Online trend bodes well for iSelect

Latest research shows more and more people are comfortable buying their insurance online.

a woman

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Recent finding by market research house Roy Morgan showing "that 49.6% of the population with insurance (up 1.5% from the previous year) now identify the internet as the media most useful for selecting insurance stocks" would appear to be good news for a number of companies heavily exposed to this means of selecting insurance products.

Front and centre is the recently listed comparison website iSelect (ASX: ISU), which provides a medium for consumers to compare and select many products, including insurance products. A number of the newer entrants into the insurance space are also using the power of the internet to grow their direct-to-consumer offers as well.

Wesfarmers (ASX: WES) and Woolworths (ASX: WOW) both offer direct internet applications respectively under their Coles and Woolworths branded insurance products, and insurer NIB Holdings (ASX: NHF) also uses online marketing and sales as an important avenue to grow its customer base and stands to gain from this consumer trend continuing.

In commenting about the findings, Industry Communications Director for Roy Morgan Research, Mr Norman Morris stated:

"Clearly the importance of the internet as a channel to research and purchase insurance products has moved beyond the early adoption phase. The vast majority of the population are now using the internet on a daily basis, spending more and more time online and becoming more comfortable conducting financial transactions via the web."

Morris went on to say that:

"With the growth of the online comparisons and the relative ease with which policies can now be researched, understood and taken up; insurance providers who are slow to invest in optimising their digital presence and understanding how and where to create effective customer engagement through the internet and social media, risk losing touch with an ever-growing proportion of the market."

It appears directors of iSelect would agree with Mr Morris on the positive outlook for online insurance sales. With the share price having fallen to its current level of $1.35 – well below its initial public offering price – most directors have entered the market to purchase iSelect stock.

Foolish takeaway

While it is of course encouraging to see directors buying stock in iSelect, arguably the company still trades on a hefty earnings multiple despite its recent share price falls. Identifying industry tailwinds is useful when considering investing in a company but not overpaying for the stock is still critically important.

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Motley Fool contributor Tim McArthur owns shares in NIB Holdings.

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