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Update on E-Commerce and its Use by Insurers

Update on E-Commerce and its Use by Insurers. CAS 2000 Spring Meeting Las Vegas Tony Alfieri, eCoverage. Introduction. Insurance industry has survived the onslaught of new technology practically unchanged…until now

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Update on E-Commerce and its Use by Insurers

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  1. Update on E-Commerce and its Use by Insurers CAS 2000 Spring Meeting Las Vegas Tony Alfieri, eCoverage

  2. Introduction • Insurance industry has survived the onslaught of new technology practically unchanged…until now • First it was online trading and other financial services. Now online insurance is expected to take off as well • Who will be the winners and losers? • Consumers will reap big rewards • New pressures on industry already enduring unprecedented price competition

  3. What do the experts say? "Online offerings are increasingly important to financial services institutions, with consumers conducting a significant and growing percentage of all financial transactions online. There is a substantial opportunity for the player who can put the right ingredients together to create a truly powerful Internet insurance offering.'' Booz Allen & Hamilton 3rd Annual Internet Insurance Survey

  4. What are the opportunities? • Recent study by Booz Allen & Hamilton estimates that the internet and technology could cut expense for insurance companies up to 60%, particularly in areas of distribution and customer service • Estimates for online sales vary; recent Forrester report estimates $14B online market by 2004 • No dominant online brand today

  5. Is there a dominant brand? Among online users, percent who could name a web site by product category “Online insurance is wide open.” - Ben Black, Harris Interactive Source: Harris Interactive

  6. What is happening today? • Brick and Mortar companies discover the web (finally) • Insurance Marketplaces • New Challengers

  7. Brick and Mortar Companies • Informational Only • Lead Generator • Application is forwarded to agent for quote • Online Quotes • Referral to agent for binding of coverage • Online Quotes, Binding of Coverage, and Claims • Progressive as an early leader • Allstate

  8. Brick and Mortar Companies • General consensus among analysts is that most large personal auto carriers will be offering online quoting within the next 12 to 18 month • Unclear as to how many will be offering coverage binding online during that timeframe • In general, most carriers business plans only consider the web as simply an additional distribution channel

  9. Insurance Marketplaces • Quote aggregators and lead generators • Often more than just personal auto • Homeowners • Renters • Life • Annuities • Examples: • InsWeb • Quicken Insurance • Insurance.com • Quotesmith

  10. New Challengers • Internet Only Carriers • View the internet as more than just a distribution channel • See opportunity to build more efficient ways to sell and service insurance products • Changing the paradigm of control in the insurance purchasing process • Examples: • eCoverage • ePolicy • Esurance

  11. A Challenger’s Perspective: eCoverage • Formed about 1 year ago • Based in San Francisco • Began selling personal auto online in California in September, 1999 • Currently offering auto product in about 8 states • Plans to offer product to approximately 25-30 states by end of Q2 • Blue Chip Investors and Board of Directors

  12. Investors & Board • SOFTBANK Venture Capital • E*TRADE Group • RRE Ventures, co-founded by Jim Robinson III (American Express) • David Coulter, (Bank of America) • Ken Langone, (EDS, Home Depot) • Chris Larsen, (E-LOAN) • Accel Partners

  13. Captive Business Model Issuing Carrier MGA Brand Name Reinsurer

  14. What is eCoverage doing? • Complete overhaul of traditional insurance company processes • Building company around the technology and business practices of the internet • Staffing with innovators from within and outside of the industry, willing and motivated to break the mold Key Point: Innovation can only happen if you provide the proper platform to support it.

  15. Three Key Areas: It is critical that a company have ownership of 3 key areas of the business: • Technology • Customer Experience • Product

  16. Technology • Core technology developed entirely in-house • Seven patents filed on technology allow for unprecedented flexibility in product and business development • Superior data quality and accessibility • APL not spoken here

  17. Customer Experience • eCoverage takes responsibility for the customer experience, from quote to claim • Licensed, non-commissioned professionals online or by phone 24x7 • eCoverage branded claims process

  18. Product • Unique sales environment brings new challenges • Current industry products assume agents touch • Proprietary personal auto product designed exclusively for sales over the internet • Superior understanding of data facilitates continuous updating of risk management operations in order to minimize risk and maximize profitability

  19. Conclusion: Who will win? • Consumers, for certain (better customer service, lower prices) • Companies who can : • Differentiate themselves via Superior Customer Service and real value-added product innovation • Leverage new technologies to create more efficient and cost effective processes throughout entire organization • Keep up the pace in a continuously evolving environment

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