in their plans.

Already, a small but growing cadre of traditional and Internet banks has created insurance offerings on their Web sites, often with the help of specialized vendors such as Insweb or Answer Financial Inc.

Though the Net hardly merits mention today in the world of insurance only a third of 1% of all insurance sold is purchased online, according to Gomez Advisors, a electronic-commerce consulting firm bankers and analysts alike expect that will change radically in the next few years.

"Selling insurance on the Internet is still ahead of the market and ahead of the technology," says Glen Milesko, chairman of Bank One Insurance Group. "Still, you want to be there when the market does explode."

Adds Peter Aharonyan, president of Chase Insurance Group, "I think it will become an important distribution channel over the next two to three years."

That is why Chase Manhattan Corp., Bank One Corp.'s, Telebanc Financial Group, and a host of other traditional and Internet-only banks are already laying the groundwork.

Most of these banks are sticking to the basics, offering simple insurance policies such as automobile, term life, and homeowners' on their Web sites. And most are doing it with the help of vendors that have done much of the needed legwork, such as garnering insurance licenses and developing relationships with dozens of life and property-and-casualty underwriters.

In recent months, a slew of banks and other financial institutions have entered partnerships with vendors, developing revenue-sharing arrangements built around the fees these vendors collect from insurance underwriters after processing a transaction.

For example,, PNC Bank Corp., E-Loan, and Lending Tree have signed agreements with Redwood, Calif.-based Insweb, the industry leader.

Not to be outdone, Answer Financial Inc., a Los Angeles company and another online insurance vendor, recently signed up Telebanc and Sallie Mae, which owns or manages more than five million student loans.

"Most banks are going to have to use a vendor like this," said E. Reese Bogle, president of Telebanc Insurance Services Inc., a subsidiary of Telebanc Financial Corp.

Bankers and analysts point out that vendors bring much to the table, including relationships with insurance carriers, state insurance licenses, and a computer infrastructure that allows an online customer to get quotes in minutes.

"Banks get to provide another offering to consumers that they either don't want to build themselves or may not have the ability to build themselves," said Frank Lallos, a senior analyst with Lincoln, Mass.-based Gomez.

Right now, Insweb has the largest number of bank relationships.

The company has already earned high marks from Gomez, which in August called its stand-alone site the best among all the online insurance offerings it studied.

"It is clear that Insweb delivers on its mission, providing enough education to help consumers make an informed transaction," said Gomez in its evaluation.

Though Insweb has been advertising on television in an effort to draw traffic to its own site, the company is also working hard to develop relationships with as many bank Web sites as it can, said Hussein Enan, the company's chairman.

According to Mr. Enan, Insweb helps potential customers find the cheapest insurance policy by matching them up with the dozens of underwriters it has relationships with.

"Once the consumer says he or she likes a particular product, then we transfer that data to a carrier's computer," said Mr. Enan.

"Currently, we do everything but close the deal now. But within two or three months, we will be able to actually close deals on behalf of carriers," he said.

Insweb gets paid by a carrier when a customer fills out a questionnaire concerning a particular policy.

This distinguishes it from Answer Financial, which only gets paid when a policy is actually sold.

Answer Financial is licensed to sell automobile and homeowner insurance in all 50 states, enhancing its role as an online broker for its bank clients.

This is one of the reasons why Telebanc turned to the company.

"We stand in the shoes of the agent," said Alan Snyder, Answer Financial's chief executive officer.

Bankers and vendors talk of a time in the next few years when the Web will become a significant distribution channel for insurance much as online trading quickly caught on among individual investors.

According to Mr. Lallos of Gomez Advisors, insurance sales on the Web will jump from $2.3 billion premium dollars this year to $13 billion by 2002.

"As more and more people shop online and buy cards online, that should increase the amount of online insurance premiums bought and sold," he said.

Still, industry observers take pains to point out the banks are not viewing online insurance as a significant business is its own right but rather as simply one more offering that will help banks retain their customers at a time when competition, both on-line and off, has never been greater.

"Banks don't want people to leave their site for another company's services because they might not come back," said Robert Sterling, a financial services analyst with Jupiter Communications.

"They need to cultivate relationships for the long-term and insurance is definitely part of that effort."

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