Anyone thinking that the insurance direct marketing boom is over may be in for a shock. The number of companies writing property and casualty policies as a result of DM has gone from 15 to 40 during the last nine years.
And DM-generated coverage could increase from 6% of all insurance sales in 1996 to 35% by 2005, according to Insurance Direct Marketing 1999, a newly released study.
“It’s gone up extraordinarily,” asserts the study’s author Donald Jackson, chairman of the Jackson Consulting Group Ltd. in Middletown, DE. “In the auto market, [insurance DM is] going to outperform independent agents.”
The leaders in insurance DM include USAA, Geico and Colonial Penn Insurance Co. Direct mail is still the workhorse medium because of the huge paper flow back and forth from insurer to buyer. Telemarketing is next, followed by television and radio advertising, miscellaneous media and the Internet.
Insurance firms are turning more and more to direct marketing because it’s efficient and cost-effective. Geico, for example, can honestly claim to save consumers 15% in 15 minutes because “the company has cut expenses by 15%,” according to Jackson.
Consumers have an incentive to use direct channels for bargain hunting, especially in light of laws requiring mandatory auto and homeowners insurance. And they are becoming more aggressive comparison shoppers, “not afraid to do business by mail or by telephone with a reputable company,” Jackson says.
But Jackson doesn’t see insurance agents going the way of the dinosaur. Some consumers will always want an agent to sell them insurance in person, while others will choose to talk with an agent by telephone. Increasingly, though, consumers seem to want to deal directly with the company, he claims.
For these customers, the Web provides an ideal information and sales vehicle. Insurers, however, aren’t so sure. Very few companies sell insurance online. Instead, they still view the Web as an information source. Three out of 10 insurers use their sites to increase awareness about their products, compared with 24% who see it as a way to increase revenue and sales.
A handful – Geico and Colonial Penn to name two – accept applications online, but don’t issue policies electronically. Requests made online often are handed off to an agent who completes the transaction.
“Eventually they’re going to figure it out,” Jackson maintains. “There’s nothing wrong with handing an inquiry to an agent, as long as the agent knows how to leverage an electronic inquiry. Perhaps e-mail is the answer.” Not that any firm is using e-mail for customer contact and sales – yet.
Web sales will gain on other DM channels, though, because consumers are demanding it. “In a decade’s time, it wouldn’t surprise me if 50% of insurance transactions took place over the Internet,” Jackson predicts. “It has all the earmarks of convenience, confidentiality and ease of use.”
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