Internet adoption

During the past decade, the internet has been widely adopted by consumers. Research by the Internet Advertising Bureau shows that internet use continues to rise, reaching almost 30 million people in the UK at the end of 2005 and that broadband penetration increased by half from 30% to 45%, in the 12 months to April 2006.

In line with these trends, the internet has become an increasingly important distribution channel and research tool for businesses. In the insurance industry, recent research by Datamonitor estimates that internet sales of motor insurance will more than double between now and 2009 to account for 29% of quotes processed. Research by Mori has also revealed that 87% of businesses use the internet to research suppliers and improve efficiency. These trends are not going to stop.

In the past, UK brokers have appeared slow in embracing the internet but evidence suggests that brokers of all sizes are now realising it must be part of their business model, whether in the form of an information website, or a fully transactional solution integrated with back office systems.

This is a trend that Andy Heap, managing director of Ignition NBS, a marketing consultancy working exclusively within the insurance industry, has noticed: "The insurance industry has been slow off the mark in embracing the opportunities the web affords but things are changing fast and industry initiatives are finally beginning to look something like the vision we were sold a few years ago."

This growth has also been witnessed by Software Solutions Partners, whose e-business division has seen a huge increase in the number of customers commissioning web developments, leading to the division almost doubling in size since 2004. Brokers, whether new start-ups or established businesses, are grasping the fact that the internet is an important trading channel which they need to consider in addition to their traditional business model. This growth has led to the volume of quotations processed through SSP's internet trading platforms increasing dramatically over the past two years, to over 20 million a year.

New start-ups have accounted for 30% of SSP's new business over the past 12 months and these businesses are in the enviable position of being able to set up an integrated web and back office broking system from the outset, because there are no legacy system issues. This allows them to plan their web channel as part of their overall business plan and to put in place the processes required to integrate e-commerce into their businesses.

There will be many intermediaries who can effectively target a market for web-based quotations. An affinity group specialist, a wholesale broker with a comprehensive set of schemes, any broker with volume business or indeed any broker with a niche scheme could improve service and reduce costs by providing quotations online.

Start-up businesses are typically looking for either a website that gives them a simple web presence at the start, which will allow them to move towards a fully integrated transactional web channel further down the line, or in some cases, an integrated, fully transactional website from day one.

Those looking for simpler solutions are generally looking for the means to provide their customers with the opportunity to enter their details and receive a call back, to generate sales leads and improve customer relationships. Flexibility and adaptability are important too, to ensure that the website can grow with both the business and the customers' requirements.

Internet functionality

For some smaller start-ups, or those focusing on more complex commercial risks, there may not be a requirement for a transactional website. Dean Homer, senior account manager at Highhouse Insurance explains: "As a new start up, it is not as business critical for us to have a transactional website as we are targeting and processing mainly corporate business through introductions from solicitors and accountants. We would consider a web presence in the future though."

Established brokers, may worry about issues with incorporating the website into their back office systems, but this need not be the case. The provider of the web channel should be able to supply a fully integrated web front end for an existing system.

SSP has worked with a wide variety of brokers to help them to develop their e-commerce strategies, from smaller intermediaries to large, corporate brokers.

One initiative, for instance, is where SSP is working with HSBC in providing functionality to its Quote and Buy website. The aim is to bring in more small commercial lines business by targeting the general public, as well as existing bank customers. The site has been designed with the end user in mind, ensuring that customers can go through the whole process, obtaining quotes and purchasing cover online with minimum effort. Quote and Buy combines HSBC Insurance Brokers' own in-house developed website with an existing auto-rated scheme in its SSP sector system, via SSP sector Channel Manager. Channel Manager is an integration tool, which uses XML technology to allow real-time two-way communication, removing the need to duplicate scheme and product definitions online. This enables HSBC Insurance Brokers to maximise its investment in existing corporate and affinity web sites.

In the personal lines market, solutions have been developed for companies such as Kwik Fit, which required an XML solution to deliver quotes to aggregator websites within seconds - a vital service in an environment where customers now expect to have ready access to comparison sites to assess products and their prices.

In the past, many smaller brokers were put off developing a web presence because it was perceived that a significant investment in marketing and advertising would be required to be successful or because they did not have a well-known brand to convince buyers that they were the best option. However, with commitment, focus and a willingness to learn, many brokers have been able to use the internet as a proactive marketing tool, mainly through the use of search engine optimisation, link building and keyword bidding.

The importance of e-commerce

Smaller insurance brokers, such as Central Insurance Brokers, have recognised the importance of e-commerce as part of their business plan and now offer car, bike, van, home, and travel insurance, through SSP iconnect, a customisable, off-the-shelf transactional web solution integrated to the existing back office system.

Chris Lozetsky, director of Central Insurance Brokers, explains: "People are searching for insurance online in ever increasing numbers. They are demanding greater sophistication and security and at the same time, they want an easy, simple to use system that allows them to get the answers they need without hassle. Our website allows us to access vast numbers of new customers at much lower acquisition costs, allowing us to compete with the big boys, without having their massive advertising budgets. All of the functionality our site provides to our customers would not be possible if SSP hadn't invested in their internet products. We simply couldn't afford to offer the necessary interactive experience that our customers demand."

If properly harnessed, technology can bring a range of benefits to the broker and its customers. It provides a 24/7 shop increasing trading opportunities, and also allows the broker to offer both standard and niche schemes. Quick-quote facilities and auto-rating provide quicker service for customers, which can then be supplemented by a follow up call.

With an integrated e-commerce system there is also no need for re-keying, which reduces administration costs in terms of paperwork and time and also reduces the amount of human error.

The next stage on from having a website and facilitating online quotes is to offer secure online payment facilities to customers and offering cover online, feeding all the information into the existing back office system.

Financial Services Authority compliance is something affecting everyone in the industry and e-commerce can even assist in that area. Traceability is one of the cornerstones of FSA regulations, and IT systems can assist in providing a full audit trail for accountability of actions. Including a full and automatic record of quotation and policy details, together with rates and terms offered, providing clear evidence of what was quoted and bound online. In addition, issuing documentation at the point-of-sale assists adherence with the industry guidelines for contract certainty.

Effective use of IT and e-commerce for real-time site monitoring and statistical analysis can provide actionable management information to allow marketing and sales activity to be continually improved. This, combined with an effective website, can go towards levelling the playing field with some of the bigger providers.

Lozetsky comments: "We are effectively open, even when we are closed, with almost total control on how many enquiries we want at any particular time and how much we spend, on an instant turn on/turn off basis. Obviously this was not something that we could do with directory advertising."

Heap agrees and explains how keyword bidding can be very cost effective, especially when targeting certain classes of business, "In September, for example, there were 192 searches for directors' and officers' insurance on the Yahoo! search engine alone. The bid cost of coming first for this search term would have been 0.13p. So the worst case scenario would be a cost of £24.96 to capture all of these leads. Traditional advertising cannot compete with these low costs of acquisition."

The challenge is to focus on the suitability of products for auto-rating - small to medium-sized commercial risks need to be packaged so products are easy for the consumer to purchase online. This means focusing on the question sets and product content to streamline the product allowing it to be easily purchased on the web. For more complex products, data capture via the web to allow offline rating is also an option.

Growing importance

The internet is now a well-established part of modern society and research indicates that it will continue to grow in importance and continue to develop as a hub for communication, leisure and business. As a distribution channel and research tool, the internet has a significant impact on the insurance industry, with trends indicating a continuing shift towards internet-based transactions. As per the Mori survey, over half of internet users use it as their preferred source of information and new users are discovering the internet all the time.

However, e-commerce is not just about transacting business online, brokers can also offer better customer care through online claims processing, advice and renewal services. For instance, many brokers already post general risk management and health and safety type information on their website and allow customers to notify claims. Even if the website is not primarily used to transact business, it is key to support business development as well as giving other distribution channels a boost.

There are a range of options that businesses can pursue in terms of e-commerce, depending on the size of the business, the stage of its development, the type of customers and future plans. Brokers can pursue anything, from a simple information website about their business providing contact details, through to a quotes-only option, right through to a fully transactional solution, integrated with the back office system. For the start-up business, it is worth noting that e-commerce can be integrated into the business in stages, to complement the business development and allow the company to enter a cycle of continuous e-learning, developing the skills that will be needed in the future.

A technology provider should be able to bring experience and knowledge to a relationship and will be able to work with individual companies to provide appropriate solutions.

- Gina Cook, Business development and relationship manager, e-business, Software Solutions Partners.