Internet Insurance Model Gains Market Share, Frustrates Brokers

by Jamie Walden  on Monday, Oct. 12, 2009 12:00 am  

Lee and many of his peers in the Arkansas insurance pool claim to have dodged the Internet bullet.

"We're catering generally to the upper end of the food chain," said Matt Jones, president of Legacy Capital Group. "And so we're typically dealing with very wealthy people who are putting tens of thousands of dollars a year, sometimes hundreds of thousands of dollars a year, as premiums into insurance. And they're not going to make those purchases online."

Instead, younger consumers seem to be generating the online insurance activity.

"It seems to be a generational thing," Berryhill said. "The younger the people are they seem to have no problem going online quoting and buying insurance. And usually when they're doing that, they're shopping for the cheapest price."

Man vs. Web

But cheaper online savings come with a bundled expense, brokers say.

"Typically, something's got to give," Berryhill said. "You can't have the best product, the best service and the cheapest price in anything you buy. And insurance is no different."

That element that consumers lose, brokers said, is an advocate.

"When something bad happens, you've given [your advocate] up," Lee said of purchasers of online insurance. "And if things don't go the way you want them to go, you're dealing with the company on your own."

Joe Carter, president of Cornerstone Insurance Group of Little Rock, added that a broker was an advocate with the ear of the king.

"That insurance agent in Carlisle that's gone to church with his customer for 20 years is going to go to the mat for his or her client," Carter said. "And when you drop it to just a commodity, you lose that advocate, which can be detrimental because insurance companies do have a tendency to listen to agents, particularly agents who drive volume to them."

Carter said the carriers with which his firm dealt had a financial incentive to listen to the broker while an individual client had no real bargaining power.



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