The Web does not replace the value of an experienced agent.

Health insurance in the U.S. is comprised of a vast market of individuals and businesses needing coverage. In the small-business market alone (two to 50 employees), there are some $100 billion in insurance premiums sold to more than six million small businesses nationwide. The individual market provides an additional $17 billion in annual premiums. Many dot-com startups are trying to make health insurance yet another product sold online, likes books and airplane tickets.

Recent studies document the extent to which employers are becoming online buyers. Last fall Forrester Research predicted that by 2005, 38 percent of employers will purchase employee health benefits online, and 86 percent will use the Web to administer benefits. Insurance agents need to make the Internet an essential part of their long-term sales strategy for group benefits.

Two questions still remain: Is there space for bricks-and-mortar agents in the Internet economy? How can online and offline brokers work together to avoid channel conflict and remain viable options for health insurance coverage?

On- and Offline Brokers

On the consumer side, a number of high-profile Internet failures have frightened some business owners away from buying services over the Internet. On the business-to-business side, however, most agree that there is enough critical mass to build lasting e-businesses in the health insurance market. So are the reports of the death of local agents premature?

• Competition from online agenda agents

In the short term, worries that local brokers could be wiped out as the market moves online are unrealistic. Local brokers still have valuable customer relationships and roots in the community. Further, the customer acquisition efforts of online brokers often focus on a different market segment. Only online brokers who can acquire customers through significant distribution partners — those that have a large base of loyal members — will be able to compete effectively with traditional agents.

Some online brokers are identifying associations of individuals or small businesses as a major distribution channel. Although huge, this market is tremendously underserved. National associations have few, if any, options to provide national brokerage services to all of their members. This segment, which is not one that could easily be served by local bricks-and-mortar agents, is ripe for an online solution.

• Reduction in Commissions

Will the move to e-distribution dramatically cut commissions as it has in other industries, such as travel? In fact, the commission structure for online health insurance companies typically mirrors the structure for online brokers. Although some carriers have made it a strategy to use the Internet to reduce commissions for all brokers, in many markets this has met with serious backlash. Most health insurers have been hesitant to launch an aggressive strategy to cut commissions because of the fear of alienating their core distribution channel: bricks-and-mortar brokers who market their plans to business owners.

• Spreadsheeting

Some insurance agents believe that the Web essentially turns health insurance into a commodity: A customer simply “spreadsheets” across dozens of sites and picks the lowest-priced plan.

However, existing brokers often compare prices of products for customers, even if they are not online. They know their customers are concerned about getting a competitive price and product. The real value of a broker, whether on- or offline, is helping customers make decisions on what plan is best for them. While it may not be the “cheapest” plan, it's the one that offers the best combination of benefits, services, and premiums.

• Elevation in Customer Service

While bricks-and-mortar brokers can offer local service and face-to-face contact, they may not be able to provide the type of instant information available on the Internet. Over time, customers are likely to demand the best of both worlds: real time information access and personalized service.

A few online brokers can go beyond price-only comparisons to compare benefits; explain how to choose the best health plans; and help users to understand the unique features, programs, and services offered by each insurance company. They also have experienced agents available via toll-free support lines and e-mail to help customers make complicated decisions. Similarly, many bricks-and-mortar brokers have partnered with technology firms or other online brokers to provide their customers with online information, and in some cases real-time quotes. In both cases the customer is the end beneficiary, with brokers increasing the level of services that they provide.

• Partnership Opportunities

While bricks-and-mortar agents will continue to play a major role in health insurance distribution, there are several opportunities to collaborate with online brokers. Bricks-and-mortar agents can partner with online players, using each other's strengths to complement their own services. Offline brokers can avoid the expense of developing sophisticated Web applications that provide real-time insurance quotes to customers by leveraging the development efforts of companies that already have these applications in place.

Offline brokers also can refer business to an online broker. Many offer a wide range of products as a convenience — and to avoid sending customers to a competing, multi-line agent. However, some online brokers that specialize in one product, such as health insurance or property and casualty insurance, have co-branding programs, where a bricks-and-mortar broker can refer customers to service one insurance need, and the broker would still retain primary customer contact and gain a share of commission revenue. This strategy allows brokers to move their focus from less-profitable products to their higher-margin lines. Finally, local brokers can form partnerships with national online brokers to provide customer contact for groups who want the services of a local agent.

Personal Service Still Key

Though the Internet will undoubtedly become a more common way of doing business, customers will still want personal service. That leaves open an enormous space for traditional bricks-and-mortar agents to combine their existing strengths with the power and simplicity of the Internet. The Web is an extraordinary and cost-effective sales tool that showcases products and services instantly. However, it does not replace the value of an experienced agent.

Partnerships between online and traditional brokers can combine the best of online services with the high-touch of personalization, allowing the distinction between online and offline sales to blur, leaving only more knowledgeable and satisfied customers.

Bob Darin is chief operating officer of, a Los Angeles — based Web site operator that offers small businesses online quotes from major carriers. Before joining, he was managing director, business development, at the national Blue Cross and Blue Shield Association. Visit or call (310) 737-9300.