"Direct insurers challenge the market

A couple of new insurance companies operating completely or mainly via the Internet are challenging the market. Examples are Ineas, based in the Netherlands, the US company GeneraLife, GenialLoyd in Italy, and Huk24 in Germany. These companies operate with a very small workforce - their core competence is the design and structuring of products, as well as operating an Internet sales platform. Although such companies have not managed to acquire significant market share to date, most experts agree that they present a threat to established insurers in the long run because of their potential cost advantages (cf. Swiss Re, 2000).

Europe's first online insurance – Ineas
Ineas is the first pan-European insurer to sell its products exclusively via the Internet and to consistently outsource any functions that are not part of its core competencies. In October 1999, Ineas sold its first insurance policy in the Netherlands. Since then it has expanded its product range and its regional spread. At present, Ineas operates in the Netherlands, Germany, Belgium and France, where it offers private liability, household, motor and accident insurance. Ineas plans to expand into more European countries and to continually extend its product range in non-life business.
The insurance company says it can offer online clients a number of advantages. Apart from attractive prices and increased transparency, the client benefits from 24-hour access to his/her policies and the claims settlement process. Furthermore, Ineas offers an electronic policy and claims folder for the Internet, as well as a personal risk management service named PRIMES. This software module contains information on risks, insurance policies and prevention measures, as well as analysis tools to work out insurance requirements. Practical tools are also provided, such as standard letters, check and inventory lists, and calculation aids to work out the insurable values. PRIMES is not restricted to Ineas products, but also offers information on other insurance products and risks.
Ineas is set up as a company with a lean, flexible network organisation and seeks to focus on the core competencies of developing a business strategy, designing products and underwriting. It outsources all the other parts of the value chain to partner companies, including in particular claims settlement and call centre operations. The advantages of this strategy are considered to lie in the flexibility, the efficiency and quality benefits of partner companies and geographic independence, all of which combine to produce a substantially lower expense ratio compared with traditional insurers. Ineas benefits from the freedom of service provisions of the third non-life insurance Directive, allowing it to operate cross-border through a single insurance licence. Ineas says that the firm uses the Internet not only as distribution channel for selling and for customer service, but also as a back-office tool. The 50 employees in the Ineas offices in Amsterdam, Cologne, Antwerp, Turin and Annecy are co-operating in projects using the Internet. Sources: Ineas, Swiss Re (2000, p. 19), own research"