Buying Insurance Via the Net Waits

California is about to become a pioneer in electronic commerce by officially allowing consumers to complete an insurance purchase online.

Unfortunately, the vast majority of insurers, brokers and online Web sites aren’t ready for this brave new world.

The change is part of the Uniform Electronic Transaction Act, which the Legislature passed earlier this year and which becomes effective Jan. 1. The law gives electronic signatures, contracts and records the same legal weight as their physical counterparts.

The rise of all-electronic transactions is expected to lower costs for businesses and could lead to lower premiums for insurance customers as well, analysts say.

“This is very sweeping legislation . . . this is changing business rules,” said Kevin Brown, project manager for the law at the California Department of Insurance. “This is changing everything.”

Well, not quite yet. Today, fewer than 1% of insurance transactions are started online, although consumers are increasingly using Web sites to shop for quotes and compare services, a recent report from brokerage Morgan Stanley Dean Witter shows.

Even those who start an insurance purchase on the Internet, though, typically must send in a paper form with their signature to complete the transaction. The only exception so far is ECoverage, a San Francisco-based online insurance services company launched earlier this year.

Anticipating the bill’s passage, ECoverage used electronic commerce from the start. The company uses a customer’s credit card number to “bind” or authorize the transaction, and uses verification services provided by another company, VeriSign, to authenticate forms and the buyer’s identity.

ECoverage now is offering auto insurance in California only, although the company hopes to expand nationwide next year.

Analysts and insurance experts said pressure from such Internet start-ups, as well as business economics, will encourage the notoriously slow-moving insurance industry to adopt ways to complete transactions online.

Morgan Stanley estimates that 15% of the $100 billion spent on auto insurance annually and a similar percentage of the $2 billion spent on new term life insurance policies will be purchased over the Internet by 2003.

“Businesses want to do this because it cuts a lot of expense out of the paper handling,” said Steve Kroll, vice president of marketing for Answer Financial Inc., which offers insurance to affinity groups via its Insurance Answer Center Web site. “People are clearly becoming more comfortable putting their credit card numbers and personal information over the Web.”

Kroll said his Canoga Park-based company is exploring ways to finish insurance purchases via its Web site, which offers policies from 100 insurers to about 11 million members.

Companies have a choice of several technologies for making electronic transactions, Brown said. Some, such as American Express with its Blue card, could provide special smart cards and electronic card readers to customers to ensure their identities. VeriSign issues digital signatures and certificates to authenticate both sides of a transaction.

Third parties such as banks or notaries could also issue electronic identification badges.

Brown said more legislation is expected next year that should clarify what steps companies must take to ensure their electronic transactions are safe and legal.

Insurance companies using the Internet and other electronic distribution systems will be able to lower costs and premiums, thus stealing business away from companies that resist the shift to the Net, the Morgan Stanley report says.

Currently, the Internet insurance market is still developing. Shoppers who use services such as InsWeb, QuickenInsurance and Insurance Answer Center typically receive only a handful of online quotes, many from small insurers.

Market leaders including State Farm and Allstate still require online shoppers to go through an agent to get a quote, although Allstate announced in November extensive plans to expand its online channels.

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Web Shopping for Insurance

Most major insurance shopping services say they offer online quotes from more than a dozen companies. Unfortunately, few of those companies are household names. Many of the largest insurers and those offering the lowest prices do not yet offer real-time online quotes. Thus, consumers shopping for any type of insurance may for now need to supplement their Internet shopping with calls or e-mails to one or more of the three major insurers (State Farm, Allstate and Farmers) as well as to price leaders such as the Auto Club of Southern California, Mercury, 20th Century or Geico. For auto insurance specifically, shoppers also can call Consumer Reports, listed below, for quote comparisons. A look at some major insurance-related Web sites:

* ECoverage (https:///www

.ecoverage.com) writes its own auto insurance policies in California, which distinguishes it from other sites that act as a kind of broker or supermarket for numerous insurance companies. The company hopes to expand nationwide next year.

* Insurance Answer Center

(https://www.answercenter.com) offers comparison shopping for auto, home, vision, dental and other insurance for members of affinity groups and companies that have signed up for the service.

* InsWeb (https://www.insweb.com) offers comparison shopping for auto, home, life, health, condo and renter’s insurance.

* Progressive Corp. (https://www

.progressive.com) compares the company’s own vehicle insurance rates in California to those of State Farm and Allstate.

* QuickenInsurance (https://www

.insuremarket.com) has auto, home, life, health, disability, long-term care and business insurance shopping services, although availability of some products is limited. The site is run by software maker Intuit.

* Quotesmith (https://www

.quotesmith.com) provides life and health insurance quotes; for auto insurance, it offers direct links to sites run by Progressive Insurance Online and QuickenInsurance.

* The California Department of Insurance (http//www.insurance

.ca.gov) offers a price comparison survey using hypothetical examples. Although far from exact, the comparisons can give consumers some idea of which companies might offer them the best rates, along with the companies’ phone numbers and licensing information. The Web site also offers links to the department’s difficult-to-decipher complaint survey.

* Consumer Reports (https://www

.consumerreports.org) offers the most comprehensive auto insurance quote service in the country, using rates insurers file with the states. So far, however, the service is only available by phone; a list of up to 25 quotes costs $12 for the first vehicle and $8 for each additional vehicle. For more information, visit https://www.consumerreports.org

/Services/autoinsure.html or call (800) 224-9495.

Source: Times Research

COMPARISON SHOPPING

A look at some insurance-related Web sites. C4