March 13, 2000

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Agents See Competition And Opportunity In The Internet

By Charles Waltner

here's a phrase insurance agents are getting used to hearing: disintermediation. Insurance agents for years have served as the intermediaries--the middlemen--between insurance companies and their customers. But during the last few years, new sales channels have circumvented agents. Agents have been stung in particular by the growth of toll-free direct sales from companies such as Progressive Casualty Insurance Co. and Geico Corp.

Now the Internet may make things even tougher.

Kathryn McAravy, office manager at Employee Benefit Insurance, a Seattle agency, says her company suffered a 3% drop in sales last year, the first time it didn't grow in 23 years. She attributes much of the challenge to the agent business to heavy promotion of direct sales, and she realizes the Internet can only make matters worse. Her agency doesn't have a Web site, and the staff doesn't have E-mail, though the company is considering putting up a Web site. "We're really in the dark ages," McAravy admits.

Agents still push their importance as consultants for complicated product purchases. But many also realize that much of what they do can be handled by good interactive software.

It's unlikely that consumers will perform the entire insurance purchasing process without human help, Forrester Research analyst Bill Doyle says. "Consumers might need a human being to buy insurance, but they may not need an agent," he says, noting that customer-service personnel can answer many questions. Doyle says the Internet will put tremendous pressure on commissions, and he expects agent ranks to dwindle by one-third to one-half within five years.

But Martin Sullivan Jr., an owner of the Sullivan & Sullivan insurance agency in Redwood City, Calif., isn't as concerned. His company had partnered with InsWeb, a leading online insurer, and was unimpressed. Sullivan says InsWeb's infrastructure "isn't there yet."

However, Sullivan recognizes the potential of the Internet. "Every agent will need a Web site, and the Internet will be huge in this business," he says. "But in my opinion, it's still five years away."

Return to main story, "Internet Slowly Transforms Staid World Of Insurance."

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