What's New in Cybertalk?

by Jean Gora
May 1998

Note: CyberTalk is a column that appears monthly in LOMA's Resource, the magazine for insurance and financial services management. To see more contents of the magazine and to see how to subscribe, click on Resource.

Improving the Internet Distribution System

Evidence is beginning to appear that the Internet is a successful insurance distribution channel. Several insurance company sources with significant Web activities have told the author that Internet activities generate both higher close ratios and higher-face-amount policies than traditional sales activities do. This generalization applies both to direct Internet sales and to sales generated by Internet agent referrals. Although current volume is low, it is growing. These sources attribute their success to several factors, including:

• Web user demographics. Web surfers are more affluent and better educated than the population in general. Hence they are more willing to learn about insurance by reading about it. Once they decide to buy, they are more able to afford high-face-amount policies.

• Success stories from other industries. Individuals who have used or heard about Internet auto malls, travel agents, and discount brokers are willing to apply what they have learned to the purchase of insurance.

• Improved methods of generating traffic. The chief improvement in recent months has been the establishment of links between the leading insurance malls—such as Quicken InsureMarket and InsWeb—and other relevant sites, particularly personal finance sites. America Online’s personal finance channel, which includes an insurance section, is cited as a particularly valuable source of leads that convert into sales. Apparently, individuals that come to insurers’ sites from personal finance sites/channels and file online requests for insurance are serious insurance shoppers. Specifically, these consumers are more likely to be serious buyers than individuals who come through banner ads appearing on non-financial sites. One source told the author that these consumers are more likely to be serious buyers than the individuals who find the site after having been exposed to significant media advertising.

Insurance companies that distribute through America Online (AOL) include CP (Colonial Penn) Direct, Lincoln Benefit Life (Allstate), The Hartford, Nationwide, and Prudential. Quicken InsureMarket also appears on the same list. InsureMarket also provides two of the three functions offered through this channel—its insurance planner and its comparison shopping service. As the table in this column shows, many of the companies that distribute through AOL also do so through InsureMarket and/or InsWeb. In addition to their appearance on AOL, Allstate appears on both InsureMarket and InsWeb, The Hartford and Nationwide appear on InsWeb, and Prudential appears on InsureMarket.

Other Insurers on InsWeb include CAMICO (professional liability for CPAs), Matrix Benefits (Section 125), The McGraw Group (personal watercraft), RV Nuccio (wedding), and Sullivan & Sullivan (motor cycle). Immediate quotes are available from Matrix Benefits, RV Nuccio, and Sullivan & Sullivan.

Quicken InsureMarket and InsWeb

InsureMarket and InsWeb have many common features but also many different ones. Both sites allow the consumer to fill out an online request for insurance. The request may be either for a price quotation or for a referral to an agent. If the participating insurer tries to sell directly, the request for a price quotation may be little different from an application. Usually a paper application is required at some point in the transaction. The consumer fills out this request once. That consumer can then send the request to one or more of the insurers that do business through the mall.

Many of the insurance quote services that do business on the Internet base their quotes on rates filed by insurers with the NAIC. In the life area, InsureMarket supplies quotes using rates supplied to it by the participating carriers. In the auto area, both InsureMarket and InsWeb have online links to participating companies’ underwriting systems. (At this writing, InsureMarket has an operating online link to only one auto insurer —Travelers—for business in one state. InsWeb has online links to eight auto insurers for business in 47 states.) InsWeb also has such links for life products as well. Thus, the price quotes generated by these services can be considerably more accurate that those generated by the quote services. In the auto insurance area, carriers can issue binding coverage on the Internet in states that allow them to do so. In the case of Travelers, InsureMarket:

• Interacts with Travelers’ database to produce an individualized rate quote.

• Verifies driving records with states while a transaction is being processed online.

• Processes payments online.

• Provides immediate notification to approved customers (when Travelers’ conditions are met).

• Allows coverage to begin as soon as after midnight of the following business day.

InsWeb interacts with insurers’ databases to produce individualized rate quotes, but it does not execute any of the other functions described above. It has focused much of its effort on providing quotes from multiple carriers—a feature the company’s consumer research reveals to be in great demand.

Although both InsWeb and InsureMarket offer information about insurance, the information offered by InsWeb is in greater depth. In its short life span, InsWeb has had greater participation by property/casualty insurers than life insurers. Until recently, InsureMarket operated exclusively in the life market. Because InsureMarket is part of the Quicken.com site, it offers greater access to information about a consumer’s overall financial situation.

The two organizations structure financial arrangements with carriers somewhat differently. InsureMarket operates as an insurance agency and takes commissions on sales. It also imposes a one-time set-up fee and annual fees. InsWeb does not operate as an agent but charges transaction fees plus an initial set-up fee and an annual maintenance fee. The fees vary depending on the complexity of the issues involved.

Because Intuit, the provider of the Quicken household financial management software package, owns InsureMarket, InsureMarket has had a recognizable brand almost since its inception. InsWeb has had no such affiliation. Thus, InsureMarket has benefited from Intuit’s attempt to operate as an integrator on the Internet through the Quicken.com Web site and a number of alliances with other heavily traveled sites. In the last several months, InsWeb has announced a number of similar alliances that suggests it is attempting to pursue the same strategy.

Quicken InsureMarket’s Alliances

As noted previously in this column, the Quicken software package serves as the front end to several dozen home banking and bill payment services. Investors can download daily portfolio performance data from a dozen major securities brokers. Thus, even before Intuit established Quicken.com, it had alliances with many of the major financial institutions in North America. Intuit has established a new alliance with the Integrion Financial Network that connects banks to Quicken and other household financial management software packages.

The banks that control Integrion serve 75 percent of the retail bank population in North America. In client/server jargon, Quicken functions as fat client software. In the world of the Internet, fat server software dominates. The logic of each application resides on Web servers and not in the client Web browsers of individual surfers. The user does not have to buy a software package in order to use the application. Fearing that consumers would prefer the Internet fat server model, Intuit has attempted to build a new business using the fat server model. This new business—called Quicken.com—is that of a personal finance integrator. It capitalizes on the Quicken brand.

At the Quicken.com site, one can find not only InsureMarket but also

• Hyperlinks to the sites of many of the banks and securities firms with which Intuit already had alliances.

• A huge mutual fund section with information and purchase capability.

• Hyperlinks to auto loan and credit card sites.

• Quicken.mortgage, a mortage shopping site through which six major lenders, including Principal Residential Mortgage (owned by Principal Mutual), offer online loans. That service, which began in November 1997, had already received 10,000 mortgage applications by the end of March 1998.

Quicken.com claims 40 million page views per month. InsureMarket is publicizing data that shows that as Quicken.com has expanded and entered the alliances shown below, the ratio of insurance applicants to visitors to InsureMarket has improved. Most interesting of all are the alliances that Intuit has entered with other site operators that feed traffic to Quicken.com. Partners include the following:

• America Online (AOL) has 11 million members and is probably the largest single port of entry to the Internet for new users. As noted above, Quicken.com and InsureMarket are accessible through AOL's personal finance channels.

• Microsoft offers Active Channels as part of its Internet Explorer Web browser. Quicken.com is accessible through its financial active channel directly from the browser.

• CNNfn is the Web site of the CNN Financial Network. Intuit is supplying a special branded version of Quicken.com to CNNfn. CNNfn is, of course, linked to CNN’s own Web site, which is promoted through CNN’s television networks. A CNN employee told the author that during the first week of the recent presidential scandal, the number of people who visited the major CNN Web site equaled the number who viewed its television programming. CNNfn claims 53 million pages views/month.

• Excite is the operator of two major Internet search engines: Excite and Webcrawler. Internet search engines are among the most heavily visited Web sites. Intuit has made an investment in Excite and thus has the opportunity to funnel people who use it to Quicken.com. Excite claims 75 million financial page views per month. Quicken.com appears as part of the Excite Business and Investing channel.

Together these alliances are helping solve one of the Web’s major problems—attracting traffic to financial sites. Intuit is also adding bill presentment software to the 1998 version of its Quicken software package and could readily add such a service to Quicken.com.

InsWeb’s Alliances

In the last several months, InsWeb has announced an assortment of alliances intended to draw traffic to its site. InsWeb provides its partners in these alliances with comparative auto insurance quotations. Following is a list of some of the alliance partners.

• BanxQuote is a company that operates a network of co-branded banking centers on the Internet in partnership with major media sources. The network provides dynamically updated deposit and loan rates, online banking and trading, global electronic commerce and other market data. BanxQuote banking centers appear on the Web sites of the following: Bloomberg, Dow Jones, The Wall Street Journal, The New York Times, USA Today, Business Week, The Washington Post, The New York Daily News, The Boston Globe, Philadelphia Online, The Houston Chronicle, NJ, Alabama Life, Oregon Life, Michigan Life, Cleveland Live, Inside Denver, Startribune.com, Pioneer Planet, Tulsa World, Infoseek, American Banker, Women’s Wire, Quote.com and Netscape Guide by Yahoo.

• Recycler Classifieds is a publisher of classified ads on the Internet through two sites: Recycler.com and California Classifieds (caclassifieds.com). Recycler Classifieds claims to add 40,000 cars to its site every week; half are sold within a week.

• AllApartments is a provider of apartment listings and relocation services on the Internet. According to AllApartments, 48 percent of people who move also buy auto insurance. Of that group, 91 percent make the buying decision by the fourth week after the move.

• Consumers Car Club provides an Internet automobile shopping and dealer referral service, also offering competitive rates on auto leases and loans.

• Excite operates on two Internet search engines and is also a partner of Intuit. A link to InsWeb appears on the sites’ auto channels.

Thus, InsWeb is also well positioned to attract traffic to its site—particularly shoppers for auto insurance.

The consensus among people who have inside knowledge of both the mall operators and the insurers that do business on them is that Internet auto insurance distribution is likely to take off within the next year. All drivers are required to have auto insurance; many believe they are paying too much for it and, therefore, have a significant incentive to comparison shop. The underwriting process can be completely automated. There is no need for a medical exam. Both InsWeb and InsureMarket have many of the systems in place required to do the job. The number of states recognizing electronic signatures is growing.

However, there is also likely to be movement in the life area, particularly in the term life insurance market. At least some of the carriers participating in the malls are exploring ways to dispense with medical underwriting. InsureMarket is publicizing figures that show that between October 1996 and December 1997, InsureMarket requesters significantly altered their requesting behavior. In the October 1996 to February 1997 period, 71 percent of InsureMarket requestors sought agent referrals and only 29 percent wanted direct online quotations. (Only Lincoln Benefit—an Allstate subsidiary—and Zurich offered products through the site at that time.)

In the September to December 1997 period, the percentages were virtually reversed; 73 percent of requestors sought direct online quotations and only 27 percent requested agent referrals. (In addition to Lincoln Benefit Life and Zurich, John Hancock, Prudential, and Transamerica also offered products through the site at that time). That switch represents a stunning change and is testimony to consumers’ increasing willingness to deal with financial institutions online and to their trust in familiar brands.

America Online (AOL)

When one considers the alliances described above, one can readily see why AOL enjoys an usually attractive position as a funnel of traffic. As an Internet access provider, it engages consumers before they reach the Internet. Its personal finance channels perform many of the same functions as those available at Quicken.com. (As noted above, some are in fact identical because of the alliance between Intuit and AOL.) But the consumer does not have to wade through the vast space of the Internet to find them. Thus, AOL is well positioned to involve consumers in financial services before they go further. The insurers that have a presence both directly on AOL and on InsWeb and/or InsureMarket have an opportunity to test to relative value of the various approaches

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GeneraLife and General American: Using the Internet to Communicate with Agents and Clients

Use of the Internet by insurers to communicate with their agents and provide information to the employees of group pension clients continues to grow. Let's look at the activities of two companies: GeneraLife (one of the first virtual insurance companies) and General American. The two companies are affiliates.

GeneraLife allows its agents to view in-force policies, pending policies, application status and underwriting requests through its Web site. Agents can print product brochures and forms necessary for policy submission, policy changes, and policy-service-related functions. Underwriting guidelines, current annuity values and current production report information about individual agents are available, and some types of agents may use the site to access their agency information and appointments.

According to Randy Curtis, director of technology at GeneraLife, agents can "track the status of submitted business, find out what information may be holding up issuance, and intervene. If there is an outstanding physician statement, for example, the agent can act to get the roadblock removed." The site also manages online appoints for new agents. "At the general agent and higher levels you can go in and fill out information electronically, submit it to our appointment TPA, and they take care of everything from there. It really reduces the amount of paperwork and float time, and it makes the process a lot easier," Curtis explains.

The system allows GeneraLife to keep the most current and correct information at the agents’ fingertips. This feature helps GeneraLife’s agents meet compliance requirements and do so rapidly. GeneraLife has placed policy illustrations on its site, a measure that ensures that its agents will all use the same illustration. This practice also saves GeneraLife from having to distribute and maintain illustration software.

In the future, GeneraLife will produce online commission statements and more extensive online reporting so that agents can run additional predefined management reports as well as ad-hoc queries. These features will be particularly helpful to small agencies.

GeneraLife will begin business-to-customer Internet transactions. It will give policyowners access to their policies and allow them to conduct selected transactions. For example, these customers will be able to make name, address, and beneficiary changes. They will also be able to view current annuity values and cash values of permanent life policies. They will be able to have email conversations with the home office or agents. GeneraLife is also considering adding Online Financial Exchange (OFX) technology to allow plan participants to use Microsoft’s Money or Intuit’s Quicken software to access their accounts through the Internet.

Agents like the service, according to Curtis, because it gives them access to GeneraLife 24 hours a day. It also spares them from having to maintain inventories of paper forms. GeneraLife can use the site to determine automatically which types of products sell in which locations by which agencies.

General American Life, an affiliate of GeneraLife, is making use of the Internet to allow retirement plan participants to view account information, perform transactions, and plan for retirement. Plan participants can visit the company’s site, Retirelink.com, to check account balances, track performance of funds, check their investment elections, and model repayment schedules for plan loans. Visitors to the site can access information regarding sources of funds during retirement, time frames for saving, taxes, levels of risk, life expectancy, and other relevant topics. In the future the site will allow participants to make fund-to-fund transfers, change investment elections, and apply for loans.

Both GeneraLife and General American Life make use of Genelco’s WebHarbor Secure Electronic Commerce Platform (SECP) and AuthenticateWeb. GeneraLife also uses Genelco’s AgentWeb. General American uses AccountWeb. General American uses the products for authentication, database access, Web site mail services and loan calculation. When a 401k plan participant types a password on a logon screen, the system verifies the password through AuthenticateWeb and then accepts or denies the logon.

If the password is accepted, the screens load data specific to that participant’s account. In the future WebHarbor will incorporate smart card technology and data encryption to allow plan sponsors to access plan-level information and transfer data files to General American.

Genelco introduced its WebHarbor product line on March 8 at LOMA’s Systems Forum in Atlanta. Genelco is a subsidiary of General American Life. Genelco’s products are available for purchase by other insurance companies. Thus, the number of software tools available to help insurance companies use the Internet to communicate with agents grows.