Comparison Shopping Grows Even as the Economy Improves
Insurance Experts' Forum, October 22, 2009
Carrie Burns recently wrote about a survey from Lowermybills.com showing that 83% of U.S. consumers are planning to try to reduce their auto insurance premium in the next six months. Economic indicators show the U.S. economy is slowly stabilizing, and all signs point toward a continued improvement in 2010. Yet the survey shows consumers will continue to comparison shop even as the economy improves.
Forrester’s Q3 2009 Insurance and Investments consumer survey shows that 42% of all U.S. online adults were influenced by online comparison-shopping when applying for auto insurance. In fact, online comparison-shopping sites influenced more than five out of 10 U.S. Gen Y and Gen X consumers (see Figure 1).
Why Comparison Shopping Will Grow After The Economy Improves
There are several reasons why online comparison-shopping continues to increase and impact the marketplace:
Emerging comparison-shopping advertising. Progressive has used a comparison-shopping theme in its mass advertising for years. The firm effectively communicates the value of choice, and the ability for consumers to receive multiple quotes. Esurance takes that one-step further and is now positioning itself as the online insurance destination comparison shopping site. It not only offers comparison rates, but it allows the consumer to purchase directly from other carriers at Esurance.com. I predict a major shift in 2010 as online comparison agencies follow a similar theme. The major issue is getting the consumer’s attention. Esurance and other online insurance agencies must compete with the deep advertising war chests of GEICO and Progressive. These firms must learn how to optimize media-mix spend across interactive channels, including paid search and display advertising in order to profitability acquire online comparison shoppers. These firms must offer assisted-service, like click-to-call and click-to-chat, enabling customers to start online and then purchase through a licensed call center representative. Forrester data mirrors this, finding that 48% of online auto insurance applicants start a quote online, but purchase through an offline channel (agent or call center).
Customer and agent fatigue from aggregators. Customers and agents are tired of poor experiences through lead aggregator sites. The customer believes he is comparison-shopping, but cannot purchase insurance through the site. Instead, the customer completes a form and is bombarded with e-mails and cold calls from aggressive agents. The customer’s information is typically sold six to eight times, creating an irate customer and poor lead quality for agents. Aggregators like Insweb.com are changing their business model to improve the customer and agent experience. Insweb recently launched www.insurancerates.com to deliver a better online comparison-shopping experience—giving the consumer more control over what personal information is required for a ballpark quote. Agents will be happier, too, because Insweb is limiting the amount of times the consumer lead is sold to carriers and agents.
Entrance of comparative raters. Consumer choice and transparency are the key benefits of comparison-shopping for consumers. On the other hand, the private passenger auto insurance market continues to commoditize the product, creating downward price pressure on margins and profitability for carriers. Choice is also the driving mission for independent insurance agents who continue to lose business to direct writers and comparison sites. Independent agents are fighting back with the help of comparative rating technology vendors like EZ Lynx and IBQ. EZ Lynx created an online, direct-to-consumer lead-generation portal for independent agents called www.agentinsure.com. Carriers like The Hartford, Grange Insurance, Progressive, Safeco and MetLife are already advertising on the site. Consumers can complete a form online and receive the independent agents “comparison” shops to find the best rate. EZ Lynx and IBQ are also exposing their comparative rater technology direct-to-consumers through independent agents’ local sites. This gives the independent agent a 24/7 online store portal, effectively creating online comparison-shopping through their local site.
The major question remains for carriers, agents and comparison sites: Are online comparison shoppers really good customers for your book of business? I would not invest substantially to acquire a customer who is shopping for lower rates every six months.
Methods including online behavioral targeting and real-time segmentation and analytics will help some interactive leaders filter consumers who are switchers versus loyalists. But the end game is tighter margins and increased cost per acquisition. Those are not the fundamentals many insurance executives want to hear as they try to grow their businesses in 2010.
Do you agree or disagree?
Chad Mitchell is a senior analyst with Forrester Research. He covers mobile and social media strategies in insurance, acquisition, cross-sell and retention marketing strategies, comparative raters, online guided selling tools, emerging Web and call center technologies for sales and service, agent portals for marketing and underwriting, and the best practices of leading multichannel firms. Aditionally, he advises leading insurers on best practices for public and secure insurance Web sites—analyzing functionality for quoting, policy administration and claims.
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