Like their counterparts in the United States, U.K. insurers are watching the rapid growth of Internet usage and e-commerce as the number of consumers, who venture online, surges. The market for online insurance sales in the United Kingdom is also slated for rapid growth.

U.K. insurers are poised to take advantage of the new market. About 80 percent of U.K. insurers expect to underwrite policies online within a year. About 30 percent of U.K. consumers use the Internet, a penetration rate that leads European nations. In Germany, the rate is about 20 percent, while it is less than 15 percent for the rest of Europe. In comparison, estimates about U.S. Internet use come in at around 40 or 50 percent.

As insurance-related e-commerce grows in the United Kingdom, penetration of personal line products, which are periodically purchased, is increasing. Automobile insurers will make the fastest use of the new channel. The leading U.K. direct auto insurer, Direct Line, issued 8 percent of new contracts online, while some 50 percent of quotes were obtained on the Internet. The online market for auto insurance in the U.K. is just 377 million euros this year, a figure that represents a small percentage of a market that totals more than 8 billion euros. But it is expected to reach 19 percent of all new businesses, with a market value of 2.6 billion euros, by 2003.

U.S. insurers are experiencing heavy research on less frequently purchased or more complex products; but online purchase is still rare. In Europe, the sales of mortgage and life insurance products is beginning to reflect the car sales situation in the United States. There, some two-thirds of all new purchases are influenced by online searching; but only a small percentage of cars are bought online. This should change over time. However, new product simplification, widespread comparisons, virtually free information and the increased use of on- and offline technology should greatly increase the percentage of product sold online.

Over a longer period of time, we could see the risk and investment components of life insurance being unbundled in a move that would facilitate sales via the Internet. The U.K. online market for life and pension products is barely 1 percent of all new businesses today, and will grow to only 3 percent by 2004.

The U.K. is clearly ahead of the rest of Europe in the use of the online insurance channel because it is the most competitive market in Europe. In other countries of Western Europe, one or two insurers often dominate the national market. In the U.K., a large number of insurers compete fiercely for business, and they cannot afford to neglect a new channel. There has also been considerable merger and acquisition consolidation in U.K. insurance, more so than on the Continent. And U.K. insurers see the Internet as a means for the kind of cost-cutting that follows consolidation.

Somewhat behind the insurance-related use of the Internet is the use of wireless Internet appliances. For the moment, there is no important insurance offer available via mobile phones in the United Kingdom. But the arrival of the next generation of mobile phones may change all that.