Monday, November 16th
11:30 a.m. - 12:15 p.m.

Lessons of an Insurance
E-Business Pioneer

- James Harkness, TIAA-CREF

"Internet Marketing Can Produce Profits"

Don't be swayed by the myths and misconceptions that have sprung up about Internet-based marketing, one of the first insurers to market on the Internet told other insurers Monday.

Insurers should determine if selling or marketing on the Internet makes sense, then figure out how to get it done, James Harkness, who oversees electronic commerce for TIAA-CREF, said. Harkness spoke at "Fulfilling the e-Promise," A.M. Best's annual information conference for the insurance industry, held this year in Boston.

Harkness and his team were making information available to online users before there was a World Wide Web and browser software. TIAA-CREF's first site was a "gopher" site, a simple text-based system in the late 1980s. It eventually drew thousands of hits per day from the company's membership of teachers and professors, many of whom were computer-literate.

The biggest myth may be that insurers have been slow to embrace the Internet, Harkness said. The first "teleweb" application he ever encountered was a button on a site by Geico, the auto insurer. Visitors who clicked on that button would receive a phone call promptly from a Geico representative.

A second myth: Nobody is making money on the Internet. Harkness pointed to Dell Computer and Amazon.com, two well-known retailers with vigorous Internet sales. TIAA-Cref has already sold $10 million worth of mutual fund share purchases with little marketing, he said. On Sept. 2, the insurer rolled out a product for New York residents who want to save for their children's college tuition. That product generated 17,000 online inquiries since Sept. 2, with about 10% of those inquirers turning into purchasers.

The third myth: Online commerce isn't worth attempting because security is not perfect. "Even unencrypted email and web transactions are more secure than other forms of communication," Harkness said. "Typically we're sending sensitive information in envelopes held together with a thousandth of a penny's worth of glue."

Harkness offered other advice to insurers and other financial services competitors looking to develop e-commerce, including:

• Make it interesting. "Your e-commerce efforts don't just compete with your peers, they're also going head to head with CBS, Microsoft and Barnes and Noble for brain share. At its best, the web is fun, fascinating and endlessly diverting. When you got into the Internet business, you got into the entertainment business."
• At best, 90 percent of customers will use 10 percent of the capabilities. "But that doesn't mean you don't need a rich mix of content and functionality."
• It's an itty bitty screen. "Less is often more. Figure out what people want online and give them that."
• Extranets--Internet networks that allow access to limited numbers of outsiders--are the flavor of the month but carry a downside. The reason: allowing customers inside company systems can also highlight flaws and shortcomings. "It's like a restaurant inviting people to go back and see how the meal was prepared," Harkness said. "If you've ever done that, maybe you've lost your appetite."
• Insurers complain that regulators are an online bottleneck, but few have asked for radical expanding of the permitted boundaries. "I don't know of any company that's decided to do something on the Internet and been stopped by the regulatory community," Harkness said.