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October 17th - 19th,
1999
"Online Insurance Providers Look at
Speaking at the A.M. Best Co. Insurance Information and Technology Conference, "Continuing the E-volution," Ricks said a survey of 950 America Online subscribers indicated that people interested in buying car insurance are using the Internet primarily to get policy and provider information and to compare prices. Survey respondents said 24-hour access and cheaper prices were the primary motivating factors. The main reasons that they hesitate to buy insurance online are the lack of advice, security concerns and the absence of face-to-face interaction. Online providers are addressing those factors, Ricks said. For example, investment broker Charles Schwab is working on a plan to incorporate a video teleconference online for its investors, he said. Auto insurance is a commodity-like product that can be easily explained online. However, providers of more complex insurance products, such as annuities, are challenged to simplify the products they offer online, according to Shane Chalke, who created the first variable annuity product available for purchase solely online, eAnnuity for Lincoln National Life Insurance Co. Chalke said annuities available online must be stripped down to the basics. "Annuity product development is moving at a blinding pace with lots of bells and whistles being added," he said. However, 90% of people want annuities for two basic reasons--tax-deferred investment gains on mutual funds during their saving years and income after they retire. They aren't enchanted with such features as death benefits, complicated rules and surrender charges, he said. The target market for annuities is white-collar professionals in their 50s and 60s who have a relationship with an investment broker, he said. They are likely to buy an annuity as an alternative to a mutual fund, said Chalke, who was the creative force behind AnnuityNet.com, an online annuity store. AnnuityNet.com markets its wares as private-label products to banks and brokers. Direct sales of variable annuities reached $100 billion last year, excluding 403(b) plans--a 42% growth rate over the previous year. That bodes well for online sales if the products offered are as simple as mutual funds, Chalke said. Online annuities must be designed differently from those that are sold face-to-face. For example, customers want to be able to trade online and to access their account information, he said. By Marilyn Ostermiller |
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Designing the On-Line Product:
The playing field for online insurance
sales is wide open because the leading competitors haven't found a winning model
yet, according to Marc Ricks, an engagement manager with McKinsey & Co.