Commercial insurance distribution channels on the Internet

Just 20 years ago if you worked for an insurance company in the UK, or anywhere else in the world, you wouldn’t have heard the term internet distribution channel, except perhaps in the idle chatter of the IT department experts and analysts in the company cafeteria. .

There were only two main distribution channels, or ways of getting insurance products to market and the internet, as a serious sales and marketing contender would have to wait another decade to appear.

At the time, the most important channels were the direct channel, which meant producing insurance products that could be sold to the public directly from a call center, removing the costs and expenses of managing an intermediary and the brokerage or intermediary channel.

The brokerage channel was further subdivided into insurance brokers, agents, tied agents, consultants, sub-brokers, managing agents for Lloyds and the affinity corporate market.

Both channels offered different propositions for the same products depending on how a policy was sold.

At the time, only private insurance products such as car and home insurance were available through the direct channel.

It was also believed that commercial and business insurance was too complicated a product to sell directly over the phone, would take too much time, and would require a bank of scripted approved underwriters to man the phone lines as there was no autoquote systems for commercial insurance have existed. As a result, almost all business insurance was sold through the intermediary channel.

This two-pronged situation for the sale, marketing and delivery of insurance policies continued until insurance eventually became a product that could be bought and sold on the Internet. The earliest offerings at the turn of the century were for personal insurance and there was hardly any commercial insurance beyond a single contact button.

Ironically, as personal insurance evolved in the 1900s and became a much larger distribution channel, the two previous direct and brokerage channels established themselves online, this time in much closer competition.

However, both the insurance companies and the insurance intermediaries were caught in a nap when a new distribution channel appeared on the internet; the aggregator or price comparison site, accounting for more than 90% of online internet insurance sales in record time.

The public loved to compare prices and the fact that most products from personal lines could be automatically quoted without going through an insurer meant they could all be merged into an online insurance price comparison site like we see all over the media today . This is a testament to the success of comparison sites as a channel in their own right.

Commercial insurance, meanwhile, was still in its infancy as a channel on the Internet until recently.

The slowness was mainly due to the unwillingness of the major non-life insurers to standardize and automatically quote commercial products. They thought the risk was too high and insurers resisted the change.

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The change came about through market forces as the Broker channel began selling commercial products using its own web-enabled back-office systems.

This meant that online business insurance brokers could collect information about a company’s insurance requirements on a website form and pass the data on to their internal systems. These back-office comparison systems are composed of a panel of insurers and providers who have provided car quotes.

Direct processing to an insurance company could be done through the existing EDI or electronic data exchange mechanism.

The single broker business and commercial propositions quickly became the target of the price aggregators and the large and now very wealthy comparison sites, who started offering online insurance comparisons in 2009 using broker panels, which quickly became popular with small businesses.

The major composite commercial insurers were forced to respond and released a range of autoquote products on the internet channel last year, including packages for retail, office, pub, commercially let property, tradesmen, professionals and commercial liability to name but a few. to call.

The fact that it’s almost impossible to watch television for more than an hour or two today without seeing an advertisement of a dotcom public liability policy and builder’s aids policy is proof that the Internet has finally arrived as a commercial distribution channel for insurance .