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Insurance Direct Selling and E-Commerce Grows, Business and Industry Trends Analysis

The roles of insurance intermediaries and agents, along with the overall structure of the insurance market, are changing dramatically as a result of ecommerce influences.  Insurance sites on the internet enable consumers to generate a large number of competing insurance quotes within seconds.  Because the tasks of providing information and writing transactions have typically been the primary functions of insurance agents, electronic markets that can perform these tasks more efficiently and with fewer costs threaten to displace agents.  The future role of the insurance agent may evolve toward value-added customer service and consultation.  This is similar to the evolution of the role of travel agents since the booming popularity of booking travel reservations via the internet.  The extremely rapid adoption of smartphones on a global basis means that firms that deal with consumer lines such as auto insurance must adopt mobile strategies in order to gain new customers and satisfy the service needs of existing accounts.
Thanks to extremely successful direct sales efforts by firms like GEICO and Progressive, direct sales in the U.S. personal auto insurance market are booming.  Direct marketing is also taking over in nations other than the U.S., with a signification portion of all new car insurance policies in the UK, for example, sold through direct marketing.  Independent agencies will continue to lose market share as technology and direct sales gain in use.
Independent agents face tough and growing competition from internet-based sales.  At the same time, underwriters utilizing captive agency systems have found growth opportunities by increasing ecommerce efforts or acquiring independent agencies and integrating them into their captive systems.  The internet is an extremely effective way for underwriter web sites to generate leads for captive agencies.
Moreover, thanks to the growing success of internet sites that enable consumers to shop for the best life insurance prices, direct selling is playing a growing role in the life sector as well.  Nonetheless, many insurance consumers prefer to deal with live agents in person or via the telephone.  For example, Liberty Mutual, GEICO and State Farm make it extremely fast and convenient for consumers to get homeowner’s quotes online.
Thanks in part to the rising popularity of ecommerce, many insurance underwriters are now utilizing both direct sales and sales through agents in their business models.  For example, the Progressive Corporation, an underwriter of automobile insurance, makes buying insurance online or over the phone extremely user-friendly.  At the same time, it offers its auto insurance policies through about 30,000 independent agents, one of the largest agent networks in the U.S.  Log onto and you can get an instant quote on a policy for an automobile, motorcycle, boat or recreational vehicle, in addition to homeowner’s and renter’s insurance.  Customers can also use the Progressive web site to file a claim or make a payment.  Its easy-to-use web site (which includes pages in Spanish) is part of Progressive’s overall strategy to utilize a high level of service, advanced technologies and direct sales to offer a competitive combination of coverage, service and pricing.  Meanwhile, Progressive also uses the internet to promote business for its independent agents.  
Insurers selling over the internet may enjoy a substantial cost advantage over the course of a customer’s lifetime, relative to non-internet-based insurers.  This is due to reduced sales costs, lower customer service expenses and more advanced information-gathering capacities.  Consequently, ecommerce has prompted many insurers to upgrade and integrate their information systems.  
The increased value of online connections results in decreased transaction costs.  Products such as travel, credit or burial insurance have relatively high fixed costs and low value, but nonetheless have significant transaction costs when sold via traditional methods.  Consequently, customers purchasing these products generally pay a high price per dollar of coverage.  The internet can automate the sales and underwriting process for such insurance products.  This means that prices can be lowered, and more insurance can be sold by reducing transaction costs.  Increased access through ecommerce is also influencing some consumers to purchase broader, high-value insurance products, such as liability umbrellas.  Meanwhile, the security of insurance customers’ data online is an important consideration, since large amounts of highly personal information are at stake.
Banks are becoming increasingly competitive in insurance sales, partly because they are adopting direct marketing methods.  Large numbers of bank holding companies have acquired or established insurance agency subsidiaries.  While these subsidiaries may operate using traditional agents, many of them use substantial direct marketing as well.  For example, if you are a Bank of America customer, you are likely to receive life insurance offers in your monthly bank statements.  This generates insurance leads for Bank of America at nominal cost.

Major Insurance-Comparing and Selling Sites on the Internet provides instant insurance quotes from the most diverse array of insurers offered by any one source.  The site works with over 200 insurance companies in all 50 states. is an online insurance agency that offers all types of insurance with emphasis on auto coverage.
CoverHound is a San Francisco-based firm that compares options from insurers including Progressive, esurance and Safeco, and links users directly with the selected company for policy purchase.
PolicyGenius sells a variety of insurance products from top insurers such as AIG, MetLife, Prudential and Embrace Pet Insurance.

     A growing list of major insurers are investing in online technology, as are venture capitalists with interests in the insurance industry.  In October 2019, Prudential Financial, Inc. completed the acquisition of startup Assurance IQ, Inc. for $2.35 billion.  Softbank Group Corp. headed a $300 million investment round for Lemonade Insurance Co. which offers online renter’s and homeowner’s insurance.  Clover Health, a startup in San Francisco that offers Medicare Advantage health insurance, raised $500 million.  The industry is going to see a growing list of such startups that are focused on making it easier, faster and less expensive for consumer to purchase insurance.  That goes for business insurance as well; Berkshire Hathaway, owner of major insurance companies of many types, offers a small business insurance package called THREE, a program that includes workers’ compensation, multiple liability coverages (including general liability and cyber insurance), property and auto insurance products into one accessible package. It is marketed directly to business owners via the internet only, not through agents.

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