First of all, these tools are expensive, Irwin says. Putting the tools in place and the people in place to know how to mine the data is not easy. Very few companies have found a way to pull all the data together around all the interactions they have, put it in one place, and then mine it. Thats a very expensive proposition because most of the systems theyve built were not geared to do that.

Still, Margaret Munroe, senior assistant vice president corporate communications for Amica Insurance, feels the tools are available for Web sites to make e-commerce a solid function. Web sites are moving that way, she says. Amica has two ways customers can ask questions and discuss options as they proceed through the quoting pages. We have an instant messaging option and the call me button so that customers never feel they are alone when they are at amica.com. There is a customer service person ready to help whether they are on the Web site or calling from a remote location.

Currently, most policies being sold online are either personal, auto or term life. These coverages have fewer underwriting questions and can be rated and bound in one online visit. A study by the Internet rating service Gomez, Inc., The State of Online Insurance, shows that 72 percent of online shoppers are looking strictly for automobile coverage when searching the Web for P&C products. Term life holds a similarly strong position in the life insurance market. While assistance is sometimes needed even for term life, Wendy Benson, second vice president of e-business and retail partnership for John Hancock Financial Services, says long-term care, variable products, and annuities more often require human interaction.

Easy Does It

Easing the customer through the process is imperative if a carrier intends to attract more business through the Web site. Munroe says carrier Web sites need more explanatory information available than would be available through click-through words and phrases. Customers need faster, easier-to-use Web sites with menus that make sense to a consumer. And this needs to be a totally self-serving process so that even if they forget their password, they can retrieve it without brick and mortar being involved.

Swift believes the ease of doing business makes the Internet a wonderful tool for selling insurance policies. It makes it so much easier to comparison shop, he says. You are not forced to make a decision because the store is about to close. Esurance likes to track when customers made an initial contact for a quote and when they followed through with it.

The buying process, particularly for personal auto policies, is relatively simple. The customer can enter the Esurance site, put in a limited amount of information, and get an anonymous quote. Esurance also offers comparison quotes. When you get your quote, you press a button and get two or three companies in your state and what they would charge, Swift says.

Once the customer decides to buy, more details are needed. You cant remain anonymous if you want to buy car insurance, Swift says. The customer is rated and then given an accurate quote on the premium. If they choose, they can print their insurance card out immediately, and thats it. Theyre bound. Theyre done.

While this may be an easy process to complete, Todd Eyler, senior analyst for Forrester Research, doesnt believe every Web site offers that ease of use. Insurers need to have an online demonstration of how the application process works so customers can find out what theyre up against, he says. Most sites need better instant messaging systems, he adds, to walk the potential customer through a sometimes complicated process.

Sales Not There Yet

Judging the productivity of a carriers e-commerce initiative strictly by how many policies are sold online makes analysts question the value of such initiatives, but insurers are taking a broader view of e-commerce, and what they see, they like. Im seeing a lot more people coming into the Web site, says Swift. They are doing some comparison shopping, and they are coming in and buying policies from us. Consultant Irwin wont argue. We are definitely seeing some movement there, he says.

Esurance is part of a traditional insurance family (White Mountains Insurance Group), but it does most of its business electronically, offering personal auto policies over its Internet site (www.esurance.com). Amica Mutual Insurance is a more traditional carrier, and Munroe believes the slow pace of e-commerce growth results from reluctance to get away from traditionbuying insurance from an agentrather than fear of technology.

Consumers are not ready to buy online, she says. They will research and compare prices, but when they are ready to purchase they want to speak to a person. The reason for this appears to be that the dollar commitment is too high to make without understanding exactly what is being purchased. Amica takes the time to educate customers about the insurance they are purchasing. That is why the final purchase is made with a person.

Even though customers are becoming more technologically sophisticated, Munroe believes insurance remains one of the areas in e-commerce that calls for human interaction. You would think that 20-something young people would be eager to buy online, but in talking with this age group, they are not comfortable at all, she says. They say there is a big difference in buying a $12 CD online and buying an insurance policy. They want to talk with someone.

Online sales have been growing ever so gradually. Booz Allen Hamilton published a report last year, 2001 eInsurance Study, tracing sales growth in the preceding two years and projecting it over the following three years. In 2000, online sales totaled $1.5 billion out of the industrys total of $667 billion. The number grew to $3.1 billion last year and is expected to reach $5.1 billion this year. By 2005, the number is expected to be $12.3 billion, approximately 1.5 percent of total written premiums of $793 billion.

There comes a point in time customers want to close the deal by talking with somebody, Irwin says. It could be the agent across the table or a customer rep out of a telemarketing center. What matters less is what is sold online. What matters more is the contribution online makes to the whole relationship.

Theres no question about the weak numbers, Forresters Eyler says, but he believes growth will come when the major insurers offer full coverage online in all 50 states. Its a build and they will come scenario, he asserts.

Swift believes that already is happening. Were starting to see bigger people play on the Internet, he says. Now they are taking it seriously. Thats good and bad. More competition is tough, but on the other hand, it shows were doing the right thing; that the big boys are really serious and getting involved.

What Time Is It?

To run a potentially successful e-commerce site, insurers must leap several hurdles. Finding time to work on the system is one problem insurers face in a 24/7 world. Swift says that the slowest time period for the Esurance site is between 3 a.m. and 4 a.m. Pacific time. Knowing when to work on the site is important because of the time lost. Were pretty good on that now, he says. Even the most complicated changes we get done within an hour. Every now and again you get a glitch, and it goes to two or three hours, but thats why you do it in the middle of the night so it doesnt impact your customers.

Working on the Web servers individually allows continuous service, too. We have six Web servers, so well bring down one and do maintenance on it, put it back up and bring the next one down, Swift says. Well do the same with the rating engines.

The relationship between carriers and agents also will complicate e-commerce for some time, says Munroe. Many factors have held the insurance industry back from e-commerce, but I think the main reason is most insurance companies are agent based and have not been able to bridge the electronic world with the agent brick and mortar, she asserts. For Amica, it is making sure that the Web site provides the same quality service to the customer as our employees do, since we are a direct writer. We had to connect our Web to our legacy systems to provide the most accurate quote and policyholder information.

Another issue is security. Munroe says a Web sites vulnerability is as important as that of the carriers data base. They need to do everything [for the Web site] they do on the inside of their company to protect their data, she says. As the data comes in, it goes inside the firewall and is protected just like all of the other data that has been protected all along. All companies, I am sure, have good security policies. They, of course, should be extended to the Internet. Amica not only adheres to our own security policy but passes the very stringent reviews of BBBOnline and Trust-E.

So what can insurers do if they dont currently have an e-commerce function on their Web site? They need to direct the customer to an 800 [phone line] or their office until they can quote, bind and then sell online, Munroe says. They also need to position themselves with search engines.

And when should this all happen? Says Munroe: Yesterday.

Anatomy of an Online Insurer

Three years may be a blink in the eye of a century-old insurance company, but in the world of e-commerce, its like Rip Van Winkle waking up from his nap. Things change quickly, especially for an online insurer such as Esurance, which was born on the Web in 1999.

Youve got to remember, [online insurance] was developed at Internet speed, says Phil Swift, CIO of Esurance, so there was a lot of manual process going on behind the scenes. A lot of back-office stuff was either manual or done by IT. When rates were changed, the IT department had to do the work on the Web site.

Over a period of time, weve taken those processes and given them to business, he says. There arent significant changes in the overall architecture [since 1999], but there are changes in back-office functionality.

Esurance operates on the Microsoft platform, and Swift says the company is switching from Windows NT to Windows 2000 this month. The company has upgraded its SQL database. We also have an AS/400, Swift says. We have a policy management system we run in the background on that.

Front-end functionality was written by Esurance. The Web-based software and functionality were developed in-house, along with all the customer interfaces, Swift says. The company bought a policy management package from Fiserv and a rating engine from Quadrant Information Services.

You could basically split our system into two, Swift says. The pre-sale is all homegrown, and the post-sale uses a package.

Esurance always looks outside the company first for upgrades. Sometimes the stuffs there, sometimes it isnt, Swift says. Operating in real time, Esurance cant afford batch-based or agency-based systems. Thats not a good fit for what we try to do, he says.

Cost is always important, but Swift says he looks at risks and exposures as well: We look outside all the time because if someone has done it, theres no need to reinvent the wheel.