You would have never heard of the Internet distribution channel if you had worked in the UK Insurance industry twenty years ago, or anywhere else in this world, except in idle chatter among the IT department boffins, analysts, and employees in the company cafeteria.
The two major distribution channels for moving insurance products to market were the Internet and the Internet. A serious sales and marketing competitor would need to wait another ten to ten years.
The main channels were the direct channel. This was the channel that produced insurance products that could directly be sold to the public via a call centre. It also cut out the cost and expense of managing intermediaries or middlemen.
Further, the broker channel was sub-divided into agents, consultants and insurance brokers.
Both channels offered different options for the same product depending on how a policy had been sold.
At that time, only personal lines such as home and car insurance were offered via direct channels.
Also, it was considered that business and commercial insurance were too complex to be sold over the telephone. It would also require a bank with approved underwriters and scripts to manage the lines. There are no auto-quote systems for commercial insurance. The intermediary channel was used for almost all commercial insurance.
The dual-path approach to the sales, marketing, and delivery of insurance policies continued until finally Insurance was able to be sold online. The first offerings made around the turn century were for personal insurance. Commercial insurance was only mentioned occasionally, with the exception of a contact us button.
Ironically, as personal lines insurance grew over the Noughties, and became a larger channel of distribution for the product, the broker and direct channels that were previously available online re-established themselves in close competition.
Both the intermediaries and insurance companies were unaware that a new distribution channel was emerging on the Internet. The aggregator, or price comparison site, has accounted for more than 90% of all online insurance sales.
The public loves to compare prices. Because most personal lines products can auto-quote, without the intervention or assistance of an underwriter, it meant that all these price comparison sites could be combined into one online insurance price comparison website, as seen in media. This is proof of the effectiveness of comparison websites as a channel.
Commercial insurance, however, was still in its infancy when it became an online channel.
The large general insurers were reluctant to standardise and quote commercial products. This led to inertia. They felt that the risk was too great and the underwriters refused to change.
Market forces drove the change. The Broker channel began to sell commercial products through its own web-enabled backoffice systems.
Online business insurance brokers could gather information about a business’s insurance requirements via a web form and send it to its internal systems. These back-office comparison systems include a group of providers and insurers that provide autoquotes.
Straight through processing for an insurance company could be done by the existing EDI, or electronic data interchange mechanism.
The target of price aggregators quickly became the single broker business and their commercial propositions. In 2009, large, now very wealthy comparison sites began to offer online insurance quotes using broker panels. This was quickly adopted by small businesses.
A string of autoquote products were released last year by large commercial insurers. These included packages for offices, shops, pubs and commercial let property.
The Internet is now a reliable channel for commercial insurance distribution. It’s almost impossible to watch TV for more than an hour today without seeing an ad for a tools and builders public liability policy.