Impact of Internet Channel on Auto Insurance Industry

Résumé du document

The influence of internet on the insurance industry is increasing in accordance with the spread of internet retailing. Quotes submitted and policies purchased through internet grew 23% and 29% respectively from 2004 to 2005. The proper adoption of a strategy in line with the changing trends of the internet channel can become a company's competitive advantage. This paper explains the changes in industry forces brought by the internet, value chain of insurance business, and future trends of the internet insurance market. The industry force analysis addresses how the internet has changed the industry forces in the insurance business. The major changes are in the threats of rivalry and buyers which have increased in strength. Even though barriers to entry are high under the traditional model, the internal competition among incumbent companies has significantly increased owing to the competitive business environment. Companies are competing not only on price, but on quality customer service. The barriers to entry are reduced due to the existence of the internet. New comers will struggle with their business mainly due to the lack of brand recognition and high level of capital needs.

Extraits

[...] Advantages of GEICO's online services 1. Fast quote generation Ease of use and minimum information required from the customer Low variable costs since no GEICO employees are needed in the quote generation process Due to their low price strategy, there is a high probability that their price will be lower than current policy held by potential customers. (Switch to GEICO motto and save hundreds on car insurance) Since contact information is given, the customer can be contacted by alternative means such as email, mail or telephone to increase the probability of purchase. [...]

[...] Impact of internet Channel on auto iNsurance industry Error! Bookmark not defined Executive summary overview Error! Bookmark not defined Five industry forces analysis Vlaue Chain analysis Internet insurance process analysis and demonstration Future trend in e-insurance Conclusions Appendices 20 Executive Summary The influence of the internet on insurance industry is increasing in accordance with the spread of internet retailing. Quotes submitted and policies purchased through internet channel grew 23% and 29% respectively from 2004 to 2005. The proper adoption of a strategy in line with the changing trends of the internet channel can become a company's competitive advantage. [...]

[...] As a result, there is no real substitute for a driver to purchase insurance. Bargaining Power of buyers: In the agent system, the buyer is dealing with a broker that him which policy and company to choose. Because he trusts his broker, the end customer has no real power. The broker can leverage his power by asking greater commissions or rewards from the insurance companies. That is, the insurance company is facing a moderate power of the buyer via the broker. [...]

[...] However, internet technology may reduce some barriers to entry of the insurance industry. Unlike traditional companies, those companies who focus on internet insurance business could be profitable by reducing transaction between customers and brokers. So they do not necessary to have profits from other investments. Bargaining power of Suppliers6: The suppliers of insurance business are car dealers (repair shops), towing service companies, car rental shops, hospitals, and reinsurance companies. There are no critical suppliers except reinsurance companies. Many suppliers are available for each category of suppliers. [...]

[...] In this study, we will focus on the auto insurance industry. The role of Insurance Agents/Brokers: A definition of insurance agents and brokers is needed in order to understand their role in the insurance industry. An agent is a licensed producer appointed by insurance companies to offer their products for sale.[1] There may be 2 types of agents: personal line insurers and commercial line insurers. The former sells private passenger auto and homeowners insurance while the latter sell insurance for business. [...]