Meeting at Safeco's Seattle headquarters are (from left front) Bill Tormey, Safeco director of business development, and George Johnson, Safeco senior vice president of marketing and operations. From left rear are Bill Thomas, senior vice president and chief operating officer of Safeco personal lines, and John Timm, president of Timmco Insurance, Inc., Portland, Oregon.
John Timm, president of Timmco Insurance, Inc., an independent agency in Portland, Oregon, got a great deal on his latest hire. His new producer works long hours, including the overnight shift, handling high volume personal auto and term life coverage, among other products.
The new producer also works for a split commission, doesn't need employee benefits and is happy to refer customers to Timmco's other agents for advice and other services. This new employee doesn't get sick, doesn't complain when the office coffeepot is empty and doesn't even mind re-quoting business over and over again until the customer is satisfied.
Those are the advantages of the Virtual Producer, a new electronic commerce program from Safeco Corporation in Seattle, which not only automates insurance sales over the Internet, but also uses the marketing power of online sales to build new customer relationships for Safeco agents.
When prospective insurance customers browse Timmco's Web site (www.timmco.com), they are greeted with a range of interactive features that allows them to research lines of coverage and evaluate their coverage needs--as well as information for the agency's offices in Portland and St. John's, Oregon.
Browsers also see two icons offering instant online quotation and application for personal auto and term life insurance, two of the most popular personal lines coverages at the agency. By clicking on either of the icons, the customer enters the Virtual Producer system that collects risk information, quotes the coverage and accepts the application.
The personal auto insurance process takes about 15 minutes; term life can take less than five minutes. If the online customer needs assistance during the process, he/she can access the Safeco Customer Contact Center, a 24-hour/7-day-a-week information resource that can provide answers to questions from Safeco insurance specialists via Web chat, electronic mail or call return telephone service.
Direct online insurance sales aren't new, says Timm, one of 15 Safeco independent agents who beta tested the Virtual Producer in 2000. And many agents still feel threatened by insurers that sell directly online, cutting their agents from the sales process.
"The Virtual Producer attracts customers that we would ordinarily never be able to meet . . . These folks are from a whole new marketplace where we can continue to grow."
--John Timm, President, Timmco Insurance, Inc.
But what makes the Virtual Producer distinctive, he says, is that the agent not only receives compensation from the sale, but also gets new customer relationships from the sale. At the end of the automated, online sales process, customers choose a local independent agent for a permanent contact. In the future, when that customer has more complicated insurance or financial product needs such as homeowner's insurance or small business package coverage, he/she has an experienced, trained agent as a resource.
"What the Virtual Producer does is attract customers that we would ordinarily never be able to meet," Timm explains. "Virtual Producer is selling customers at night, on the weekends, whenever our offices are not open. Over time, this system will not only sell us and Safeco some personal lines policies, but help us to grow in the new world of electronic commerce."
Timmco, a 30 year-old agency with six employees, began experimenting with Internet-marketing in 1996, launching its first Web site with assistance from the Safeco SiteBuilder program for agents. The first Web site was a classic representation of the early days of the World Wide Web, Timm says.
"It said who we are, where we are and what we do, and asked people to contact us. It was an online billboard," he says. "What we learned from having a Web site was that we needed to do more to take advantage of the growing online marketplace.
"It can be an overwhelming task for an independent agent--just learning what to get done and how to get it done is a difficult and time-consuming process--even before you try to implement it. Agents really need their insurers' help," he says.
Last summer, Timmco began working with Safeco on its e-commerce programs and in November added the Virtual Producer icons to its Web site. The online system sold only two policies the first month, but Timm is pleased that at virtually no cost, he added two new customers to the book of business.
"And these are customers who we would likely never have seen come into our offices. These folks are from a whole new marketplace where we can continue to grow."
Bill Thomas observes that the Virtual Producer carves out a place in e-commerce for Safeco and its agents.
Safeco began testing its personal auto and term life insurance sales system in October in Oregon, then expanded it to Tennessee, Kansas and Illinois in November. The insurer plans to roll out the Virtual Producer system nationwide in 2001. The insurer also plans to launch homeowners and small business package online sales systems in 2002.
Safeco does not charge a fee to agencies that add the Virtual Producer icons to their Web sites, but the company does receive a portion of the standard 10% commission on personal lines auto, 4% on new sales and 6% on renewals.
Some of the 15 test agencies are also featuring ShareBuilder, an online system that allows individual investors to make automatic dollar-based investments in more than 2,000 publicly traded stocks.
The insurer also plans to roll out ShareBuilder nationwide to agencies and financial advisors early in 2001.
The Virtual Producer is part of Safeco's new "Brick 'n' Click" electronic commerce initiative that is designed to take the insurer deep into the world of online financial services marketing while supporting and leveraging the experience and resources of its agent-distribution systems, Safeco executives say.
"We put our most valuable business partners--independent agents and financial advisors--at the center of our Internet initiative," explains Safeco President Boh Dickey. "They've been our lifeblood for 77 years, and we do all we can to extend their local advice and expertise on Main Street and across the Internet superhighway."
Bill Thomas, senior vice president and chief operating officer of Safeco personal lines, agrees. "Despite all of the efforts the industry has been putting into direct online sales, it is clear to us that our customers need to have agents as a critical resource for advice, counsel and assistance in purchasing insurance for their various and sometimes complicated needs.
"Our task for the last few years as we have been exploring the possibilities in e-commerce has been to create a structure that will assist our agents in expanding their customer relationships and diversifying their revenues--while at the same time producing a convenient purchasing system for the customers who shop for insurance online," he says.
The Virtual Producer system is a solid step in that direction, he says. By serving the needs of the price- and convenience-oriented online shopper, it carves out a place in e-commerce for Safeco and its agents. At the same time, it builds a new book of customers for cross-selling and gives agencies new personal lines revenue.
Agents, George Johnson explains, are the "brick" that provides the security and stability to the online sales environment. The "click" provides the convenience.
George Johnson, senior vice president of marketing and operations for Safeco Corporation, says agents can expect online sales to continue to grow--and therefore need to get themselves ready to take advantage. However, his estimates are more conservative than many others.
Johnson says, for example, online sales of insurance are likely to grow to about 11% of total personal auto insurance sales volume by 2004, a significant but not dominant portion of industry revenue.
"What this projected growth indicates to us is that we have to have a technology platform and a distribution channel in place to take advantage of this growth and Safeco has been working for the past five years to develop that platform and secure the distribution network," he says.
The company's agency force, he adds, has always been at the center of the strategic development that led to Brick 'n' Click. Agents, he says, are the Brick that provides the security and stability to the online sales environment. The Click provides the convenience.
"Insurance customers still need the agent as a resource to talk to about their insurance decision, to help identify their coverage needs. They still need real people with expertise to verify coverage and perform services as part of their insurance relationship," he says.
Agents also need to be ready to interact with this growing group of online customers within the high-tech distribution channel, he adds. Keeping up with the latest information technology platforms could cost businesses as much as 30% of revenues each year, and part of the Brick 'n' Click strategic initiative is to provide agents with the technology resources to stay current with the trends.
Bill Tormey points out that the Virtual Producer embodies Safeco's dual goals of selling insurance on the Internet while at the same time strengthening its local agency sales force.
The reward for agents is the ability to solidify their own local markets and compete effectively against direct marketers, says Bill Tormey, Safeco director of business development.
"It has always been true that for an agent to succeed, he/she has to be where the customer is--and more and more, that customer is going to be online. What we have been grappling with at Safeco is the problem of being able to sell insurance on the Internet while at the same time strengthening our local agency sales force."
The Virtual Producer system embodies that dual goal he says, by bringing the agent onto the Internet with the ability to conduct virtual sales--but also bringing the customer to the agent for counsel, service and future sales, he says. *
The author
Len Strazewski is a Chicago-based freelance writer specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, the Chicago Tribune and Human Resource Executive, among other publications.
For more information:
Contact: Bill Tormey
Phone: (206) 545-3320
E-mail: wiltor@safeco.com