Insurers keen to test the Internet’s potential

A big attraction of the Internet is its potential as a low cost way of reaching a bigger audience.

"There’s no doubt technology and the Internet are going to become an increasing part of the business, it’s just a matter of how quickly people pick them up," Insurance Council chief executive Chris Ryan says.

But anecdotal evidence from overseas suggests selling insurance over the net isn’t a walk in the park.

The public doesn’t like buying insurance – they don’t like thinking about why they might need it and they don’t really trust insurance companies. That means it’s a product that is sold, rather than bought - something a passive computer can’t do well.

As a result, Internet insurance selling hasn’t been the roaring success overseas some initially predicted.

Broadbase managing director Geoff Nairn, who set up online insurance broker AssureDirect, acknowledges the Internet’s limits, but says the cheaper prices go a long way to redressing them.

"Generally speaking the price reduction can overcome some elements of lack of trust, though if you reduce the price too much people start to think there is a problem," he says.

Another online insurance site is Weinsure, which has been established by Tauranga-based adviser Simon Beaton.

Beaton says Weinsure has tried to overcome the trust issue by selling its products through lawyers and accountants – who already have a relationship with the client.

Malcolm Congdon, of the Corporation of Insurance Brokers, says experience so far makes it clear the Internet will never replace brokers.

"Almost the reverse is occurring, brokers seem to be having a resurgence."

Brokers still add value, particularly for commercial clients, by searching the market for the best product, he says.

AMP’s experience with its first online life insurance product – originally named EZ Life and now called Life2go - supports Congdon’s view.

AMP Financial Services manager customer solutions Andy King says the biggest surprise about Life2go has been the way it is being used by agents.

About half the sales through the site are direct to the public, King says. But the remainder is made through agents or AMP’s own direct sales force.

"For agents and the direct teams it’s almost become a business to business tool," King says.

Some customers are just not comfortable buying online, particularly when they have to put in credit card details, he says.

However, some people who browse but don’t buy will later call up an agent.

King, who says Life2go accounts for a small percentage of AMP’s life business, also agrees the Internet is unlikely to replace brokers.

"I don’t think we will ever replace that advice. What the Internet does is give support, it’s a tool for customers to make comparisons. But, particularly when dealing with complicated products, people want to sit face to face with someone and talk."

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