Insurers' Web sites are making progress in shedding the industry's traditionally conservative image, although they are being challenged by the increasing sophistication of online capabilities and the rising expectations of consumers, observers and researchers say.

Consumers are looking for greater interaction and responsiveness from service suppliers, including insurers, according to a wide variety of companies and organizations that rate insurers' Web sites. At the same time, consumers prize their privacy and want clear assurances that insurers are protecting that information.

In terms of their image, "financial services companies are trying hard to shake off the stereotype of being stodgy and present themselves as partners in consumers' financial lives," said Lisa E. Phillips, senior analyst with eMarketer Inc., a New York-based research company that analyzes public information for marketers.

Multimedia buys

To convey their message, the top 50 insurers, which spent $2.2 billion to reach customers through advertising in all types of media last year, spent 3.5% of that total for online advertising according to TNS Media Intelligence. U.S. insurers with the five largest ad budgets in 2005 were, in order: Allstate Insurance Co., Berkshire Hathaway Inc., State Farm Mutual Auto Insurance Co., Progressive Corp. and Blue Cross & Blue Shield Assn.

Reaching online consumers can be challenging because research shows they are "a small but elite group" who are well-educated and tend to have above-average credit ratings, Ms. Phillips said in the report "Financial Services Online Marketing," which was published in June.

One way to attract customers is for insurers to gain prominence by having a Web site that experts in the field consider to be worth visiting.

For example, State Farm won a prestigious Webby award this year for its "Now What?" Web site, www.nowwhat.com. The site targets twentysomethings who may not realize the losses they may suffer in renting an apartment or owning a car. The interactive Web site presents a range of loss scenarios--including a falling air conditioning unit, theft and flood--with click options that allow a viewer to obtain specific coverage details as well as get a quote and find a local agent. It was created by Tribal DDB in Chicago.

The 10-year-old Webby awards, which The New York Times has hailed as the "Oscars of the Internet," began its insurance category two years ago, said David-Michel Davies, executive director of the award. The competition didn't have an insurance category before that "because frankly, there was not a lot of interesting work being done by the industry online," he said.

"I think insurance Web sites have really dramatically improved over the last few years," Mr. Davies said. The health industry especially has responded to Internet consumers' interest in health issues by providing reputable medical information about health conditions as well as links to help consumers stop smoking or track weight loss, he said.

"Part of the reason we create these categories is to get the stuff that's really great entered (into the awards competition) so it can serve as an example to the industry of best practices," Mr. Davies said.

"A good Web site can help an insurance company brand, while a bad one will hurt it," said William Rice, president of the Simsbury, Conn.-based Web Marketing Assn.

Lagging in innovation

The insurance industry's strengths are limited when it comes to Web sites, according to the association's Internet Standards Assessment Report, which establishes industry benchmarks for Web site content. The most recent edition of the study found that, in six of the last nine years, the average score for insurance industry Web sites was lower than the average scores for the top sites for more than 80 other industries.

"Content and copywriting tend to be the strong suits for insurance Web sites, while they lag in innovation due to the conservative nature and risk averseness of the industry," the report said.

"For the vast majority of insurance products, you will see much more development for brokers than for consumers," except for companies that sell products directly to consumers, Mr. Rice said. Most insurer Web sites make use of "chat technologies" that allow agents or brokers to exchange information with the insurer and obtain product information in a cost- effective way.

Recently, though, there have been some signs of improvement, he said.

Getting better

The independent judges who chose the winners of the association's WebAward competition found more innovation and variation among this year's submissions, which included blogs, he said. Comparisons with past year's awards is difficult, though, because the association awarded a broader range of awards this year

to property/casualty and life/ health insurers whose ratings exceeded the industry's average.

Attracting customers to insurer Web sites is important because online customers are wary about opening e-mail that purportedly comes from financial institutions.

"E-mail is not a reliable marketing tactic for financial service companies because of consumers' fear of fraud, identity theft and phishing attacks," Ms. Phillips wrote.

"Consumers are reluctant to open e-mail from their financial institutions and 'click-through' rates of around 1% for financial service e-mails are worse than for any of the industries measured by Bronto Software Inc., an e-mail marketing service," she wrote. A click-through is a usage measurement that tallies when a consumer clicks on an ad.

Yet, "the real value of e-mail for financial service companies is in the customer service area," Ms. Phillips said.

The greatest increase in traffic, though, "occurred among existing customers who used their insurer's site to seek service," according to a 2005 J.D. Power & Associates report. "In fact, nonclaim interaction with the provider was deemed the top factor contributing to customer satisfaction, followed by billing, the policy purchase experience and the claims experience," that firm found.

"Amazing as it may seem in 2006, some financial firms can still not accept online inquiries from customers or prospects," Ms. Phillips said.

"The concept should be a no-brainer for financial firms that heavily pursue relationship marketing," Ms. Phillips wrote. But a JupiterResearch report earlier this year found that 92% of e-commerce Web sites offer e-mail as a customer support option, but only 41% automatically acknowledged customers' messages.

Health insurers had 56% response rate to online inquiries from prospects compared with 78% for property/casualty insurers and 90% for banks, according to a 2005 study of 195 financial firms by Aite Group L.L.C.

Finishing the dealEven when e-mail inquiries were answered, nearly half of the financial firms didn't address the question posed and about one-third couldn't answer the question, forcing more than one-third of all prospects to use other channels such as call centers, according to Aite Group's research.

Such online failures can lead customers to abandon transactions or turn to competitors, according to a survey of 2,790 U.S. adults conducted by Harris Interactive. The survey was commissioned by TeaLeaf Technology Inc., a San Francisco-based company that produces tools allowing business Web sites to monitor customers' online experiences.

Online customers are intolerant when they are unable to get the information they want or complete a transaction online, the researchers found. About 40% of online consumers would abandon a transaction at a Web site or immediately turn to an online or offline competitor if they were frustrated in accomplishing a task, the survey said.

According to the survey, the top problems that would cause online customers to "immediately and permanently" turn to a competitor's Web site are: incorrect information or lack of information, inability to complete the transaction because of an endless loop, difficulty in navigating the site and being automatically kicked off a page.

Also, the survey found that "an astounding 91% of online consumers who experienced any type of problem when conducting an online transaction said they are at least somewhat likely to question the ability of a company to keep their private data secure if they encounter an online issue."

In addition, online customers are very sensitive about sharing their personal data, said Terry Golesworthy, president of The Customer Respect Group, an international research and consulting firm with U.S. headquarters in Ipswich, Mass.

"Consumers expect information to be controlled by them," he said. Consequently, consumers are concerned about whether they can trust a Web site with personal data.

His researchers assess trust, in part, by examining sites for their transparency and adherence to stated principles regarding consumer privacy.

Opt in, opt out

Consumers prefer sites that require them to "opt in" before their data is shared for contact purposes, Mr. Golesworthy said.

However, insurers, agents and brokers typically prefer an "opt out" system because most people won't take the time to click that option thus leaving consumer contact information available to them, he said.

His company rated insurers and other industries on the basis of specific definitions of trust, responsiveness, site usability and communication. In its sixth study completed in June, the insurance industry scored the lowest--overall and in every subcategory--among the 12 industries studied. Property/casualty insurers scored the best, life insurers ranked second and health care companies came in a distant third.

Boston-based Liberty Mutual Insurance Group was the only company to receive an "excellent" rating, according to the study.