What's New in Cybertalk?

by Jean Gora
October 1998

Note: CyberTalk is a column that appears monthly in LOMA's Resource, the magazine for insurance and financial services management. To see more contents of the magazine and to see how to subscribe, click on RESOURCE MAGAZINE.

All the Right Friends: Alliances Pay Off for InsWeb

Interesting things have been happening on InsWeb, one of the two leading Internet insurance malls. Traffic on the site has increased dramatically—proof that its alliance strategy is paying off. InsWeb continues to announce new alliances. In addition, it has attracted increased involvement by leading insurers, including CNA and State Farm. This month’s CyberTalk examines the different strategic alliances that are helping make InsWeb successful. Additionally, Robert Hamilton of CNA reports on his company's InsWeb activity in this column, and selected other CNA activities on the Internet are profiled.

During the first half of 1998, more than 1,000,000 visitors came to the InsWeb Internet site, an increase of more than 100 percent over the last half of 1997, when 480,000 visitors came to the site. This dramatic increase is the result of extensive alliance development on the part of InsWeb.

Seventeen insurance companies now offer products to consumers via InsWeb. In addition to CNA and State Farm mentioned above, they include Nationwide, TIG, AIG, The Hartford PLIC, American Express, Mercury (through Griffith's Insurance), Kemper, Liberty Mutual, InsureDirect (a Reliance Insurance subsidiary), Zurich Kemper, Western Southern Life, Lincoln Benefit Life (an Allstate subsidiary), and Blue Cross/Blue Shield of New Jersey.

Strategic Partnerships

Since November 1997, InsWeb has signed more than 15 partnerships with other leading Internet sites. It has an exclusive agreement to provide insurance quotes and information through Yahoo's Insurance Center. It also has alliances with Classifieds2000, InfoSpace, USA Today Online, Switchboard, MetaCrawler, StockSite, AutoTrader Online, Consumers Car Club, BanxQuote, RentNet, Microsurf, All Apartments, and Realtor.com.

Yahoo, one of the leading Internet search and index sites, receives 30,000,000 visitors a month. InsWeb's Yahoo Insurance Center will be available to all of them.

AutoTrader Online offers more than 500,000 used cars for sale. Trader Online operates 20 Internet sites that sell aircraft, boats and yachts, big trucks, motorcycles, recreational vehicles, heavy equipment, collector cars, and general merchandise. InsWeb sells auto insurance through AutoTrader Online.

Both MetaCrawler and StockSite are provided by go2net. MetaCrawler is an Internet search/index site. StockSite offers stock portfolio tracking tools, company research, and news. InsWeb sells auto insurance through these sites.

Rent Net, a subsidiary of Cendant, represents rental properties in more than 2,500 cities in the US and Canada. It provides free unlimited access to lists with test, photos, floor plans, and location maps. Microsurf operates a network of Web sites that help home buyers. One of its sites is MoverQuotes.com, a site that allows consumers to compare the prices and routes of more than 1,000 moving companies. MortgageQuotes.com, another Microsurf site, offers real time mortgage rates from more than 1,000 lenders. InsWeb sells auto insurance through Rent Net and Microsurf and term life insurance through Microsurf.

In August 1998, InsWeb announced an alliance with Microsoft that will make InsWeb's insurance shopping service available through Microsoft's Money 99 Financial Suite, its household financial management software package. InsWeb is integrated into the package. InsWeb and Microsoft are offering several joint promotions in conjunction with their alliance. In one of them, Money 99 users will be eligible for two $5,000 drawings that can be used to pay for insurance policies. In another, individuals who complete InsWeb's auto insurance application will be offered a 4-month free trial subscription to Money.

CNA and InsWeb: Significant Potential Value

CNA is one carrier that is taking advantage of InsWeb's capabilities. In July 1998, it began marketing term life products to consumers in 47 states through it. These products include 10-year, 15-year, and 20-year term life policies. It had already been selling simplified auto insurance on the Internet. It uses three approaches to auto insurance distribution via InsWeb:

• Unquoted lead referrals to agents in Illinois.

• Quoted referrals to agents in California.

• Quoted direct writing from CNA's call center.

It offers term life quotations in InsWeb and uses the same call center as a back end for the service. The call center staff arrange paramedical visits and credit checks. In effect, the call center functions the way a managing general agent (MGA) might. In essence, the Internet provides a front end to CNA's call center operation. The company does not currently allow online payment of initial premium by credit card but wants to experiment with that technology in the future.

According to Robert Hamilton, vice president, E-commerce Marketing, CNA, his company wants to test whether the Internet allows it to reach a different group of customers than it has been able to reach through its network of independent agents. "There may really be people on the Internet who go online looking for insurance options—people who really want to buy," he says. According to Hamilton, 85 percent of the reason CNA is conducting InsWeb pilot projects is to learn. The company hopes to enter email dialogues with consumers who obtain price quotations. It will use these encounters to try to understand what consumers are looking for from insurers on the Internet.

CNA requires medical underwriting for its term insurance policies. It has tried to establish procedures that will speed up this process. "The Internet provides an automated front-end. People forget that you have to automate the back-end too," said Mr. Hamilton. He acknowledges that the need for paramedic visits makes the timing of back-end term life processing variable. Even if the back-end of the life insurance sale cannot be completely automated, CNA sees significant potential value from the Internet—particularly for agent communication and customer service. "You really need to take a holistic point of view," says Hamilton. There are huge customer service opportunities on the Internet.

CNA distributes through independent agents. Two years ago, it told the agents that the Internet represents an important new communications channel that CNA would use. It offered to "be supportive" to any agents that wanted to establish their own sites. However, it decided not to invest its own resources to put agents online. "The single-page agent Web site is obsolete," says Hamilton. Some of CNA's agents have developed their own effective Web sites, and CNA works with them. CNA offers online term life insurance quotations on its own Internet site as well as that of InsWeb. (The CNA Web site was profiled in the August issue of CyberTalk.)

CNA Financial Corporation is one of the 10 largest insurance groups in the U.S., with assets of more than $61.3 billion as of December 31, 1997. It is the third largest property/casualty insurer and the second largest commercial insurer in the U.S. It received 12 percent of its revenue from its life insurance operations in 1997. As of November 1, 1997, the Loews Corporation owned 84 percent of CNA common stock. CNA faces intense price competition in many of its business lines and is attempting to lower costs to improve shareholder value. It has announced plans to reduce its workforce of 24,000 by about 10 percent over the next 12-18 months.

CNA is an investor in InsWeb through its majority ownership of AMS. Other InsWeb investors are Nationwide Insurance and Century Capital, a Boston investment fund.

As well as being an investor in InsWeb, CNA is also an investor in the Home Financial Network, which develops PC and Internet home banking software. The software enables financial institutions to deliver private-branded electronic financial services to their customers at home. Products are targeted at middle/mass market PC owners. HFN offers a simple ATM-like interface that is easier to use than that of Quicken, the leading household financial management software package.

In the future HFN will offer Home ATM Insurance that will link its home banking software to the online insurance services of insurance carriers and managing general agencies. When home banking customers are online to check account balances or pay bills, they can also visit the Home ATM Insurance center and get comparative price quotes. They will be able to submit applications electronically. CNA Insurance provides technical resources and insurance products and services that financial institutions can offer their customers via HFN's Home ATM Insurance applications.