The promotional cost of selling motor insurance over the Internet has for the first time dropped below the cost of telephone sales.
An analysis of benchmark data from UK insurers estimates that the average advertising cost per motor insurance policy sold via online channels currently stands at only £26, whereas for the telephone channel this cost averages £28 – nearly 8% higher.
The survey was conducted by eBenchmarkers using data provided by 16 of the UK's leading insurance firms.
Stephen Adler, joint managing director of eBenchmarkers says: "This is an historic development. For years people in the business have trumpeted the potential for lower costs in online sales whilst in practice volumes were so low that other channels were able to achieve far greater economies of scale and hence lower unit costs per sale. Now, for the first time the huge growth in online insurance sales, especially in motor, has tipped the balance. In future, online cost of sale will continue to improve relative to other channels."
The latest benchmark also found that in the past six months, the online insurance sector has continued to experience rapid growth, up 41% from the previous year. In contrast the number of sales by telephone fell, a sign that many consumers now perceive the online channel to be easier to use.
Indeed, the average conversion rate into sales for online insurers with the shortest processes is 31% higher than those with the longest processes according to eBenchmarkers. The proportion of insurance applications completed solely online is twice as high for insurers with the shortest processes compared to those with the longest processes.
David Carpenter, joint managing director of eBenchmarkers says: "Our findings show that simple process issues often account for a large proportion of the variation in performance between insurers, particularly drop out rates in the application process, the ability to compare prices for policies, and how easy it is to complete the sales process online and using other channels. These are the main issues that insurance companies need to address if they want to ensure they stay competitive."