“Clicks and Mortar”

There is little wonder to why insurance company leaders are reluctant to embrace e-commerce wholeheartedly. Having being struck a double whammy of first “panel beating” their multi-million dollar legacy-based systems into shape for Y2K, then being told these same platforms are virtually obsolete in the approaching wave of “next generation” Internet-selling technology, any self-respecting executive dealing with long-term capital investment planning would balk at the high-flying projections being cast about by the “new economy” whizkids.

In fact, as Duncan McKie, president of research agency Pollara Inc. (Toronto) observes, “e-commerce is still a negative sum game”. Outside of the pornography and gaming industries, and of course online service carriers, companies retailing via the Internet have yet to make a cent in profit. Which is not to say that Internet selling is dead-in-the-water, in fact the major online retailers such as Chapters, Amazon and eBay have either declared or have projected significant growth in revenue streams for the year ahead. The point is that these enterprises are still recovering from the initial cap expenditure vested into their online strategies. Once they have recovered these amounts, and begin turning a profit, they could indeed become the next darlings of the business investment community. More specifically, once they have the up-and-running economically viable technology platforms to deliver goods to a loyal audience, they would be ideally positioned to branch into selling any product they so desire. In essence, the nature of the Internet is not about professional knowledge, but a delivery mechanism.

In that respect, McKie believes that the selling of financial services, including insurance, offers the most upside growth potential on the Internet. Pollara recently released its “InsurPoll” survey, conducted among 1,700 Canadians, to determine their attitudes to online buying of insurance and financial services. At first glance the survey results weigh strongly in favor of the traditionalists’ theory (the same kind that believed that the introduction of cinema was going to be a short-term popular fad) that the Internet will not garner much attention in the retailing of insurance — so therefore, the argument goes, why bother to do anything about it.

The InsurPoll survey suggests that 78% of the insurance-buying public will never consider buying insurance online (that said, I remember a time when many people refused to use an ATM machine, now the lineups at auto tellers are longer than those in the banks — but this might have more to do with the generally tardy and uninviting service presented by the live tellers). At any rate, McKie notes, “InsurPoll shows that most consumers think insurance [at present] is a product which requires expert, trusted advice to be purchased correctly…and to get the best price possible”.

He goes on, however, to suggest that the Internet cannot be ignored due to lack of buying interest as a significant number of the InsurPoll respondents claim they will/or currently do use the Internet for researching the cost of insurance and other financial services. The InsurPoll numbers indicate the following: 37% of those surveyed are either likely or somewhat likely to obtain insurance price quotes over the Internet, 31% will search the web for services, 13% are likely/somewhat likely to buy insurance online, and 19% would consider renewing their coverage through cyberspace. In conclusion, McKie states, “Today, insurance is suited to a “clicks and mortar” strategy rather than an ‘online only’ strategy”.

I fully support the approach suggested by McKie, but believe the selling impact of the Internet will, in future years, be far greater than he suggests. Firstly, nearly 40% of a 2,000-respondent “New Media Perspective” survey recently conducted by Pollara indicate that they will not currently buy any product over the Internet for security reasons. Anyone who has kept track of encryption advancements will know that basic transactional security is well in advanced development. Historical journals tell of a reluctance by the general social populaces to accept paper money for lack of security, the pockets of my own suit pants are, however, very glad of this social advancement. And, like ATM machines, the Internet’s convenience and popularity will most likely overcome even the most stalwart of society’s conservative members.

Another vital factor revealed by Pollara’s research is that the most common user of the Internet for purchasing and research purposes is not your average 15 year-old in search of obtaining illegal steroids and viewing porn, but rather what the agency has dubbed the “Savvy Crowd” being of between 35-40 years of age. Over 85% of the “savvies” have purchased goods online and 84% of “trendies”, being the next generation of users of around 34 years of age, have acquired goods through the Internet. Needless to say, the following generations of users, which will grow as a total percentage of the population as the Internet becomes an integrated communication/entertainment package (most likely wireless), will follow this trend. It is also significant to note that roughly 85% of online users surveyed hold either a college or university degree — and therefore are the more likely to possess insurable assets.

The underlying message I hoped to press forward in this debate is two-part: yes, maintaining an online information presence is essential, and secondly, realizing that simple statistics, such as “78% of the public will not buy over the Internet” can be highly misleading. For instance, asking the average person on the street today whether they will buy insurance or any other product over the Internet in the future is akin to asking dubious witnesses to the first and shaky flight of Orville and Wilbur Wright’s powered aircraft to whether they would consider flying across oceans and continents in their lifetimes.