Many Americans are struggling with high out-of-pocket costs for health care.
By Linda Koco
Internet superstars Google and Amazon are likely to become competitors for online insurance sales, according to predictions from life insurance and property-casualty executives polled by Accenture, a global consulting firm.
The executives came from 78 European companies, but since they were commenting on digital sales trends and expectations, and since digital is global, the findings should have value to U.S. insurance professionals forming digital strategies.
The overwhelming majority — almost 90 percent — are expecting competition to intensify in the insurance distribution market over the next three years, Accenture said.
Where do Google and Amazon fit in? Almost two-thirds (64 percent) of the executives believe this intensified competition in insurance distribution will come from non-insurance players such as Google, or e-commerce giants like Amazon.
Since both Google and Amazon conduct sales worldwide over the Internet, they already have an international infrastructure in place, making the idea of an internet firm/insurance firm partnership feasible regardless of country.
LIMRA has already picked up indications of U.S. executive receptivity to alliances between insurers and alternative distribution channels of this kind.
In January, for example, LIMRA reported that 90 percent industry executives it had surveyed believeinsurance companies will continue to form strategic alliances with “non-traditional organizations” to expand distribution. (The example cited was MetLife’s trial alliance with 200 Wal-Mart stores, not an internet company/insurance company alliance, but the concept of alternative distribution was the point.)
They’ll have to wait
People might have to wait a while for an expansion in the United States involving Google or Amazon, though.
It’s a fact that, in 2011, Google purchased an insurance quote service called BeatThatQuote.com. Then, the next year, Google began offering a quoting service for auto insurance and travel insurance in the U.K.through its web site. However, searches on Google for European-wide or U.S. Google-quoting services turned up nothing.
As for Amazon, searches on that company’s website turned up many books and resources about insurance, but no links for making insurance purchases on Amazon or connecting up with a seller through Amazon.
Even so, Accenture sees the shift to digital among carriers as inevitable.
“Our study reveals that the industry is investing heavily to transform itself,” said Piercarlo Gera, global managing director-distribution and marketing services, in a statement.
For instance, 78 percent of the surveyed European insurers are planning to increase investments in the digital transformation of their sales and distribution functions. They expect to spend $36 million, on average, in the digital channel over the next three years.
Gera described this transformation as “critical” to carriers’ ability to attract consumers. Which consumers? The ones who are becoming “increasingly unwilling to buy a product or service that does not provide the same levels of convenience, simplicity and speed to which they have become accustomed from many other services they use every day,” he said.
He pointed in particular to the “digital generation,” or Generation D, as it is sometimes called. These are consumers who are already accustomed to buying books, electronic devices, music and travel online.
The threat posed by internet giants is real, Gera contended. His reason: User-experience improvement is part of internet company DNA. “This is a strategic weapon in gaining market share in the insurance distribution business,” he contended.
How might digital insurance distribution affect insurance sales agents in the United States?
Another Accenture survey, published in April, indicates that agents are still at the center of the action in the U.S.
The survey sampled views of more than 4,000 U.S consumers of automobile and home insurance products. It found n that although U.S. customers are turning to digital sources for insurance quotes and other information, they still prefer personal contact with agents when purchasing the products.
Specifically, 76 percent said they prefer setting up and paying for their auto and home insurance policies in person with an agent, while only 58 percent prefer doing so via the Web.
Where quoting is concerned, however, U.S. consumers are more digitally-minded. Forty-three percent said they favor obtaining quotes from websites, while only 26 percent prefer the phone and 26 percent, in person, Accenture found.
So, for now at least, insurance sales agents in the U.S. continue to be the ones that U.S. buyers prefer when it comes to plunking down money to buy a policy. Numerous other industry surveys have produced similar findings, and on the life and annuity side of the business as well.
Digital Could Double by 2016
The Accenture study of European insurers was conducted from late spring to early summer. It found that insurance sales through digital channels in Europe could reach $34 billion in 2016, more than double the 2012 value of $16.2 billion.
In addition, policies sold through digital channels are expected to account for 18 percent of European insurers’ total annual new business premium volume in 2016, compared to 11 percent in 2013, the researchers said.
Fifteen of the carriers were located in France; 12 in Italy; 11 in Spain; eight in Germany; and seven in the United Kingdom. The others were from Belgium, Austria, the Netherlands, Sweden, Switzerland, Finland, Norway, and Denmark.
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at email@example.com.
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