DOA On The Web

What’s among your least-favorite activities in everyday life? Listening to a life insurance sales pitch probably ranks up there with going to the dentist and dealing with auto mechanics.

The Internet seems like the perfect antidote for dealing with life insurance agents. Theoretically, at least, you should be able to obtain your information and make your purchase without having to listen to a long drawn-out presentation. One that makes you feel enough anxiety about impending doom that you’re willing to commit to a long-term payment schedule (“You wouldn’t want your children to go without because you’re not around?”).

You’d think the life insurance industry – which takes in more than $88 billion in premiums each year – would be ready to latch onto the Internet juggernaut to increase its marketing effectiveness and reduce its selling costs. With all those expensive agents…

Well, not exactly. As in many other established industries, it’s the unencumbered upstarts that are taking maximum advantage of the Internet, while the established corporate behemoths are dragging their feet.

In other words, you can go to the insurance upstarts – essentially online brokers – and do what you’d expect to do: Fill out a form, get a quote, and be well into the buying process.

When you go to the big insurance company sites, though, you’re generally limited to promotional information about the companies, and the “opportunity” to look up the names of agents near your home so you can call (ugh!) and get one to come bother you.

Consider the contrast between Netaquote.com, an online firm, and Massachusetts Mutual Life Insurance Co., one of the nation’s oldest (established 1851) and largest (ranked the nation’s sixth largest by Standard & Poor’s) life insurance companies.

Netaquote’s site is short on text, touting its “online, real-time system to search for the most competitive term life insurance from over 100 companies.” It devotes its site to allowing visitors to price out alternative term insurance approaches (such as five-year up to thirty-year policies; or annual, semiannual, quarterly, or monthly billing options).

Enter your age, term of policy desired, and whether or not you have any significant medical condition, and you receive the five best quotes it can come up with from established life insurance companies. Once you have the quote, you have three choices: Apply online, get a new quote or have an agent contact you.

The situation is much different on the MassMutual site. The home page is full of news – about MassMutual. There’s news about its new mutual funds, IT jobs, record quarterly results, and so forth.

If you want to buy insurance, though, you’ll have to work at it. Look hard, and you’ll find the tiny “Office Locator” box on the home page. Once you’ve entered your state and city, you’ll be provided an office location near you, and the options of sending an email or viewing the office’s own web site.

Most major insurance companies take a similar approach. At New York Life, the fourth largest life insurer, you can actually search for individual agents, as well as offices near your home. Once you have a policy, you can examine its provisions online. But as for actually buying online: Nothing doing.

At Metropolitan Life Insurance Co., the number three life insurer, it’s a similar situation. One special feature here: You can get a map showing a MetLife agency near you (perhaps so you can drive over and get an agent to give you a spiel).

A pleasant exception is the nation’s largest insurance company, Prudential Insurance Co. of America. By filling in your age, zip code, length of insurance period, and special features you desire (like waiver of premium), you can obtain a quote. It comes with all kinds of provisos (like it’s contingent on further application), but at least it’s the start of the buying process.

Why are the big insurance companies so slow to adapt to the advantages of the Internet? One reason is that insurance companies in general are slow to adapt to change. But there’s another reason – the same reason Merrill Lynch took so long to accept online trading: Fear of offending its sales people – the brokers and agents.

What’s so bad about offending insurance agents? Well, it turns out that it’s extremely difficult for established insurance companies to recruit and retain insurance agents. The insurance companies fear that if they sell directly to consumers, their agents will flee and join other insurance companies that resisted the urge to go direct.

So some of the insurance companies discreetly sign on with the upstarts like Netaquote.com and insweb.com, and let them do “the dirty work” of making it easier to buy life insurance online. Others simply bury their heads in the sand and hope that buying insurance on the web will prove so complicated that they can continue with the existing agent system.

Truth is, life insurance isn’t an easy product to sell via the web. There are sensitive issues like family medical histories, medical records, and physical exams that are part of the process. Human intervention is necessary in many situations – certainly much more than for stock trading online.

Yet it isn’t difficult to imagine a time not far off when the results of a recent physical exam along with other sensitive data can be accessed automatically by any insurance company to which an individual applies. Information about the pros and cons of various types of policies can similarly be explained. Such information is, to some extent, available right now on some insurance and financial information sites.

In the meantime, what’s to prevent established insurance companies from setting up their own agents to launch the buying process online? The companies could enable consumers to access an agent in their geographical area online, and fill out an initial insurance application, just as the upstarts do. Then, the friendly agent could get involved to move the application through “the underwriting process” (the assessment of medical, employment, and other risks).

If the companies wanted to be truly marketing oriented, they could offer prospective customers the opportunity to stay informed about “protection” and “security” issues via regular email communication.

But what prevents the established insurance companies from being more innovative is likely that oldest of culprits: Fear of change.

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