The insurance marketplace is undergoing a transformation that may eventually lead to significant changes in how consumers purchase insurance products. A variety of distribution channels are currently used in this market place, and some insurers utilize a combination of distribution channels. These include the Internet-led channels, company-led channels, bank-led channels, and agent-led channels.
Of these distribution channels, the most discussed and anticipated channel is the Internet-led channel. The widespread diffusion of the Internet has created an explosion in the growth of electronic channels, including direct channels (that is, individual company web sites), electronic markets, or “electronic intermediaries over which multiple buyers and sellers do business” (Malone et al., 1987), and other cybermediaries (Sarkar et al., 1995). Prior to the advent of the Internet, most purchasers of insurance products used traditional agent-led distribution channels such as direct writers or independent agents. Given its reliance on traditional channels, the insurance marketplace has only recently begun to reflect this broader growth in electronic channels. The Internet was expected to have a major negative impact on the traditional agent-led distribution channel. However, consumers have not shown a marked preference for purchasing insurance product via the Internet (Trembly, 2001). Currently, less than two percent of insurance products are purchased via the Internet.
