breaking ground for online brokers

As the nation’s largest privately-held multi-line insurance brokerage group, Cowan Insurance Group was in a unique position to take the lead in e-commerce, according to Scot Dalton, president of subsidiary Cowan Dalton Inc. Not only did the company have the necessary capital to make the move online, but more importantly, they had the vision. That vision was realized in August, with the launch of the cowaninsure.com Insurance Centre.

It was two years ago that the idea of making a solid e-commerce venture first arose, he says. “We had been looking ahead at our marketing plans, and the Internet is pretty hard thing to ignore. The world of commerce was moving online even then.”

Part of the process was the sale of Dalton & Associates Inc. brokerage to the Cowan Group. Dalton, who first entered the broker business 22 years ago, following his graduation from Mohawk College’s Insurance Administration program, was ready to take the leap into e-commerce. But coming up with the vision was just the first step.

A new technology

The technology that could bind the company’s knowledge of the broker distribution system with the mass marketing capabilities of the Internet was simply unavailable, Dalton notes. “We had to create that offering.”

After a year of developing the idea for the site and getting the endorsement to pursue it, another year would be spent in software development to get the project up and running. Key to the site’s success would be moving beyond the single-product, single-insurer sites already populating the Internet. “With [our] website, we’re able to achieve the economies of a direct writer, with the choice [offered by] brokers,” Dalton says.

Dalton holds the industry’s AIIC and CCIB designations, and has been a past president of the Insurance Brokers of Waterloo Region. He has also acted as director for Zenith Insurance Services, a direct marketing call center owned by Lombard Insurance. Thus, he brings a combination of experiences, from both the broker and direct sales ends of the business into the new venture. The company also sought out partners from the technology field to provide the expertise needed to develop a “broker-like” experience online. Open Text Corporation provided the software, an XML-based system called Livelink which would allow for multi-company quotes and policy issuance. A Virtual Underwriting engine is also in place that complies with all partner insurer policy rules, reducing errors while giving real-time service.

And, to facilitate marketing for the new site, Cowan approached AOL Canada. The Internet service provider reaches 185,000 households, plus another 50,000 users through its CompuServe network. AOL provides an instant audience for cowaninsure.com’s products. The most critical phase, however, was determining what that audience is looking for.

The “broker experience”

The much-publicized lack of success of some high-profile online retailers may be making e-commerce a frightening venture for some. Cowan has tried to ensure its own success through extensive customer surveys, intended to discover what they wanted from an online insurance broker, what the barriers to e-commerce would be, and what consumers value about traditional broker-based insurance distribution.

“They were looking for a traditional broker experience online.”

Dalton says of the consumer responses, “they were concerned about security over the Internet, they were concerned with service levels over the Internet.” Specifically, consumers wanted to know how the company would “tie-in the people and the technology”, that is, the service levels they have come to expect through a broker and the speed and convenience of Internet buying. This concern, he adds, supported the company’s own thinking that any online offering would have to be combined with a call center. Customers “wanted the option to talk to a person” if they had questions arising out of their online experience.

The other feature Cowan wanted to bring to the online experience was a range of quotes from multiple companies, on multiple product lines. “Multi-policy discounts give customers the best advantage,” notes Dalton, so the site was set up to offer these kinds of discounts to mirror the brokerage experience. Currently, the site sells auto and most lines of residential insurance, including seasonal, rental and floater coverage. These offerings meet about 95% of personal lines needs, he estimates. According to research survey results, “consumers are still quite satisfied purchasing in the traditional means”, Dalton points out, so the site is an extension of, rather than a replacement for Cowan Dalton’s brokerage business. “This is about servicing the customer wherever and whenever they want…to introduce a new distribution channel and to utilize technology within the traditional brokerage.”

The cost of e-business

In order to create this multi-product, multi-company, real-time buying experience, Dalton had to find insurers willing to participate in the venture as suppliers, a task easier said than done. “The insurance industry is still thinking in traditional terms. They’re worried about channel conflict, security and underwriting integrity.” They’re also worried about the financial risks of e-commerce, he says. “Coming up with an offering that wouldn’t enhance those fears took some time.”

Another factor to consider is the movement of many insurers to establish their own online sales channel. “It’s a tough go [convincing insurers],” Dalton admits. “Many established insurers have already begun to restructure their business systems to respond to e-commerce independently.”

That said, Dalton discovered that many insurers see online brokerages as a way to resolve channel conflict with the drive to get online. The question is, “how do you take advantage of e-commerce and not disenfranchise your distribution channel?” And, insurers are also faced with the same obstacles of expense and time that any e-commerce initiative encounters.

The answer for many insurers is to hedge their bets by becoming involved in several online ventures. “Most insurers are open-minded about possible solutions in the e-commerce world…they’re looking at multiple solutions.” Three insurers, the Guarantee Company of North America, Lombard and Zenith, have already come on board with the project, and Dalton expects more suppliers to get onboard as the venture finds its feet.

He also expects more brokers will move online in the near future, particularly online sales. “A static website is easy, but doesn’t do a lot in terms of transacting business,” he notes. “Most brokers are anxious and enthusiastic about entering the world of e-commerce. We haven’t detected any particular reluctance to enter the fray”, other than fears about the high cost of doing so. “If there was an affordable [e-commerce] solution, most brokers would take advantage.”

Staying in front

Should Dalton’s expectations come to pass, and more brokers establish their own Internet sales channels (as of this writing, the Quebec brokerage Di Perno & Associates is launching its own site, AssureMoi.com), how can Cowan maintain its competitive advantage? “A strategic lead can be very brief,” he admits. And in the unknown waters of e-commerce, even determining what qualifies as “success” in its most basic terms is difficult.

The company plans to track numbers of visitors, quotes issued and policies sold on the site to establish benchmarks for the kind of traffic it can expect. As the leader, it will be important for Cowan to ensure its technology remains current. Obsolescence is “a very real risk”, notes Dalton. “The road to e-commerce is a journey, not a destination. This kind of proposition is one that you have to be very open minded about.” That includes ensuring technology is “scaleable” to adapt to changing needs brought on by new suppliers, new products and new markets.

Dalton hopes to see the business grow in terms of the number of suppliers involved and the range of products offered. “We expect with the interest we’ve had from other insurers that we’ll expand our offerings.” He also expects at some point in the future, the company will move beyond the AOL customer base to the broader market.

For future competitors, he realizes, it will become easier to get online. “Solutions will be developed that will reduce dependence on having a high level of technical skill. I see that as happening in the short-term.” But he also cautions against waiting too long to get in the game. “I hate to use the expression ‘thinking outside the box’, but there has to be a lot of thinking outside the box to address the new economy. Any company or any brokerage that isn’t up to that challenge is fighting an uphill battle.