VIMP - A Virtual Market Place for Insurance Products

Electronic Markets Electronic Markets Electronic Markets Electronic Markets Electronic Markets and Insurance and Insurance and Insurance and Insurance and Insurance Insurance and other financial services appear to be well suited to being sold electronically. No physical goods are involved , as insurance is in effect a purchase of a promise, in the form of a contract, which can be successfully described electronically. Indeed, in some countries a legally enforceable contract can now be completed electronically, opening up the possibility of advertising, searching for, comparing, choosing, and taking delivery of insurance products via the internet. The annual renewal cycle in many non-life lines of business (such as car and household insurance) makes the possibility of comparing alternative insurance products particularly attractive to consumers, and in many countries a non-electronic market place thrives, operated by intermediaries such as banks, insurance brokers, independent agents and financial advisers. Electronic market places for such products as books, CDs, computer software and hardware have developed quite rapidly on the internet. Comparative shopping tools for such goods, such as Jango from Excite (www.jango.com), are still evolving, but they are already relatively easy to use. However, there are important differences between the sale of the type of goods mentioned above and the sale of insurance and other financial products which make such market places less well suited to transacting insurance sales over the internet. This paper explores some of those differences from both the provid-ers' and customers' perspectives, and describes the development of ViMP, a virtual market place specifically designed for insurance and other complex products and services, at IBM's Zurich Research Laboratory. The nature of insurance The nature of insurance The nature of insurance The nature of insurance The nature of insurance Insurance and Trust Insurance is heavily dependent on trust. The insurer prices cover on the basis of information disclosed by the insured, and whilst insurers can independently verify some of the information provided, much of it is taken on trust at the time of underwriting (though it may be subsequently scrutinised in more detail in the event of a claim). The policyholder also places trust in the insurer. A premium is paid in advance , on the understanding that a subsequent valid claim during the period of insurance will be paid. For non-life insurance , the period of insurance is typically a year, while for life assurance it may continue for the remainder of the …