another firm, Policy Master, recently struck a deal with another insurer, also unnamed, to develop a direct-to-the-public broadcast service which would eliminate the broker operation, brokers in England being synonymous with insurance agents
in America.
The Insurance Times reports that the public service is expected to be broadcast in "Sky's" free public interactive service called "Open." The service, which will be launched in the fall with home shopping, banking and e-mail, is predicted to be in five million homes by 2003, and analysts are valuing the service in the billions of dollars. Interactive digital television includes set top boxes and free telephone calls.
Brokers, quoted in the Insurance Times report, seemed to see these new technological developments in the marketing of insurance as good and bad, depending on the ultimate outcome. A spokesperson for Willis Corroon said, "It is a fundamental opportunity as well as the biggest threat to brokers," adding that the insurance industry in the U.K. will be "completely different 10 years from now."
Said the spokesperson: "With 11,000 people in the U.K. joining the Internet every day, it doesn't take much to believe that digital T.V. straight into the living room will have a very profound impact, particularly on personal lines which is often just a price decision." However the Willis Corroon spokesperson added that the reach of these new technologies could extend to commercial lines as well. He said that, with potential insureds having more immediate access to information and products, the broker will have to earn its money by doing more than merely introducing the buyer to the marketplace.
The question in England, however, is whether brokers are willing to embrace the new technologies available to them. It is a question that might be relevant in the United States as well. The whole idea of using new and more direct technologies is intended to reduce transactional costs. At present, the agent and broker are part of those transactional costs. Moreover, brokers in England are questioning whether consumers really want to trust their insurance decisions to technology. In the Insurance Times report, Mike Williams, chief executive of the British Insurance Industry Brokers Association (BIIBA) said: "There is a bewildering array of different delivery systems for personal lines--telephone, broker, correspondence, Internet and now interactive T.V.--which is just another tool. Sales on the Internet are much slower than the growth of the medium itself. Insurance is not a commoditized purchase; it requires a qualitative judgment and it is not easy to measure the competitiveness of 80 to 90 products."
But whether consumers really want to conduct their insurance business via new technologies or whether agents and brokers believe this to be feasible, the fact of the matter is that insurers on both sides of the Atlantic are moving into these new areas with abandon. In the United States, for example, a Colorado-based company called ChannelPoint has set up in the northeast U.S. what is described as "the world's only Internet marketplace exclusively for agents and brokers," to sell life insurance, health, dental, vision and disability products. According to ChannelPoint, the new Internet marketplace is designed for insurance professionals selling plans from CAREington International, Guardian Life Insurance, HIP Health Plan of New York, Physicians Health Services, QualMed, United HealthCare and U.S. Life Insurance.
The product, called ChannelPoint Commerce Broker, automates everyday rating, quoting and other tasks and "lets the broker provide accurate product information without the need to evaluate prices and benefits manually," according to the company.
In another development, Commerce Insurance Co., the largest writer of private passenger automobile insurance in Massachusetts, recently announced that it is offering its auto insurance products at InsWeb. Commerce, which markets its products exclusively through independent agents, will be the first carrier in Massachusetts to offer automobile insurance quotes at InsWeb, the company said.
The point is that, regardless of how brokers feel about new technologies and the marketing of insurance products, the old ways of doing things have pretty much fallen by the wayside. The Internet is here, but interactive digital television is just around the corner. It already exists in England, and the United States is just a little behind. That raises the question: How long will it be until we actually get to the point at which deals are finalized over machines? *
©COPYRIGHT: The Rough Notes Magazine, 1999