The announcement is needed to reassure investors following other Internet finance cancellations. At present, the majority of consumers are still unwilling to buy financial services online. The immediate prospects for Esure.com are limited, but it could develop into a major force in personal lines insurance as attitudes change over the next few years.
UK mortgage bank Halifax will announce this week that it plans to continue with the launch of Esure.com, its Internet insurer, this year. Esure.com will initially provide motor insurance and then subsequently household and other personal insurance lines. Halifax is investing GBP150 million in the venture and aims for Esure.com to become a top-five motor insurer within three years. It claims that it will offer premiums between 10% and 15% lower than incumbent insurers.
The need for the bank to make this statement to reassure investors is a reflection of the uncertainty of the impact of the Internet on the sale of Personal General Insurance (PGI) products. Although some have heralded the Internet as the future of insurance provision for direct writers and brokers alike, enthusiasm has been tempered. This is partly because consumers are reluctant to buy financial products online, due to security worries over entering credit card and personal details onto the Internet. In addition, investors have been put off by the much-publicized recent financial difficulties encountered by dotcom businesses such as eToys and Letsbuyit, not to mention the abortion of Lloyds TSB's Internet-based Evolvebank.
Esure.com's success will be more dependent on whether consumers take up online financial services than on the sophistication of the products and services it offers. Unless consumer attitudes change, Esure.com will do little more than take market share away from other insurance websites and some gains from direct writers. This market will not be big enough to turn Esure.com into a top-five motor insurer by 2004.
However, there may be a parallel with Esure.com Executive Chairman Peter Wood's former company. Mr Wood founded highly successful direct insurance broker Direct Line in 1985, but it took around four years after it first entered the market to make significant market share gains and revolutionize the distribution of personal insurance. Similarly, the impact of Esure.com on the PGI market may not come to fruition until consumer attitudes shift - but then its success could well be impressive.