Financial services companies around the world, from large insurance carriers to Internet start-ups, expect the impact of the Internet on the asset accumulation and wealth protection market to accelerate dramatically in the next five years, according to research by Andersen Consulting and Life Office Management Association (LOMA).
The research was based on a survey of more than 200 financial services executives worldwide, which indicates that the Internet will influence every aspect of the insurance industry, including distribution channels, customer servicing, and pricing. The findings are contained in a report “The Asset Accumulation and Wealth Protection Marketplace: Winning in the eEconomy.”
“The question is no longer whether the Internet will change the insurance marketplace,” said Barry Rupert, the Andersen Consulting Financial Services partner who led the research project. “Rather, the focus is on how quickly the changes will occur, how the industry will be affected, and how financial services companies can best position themselves to take advantage of new e-commerce opportunities.”
Among the findings of the research:
- Executives expect that, within five years, online sales of protection products (term life, whole life, variable/universal life) will reach 17 percent of total sales; asset accumulation products (mutual funds) will reach 19 percent; retirement products (annuities, IRAs) will reach 17 percent; and health-related products (disability and long-term care insurance) will reach 16 percent
- Roughly one-half of companies expect to implement online quotes and application submissions within two years
- The vast majority of respondents believe that online distribution will improve the efficiency of traditional agent, broker, and financial advisor channels, thereby reducing distribution costs over the next five years
- Three-quarters of companies expect that the Internet will be an effective tool to better reach and serve the mass market
- Two-thirds of executives expect products sold over the Internet to be less expensive than products sold through traditional channels.
“Industry efforts to sell and service protection products online have been sluggish to date, due to product complexity and infrequent customer interaction,” said LOMA’s president and CEO Thomas Donaldson. “But the survey results indicate that the Internet will grow in importance in the insurance arena as customers become more experienced with online banking and Internet sales of other financial and consumer products.”
According to the research, companies that have frequent customer contact; minimal channel conflict; early-mover advantages; the ability to leverage Internet experience in other financial service markets; and a well-recognized brand name have a head start in the e-commerce race.