Trends and Analysis

Submitted by Kimberley Ferguson on 01/03/2011

Over the past few years, shopping online has evolved from being a small part of a company’s distribution channel to a multi-million pound business. No longer restricted just to those looking to buy Christmas presents or aiming to avoid the queues in Tesco, instead more people and more people – be it teenagers, housewives or the so-called “silver surfers” – are logging on. As is only logical, this trend of purchasing online is now spreading to financial service products.

A survey by Standard Life of consumer online trends found that, of those polled, 56% buy travel insurance, 55% purchase car insurance and 34% buy home insurance online. Furthermore, 20% use the internet to buy health insurance, 10% life cover, 8% investments and 3% pensions.

While more prevalent among 35-44 age group and men than woman, the online phenomenon can only continue if we use the retail shopper experience as a model. The latest figures from IMRG Capgemini e-Retail Sales Index reveal a total of £58.8 billion was spent online in 2010 with predictions of £69 billion for 2011.

So what does this signify for the consumer? And is this a good thing? Well, it depends on how this is viewed. Anything that encourages consumers to actually buy insurance or to buy investments is a good thing – we only have to look at industry commentators, bemoaning the lack of consumer interest around securing a financial future.

But what about the flipside? Which? Money Quarterly suggests that consumers waste thousands of pounds and risk being stuck with bad credit ratings by purchasing financial products that they simply do not need. But is this fair? Well, it can be if you purchase products such as extended warranties and payment protection insurance (as listed by the magazine) but somehow, it seems that it’s the lack of consumer understanding more than the channel which is to blame.

Blaming ASOS for your uncontrollable addition to shoes is a tad misplaced when you ultimately control the mouse under your index finger. However, what it does highlight is that with more and more consumers able to make snap decisions and buy specialist products online, they need to know what they are doing.

Which leads us back to the old chestnut of education. But why not be positive? The average consumer becomes remarkably savvy once they realise that something is interesting and serves a clear purpose. One only has to look at the British love of mortgages and property to see this. So if the internet makes people more aware of financial products, this could in turn lead to a greater awareness of the sector.

Admittedly, it’s not the ideal start as envisaged by the FSA but it is a start. And that can not be all bad.