Jeff Ward, a director of London Market reform technology specialists TriSystems, has been working in the field of technology, information processing and insurance for more than 20 years. But even he admits that it’s not easy to pin down all of the ins and outs of the Internet, as it continues to metastasize around the world.
Ward gave the IJ some of his “considered views” in a recent telephone interview, focused on the use of web sites to convey information and do business, and the way it’s changing, and will continue to change, the insurance industry.
While older generations may use it, teenagers and young adults have grown up with it, as their medium of choice. “Over the last fifteen or twenty years there’s been a staggering change,” said Ward. “Old ways of doing business are being replaced by children with an entirely new way of thinking.”
Insurance agents, brokers, carriers – as well as insurance trade magazines – are all seeking to cash in on the opportunities while they adapt to the demands, and the idiosyncrasies, of the Internet. “There are many platforms – newspapers, billboards, radio, TV – where [companies and individuals] can display their message, but the potential of the Internet stands out loud and clear,” Ward continued.
He said there’s a widening gulf in the UK – and presumably in most other countries – between web sites directed at the general public and those that cater to business users. Companies like Aviva and Direct Line, the UK’s largest auto insurer, have web sites that attract almost anyone who’s seeking insurance coverage for their house or their car.
Smaller companies, who usually compete on price, have also been quick to put their message on line. In addition the UK personal lines market now features a half dozen “aggregation portals” – sites that compare prices and terms among competing carriers – and through which the potential buyer can contact the carrier directly and arrange coverage.
In contrast the “wholesale market, is miles behind the retail market,” said Ward. This is not to say that wholesale, or business to business, buyers and sellers don’t use the Internet. They do, but they haven’t even come close to the level the retailers have.
In most cases – other than certain specialty lines – a potential wholesale buyer gets only limited information. “There’s usually no ‘click through’ directly to the company.” As a result B to B web sites are essentially advertisements. They may direct the user to another site, but any actual business usually falls back on traditional, i.e. non-electronic, procedures.
The Internet has also made it possible for seemingly random events to take on global stature. You Tube, eBay, MSN, Amazon, Facebook, Google, Twitter, as well as all the news sites with links, make it possible to reach millions of people within a very short time. The discovery of Susan Boyle’s extraordinary voice couldn’t have happened without the Internet. A small UK auto insurance company made a commercial featuring Meerkats. While it was successful on TV, its success on You Tube – several million hits – made it a global household name.
Ward describes that phenomenon as “viral marketing,” but he, like almost everyone else, is at a loss to explain how it gets started. “You send e-mails; you get people to watch it, and it spreads like a pandemic.” If you could “sow the viral seeds in your target community,” the Internet would do your marketing for you. Anybody who figures out how to do this – and someone will – has hit a gold mine.
For the wholesale market, however, that day is a long way away. “The London market basically doesn’t do business electronically,” Ward said. “There’s no eBay, no You Tube.” There are B to B platforms – the Lloyd’s Exchange and RI3K for reinsurance. However, they are a “closed shop.” They are highly specialized and the people who use them essentially join a small select group.
However, Ward explained, the existence of these platforms means that the technology is in place and could be expanded into a number of different segments of the insurance industry, if there were a will to do so. “There’s no evidence that the wholesale market can’t do it,” he said. “eReinsure is the equivalent of eBay in North America.
“It may not work for complex risks,” he added. “They will probably always require face to face negotiations, but there’s a great deal that can be done electronically. Much of the actual work is not so complex that computers can’t handle it.”
If electronic communications expand beyond their now limited use, it would give brokers and underwriters the added benefit of freeing up more time to work on the complex types of risks, which Lloyd’s and other London market companies specialize in.
For wholesale business, a true global electronic market is probably many years away. Retail will get there first. But the Internet, driven by the growing number of young people who use it as their primary source for information and purchases, is inexorably hastening the day when that will happen.
“Ideally you need a program for anybody with a rating,” Ward said. “Then you need to make people aware of it, and therefore you have to advertise.” That’s at least some good news for insurance trade magazines.
Topics London
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