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Selling Insurance on the Web

Today's Wall Street Journal (subscription only) features an article about the increasing use of the Web for the sale of insurance policies. I was particularly surprised to see that a recent IBM study showed that only 15 percent of adults would even consider buying an insurance policy directly through a website rather than working through an agent. Another report, however, shows quickly rising online purchases of auto policies. This might signal a shift in insurance markets ahead of regulations. Under current regulations, even a transaction taking place entirely on the Web has to pass through an agent who has passed the agents' exam in the policyholders' state. This makes almost no sense. The agent really doesn't add any value to the transaction. It seems to me, in fact, that insurance is a near-perfect product to sell on the Internet. Nobody ever has to touch, test-drive, or try it on; it involves lots of paperwork; and the sale of a policy involves no shipping costs. All sizeable insurance companies use complex underwriting systems that give insurance agents little choice as to how their policies get priced. An insurance agent might be able to do some "shopping" for a consumer but, as the success of online travel aggregators has shown, computers shop around much better than people do. Moreover, largely because of overregulation, the basics of personal line property and casualty insurance products have not changed in roughly 50 years. When and if more people start buying insurance on the Internet, the case for efforts to open up a national market will become much stronger. We may be at the start of something big.