Insurance Companies Embrace Internet Marketing

A new study projects that online ad spending by U.S. insurance companies will grow by 36% in 2007 to $980 million, and increase by 41% in 2008, to reach $1.38 billion.

The study, from the New York-based market research company eMarketer, reveals that the U.S. financial services industry--including banks, credit card companies, brokerages and insurers--is second only to retail in Internet advertising spending. U.S. insurance companies' online ad spending accounted for about 28% of the financial services total in 2006, or $720 million.

These online shoppers and buyers also expect the same level of sophistication and service from insurers' sites that they find at their favorite online retail sites. But several reports show that insurers' sites are failing to keep pace with those in other industries. eMarketer notes that the Customer Respect Group (CRG) recently reported that the usability of life insurance sites as a whole slipped from the 41st percentile to the 28th--a fact the CRG attributed to the improving standards in other industries and not necessarily backsliding among life insurers.



Consumers do not lower their expectations for service, privacy and usability when contacting their insurers, so companies risk harming their reputations and brands by not improving their online customer experience and service, says Lisa Phillips, eMarketer senior analyst and author of the report.

"Insurance companies are hampered by their business model of having to rely on local agents to make the sale," Phillips tells Marketing Daily. "They are trying to use the Internet for marketing but still trying not to usurp local agents. It's a tricky balance."

The end result is that most traditional insurance companies are really behind the times in learning how to sell policies online, she says. "Insurance company marketers really need to go outside of their industry to figure out what makes customers go through with a sale online," Phillips says. "The insurance industry is still trying to figure out why consumers are coming to their site."

Craig Oldham, Allstate's director of Internet marketing, agrees with the study's premise that insurance companies have a unique set of challenges when it comes to Internet-related marketing.

However, he believes Allstate is taking full advantage of what it can do in the category, and says it is improper to characterize insurance companies as behind the times because they aren't using the same techniques as goods retailers. And even goods retailers aren't going selling solely on the Internet, he points out. "Best Buy hasn't closed its stores and gone only to selling on its Internet site," he says. "People expect to be able to shop in different places."

Allstate looks at the Internet as a part of its multichannel approach. Many customers want to track a claim on the Internet or pay their bill, even if they want the initial contact with a live agent.

"We are certainly trying to play in the space," Oldham tells Marketing Daily. "Insurance is still a pretty complicated category. Most people want to close with a live person. They need reassurance." Even though Allstate offers a "soup to nuts" option in some states that allows consumers to go from starting to signing a policy online, the percentage of customers taking advantage of the option is only in the teens, Oldham says.

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