The lacklustre results of term insurance sold online are preventing some insurers from jumping on the Internet bandwagon. The disappointing sales figures can be attributed to bad timing and a lack of marketing say experts.
Clarica does not sell term insurance online and says it will not in the near future. “We have heard some stories about the fact that it is not going so well,” says Nicholas Thomas, Media Relations Manager at Clarica.
A source wishing to stay anonymous told The Insurance Journal that Sun Life has also monitored the issue and saw that it would not be a profitable venture. The source explained that most of the companies selling term online are losing money and that it is simply not working.
Wayne Miller, Assistant Vice-President Product and Distribution Marketing at Sun Life, explains that the company does not offer the product online because its customers expressed an interest in using the Internet predominantly as a reference tool. The product is not particularly well understood, and consumers want to ask questions and be taken through the buying process, he notes.
“Coming up with an initiative to sell insurance through the Internet is not consistent with what our target customers are looking for and it can come into conflict with what we are trying to focus on,” says Mr. Miller. “[The Internet] hasn’t been that lucrative of a channel for the sale of term insurance, so it’s not like we’re missing any boat,” he adds.
Constance Lemieux, Principal Vice-President of Technology and e-business at Desjardins Financial Security, acknowledges that the company’s website, Finactive, sees few term sales concluded online.
She stresses that consumers will go online for information on term insurance and for quotes but not to purchase online.
Ms. Lemieux adds that insurance is not the only industry suffering from sluggish online sales. But despite the low sales, the website is still an effective educational tool for clients.
She notes that few people thought online banking would take off a few years back but now it is immensely popular. The same will occur with the selling of insurance online in a few years, she says.
Part of the problem is that there is a lack of consumers being driven to the websites, explains Gregory Ellis, Co-founder of Kanetix, an online insurance marketplace that sells term, auto, property, and travel insurance.
Mr. Ellis stresses that is not necessarily expensive to set up a website, however, it can get costly to promote the site. “Some insurance companies think that if you build a website, people will come. And that’s not true! There are many sites out there that exist and nobody goes to them.”
ManulifeDirect and Canada Life’s direct term products are available on the Kanetix website, but life insurance is not the premiere seller states Mr. Ellis. “We do thousands of quotes for automobile insurance a day and we do hundreds a day for term. That’s a factor of ten to one.”
The marketing cost coupled with the expense of setting up the website drastically reduces the chances of seeing any profit, says Mr. Ellis. “I think Manulife would say that and so would Desjardins,” he notes.
Michael Kapitan, Vice-President of ManulifeDirect realizes that it has been a challenge to get consumers to go to the company’s website. “We spend a lot of time tracking them once they get to the site. We try to understand where they go, what they like, what they don’t like and then we try and improve the site,” he says.
Mr. Kapitan recognizes that the number of online sales is much lower than term sales conducted via a broker. However, he feels that Manulife is giving clients an option should they choose to buy online. “Do the majority of our sales come through Manulife Direct? No. Do a number of people go there? Yes.”
TD Life has a different story to tell however. It says it is witnessing a steady amount of online term insurance sales. “It is working quite well for us…40% to 50% of our business volume comes though the online channel,” says Adrienne Benkson, Director of TD Insurance. She states that term insurance is the most popular product that TD presently offers online.
TD’s website already has traffic coming to it due to consumers doing online banking. Therefore, the company does not have to promote the site as much. In 1998, TD became the first in Canada to launch term insurance online, which Ms. Benkson somewhat attributes to its success.
Ms. Benkson explains that the online channel accounts for 5% of the 300,000 annual term insurance sales in Canada – a statistic found through Forrester Research, a North American research firm. Ms. Benkson states that TD is currently the leader in online insurance sales in Canada. TD, along with the other insurers did not want to disclose their sales figures.
A matter of time
Ken Davies, Senior Marketing Consultant for Canada Life, is seasoned in the selling of term insurance online. He recognizes that for now, online sales are nowhere near face-to-face broker sales.
However, he points out that it is mostly a question of demographics and a matter of timing before online sales dramatically take-off.
“Young people who grew up on the Internet are going to look for online insurance and say ‘I’m going to buy it now!’ They’re not going to pick up the phone and talk to their dad’s broker,” he says.
Though Mr. Davies feels that the change will take 20 years, he says that the Internet should not be discounted as a distribution channel. “I think to turn your back on it and walk away would be like trying to throw computers off everyone’s desk.”