Insurance marketing – always dynamic – offers fresh excitement as it shifts to new methods and procedures. It’s no longer yesterday’s horse race because high-tech vehicles now roar and zoom where steeds once snorted and charged.
Tech is taking over. That’s for sure. The big question is, which tech vehicle will prevail? There are two key contenders, but only one requires human guidance.
“Formula X” insurance vehicles are like self-driving cars. They’re designed to operate entirely on their own. No drivers necessary.
“Formula 1” insurance vehicles are like complicated, high-tech cars that perform best with seasoned pros at the wheel.
Which type of vehicle will fare better? Nobody knows, but it’s time for investors, brokers and agents to place their bets on how consumers will answer two key questions:
Will most Americans start getting their insurance directly from marketing platforms, cutting out the middleman?
Or will they still need and value knowledgeable intermediaries (agents)?
It’s a $450 billion question
The stakes are high. According to the U.S. Department of Commerce (Bureau of Economic Analysis), insurance carriers and related insurance businesses account for a hefty 2.6 percent of the U.S. gross domestic product (GNP). That’s a whopping $450 billion dollars – more than many high-profile sectors including air transportation, electronic products, oil extraction and national defense.
As insurance goes higher-tech, there’s a ton of business to be done by everyone, including agents, brokers, carriers and investors. The trick is betting wisely. Tech will win for sure. But which form of it? Will it be Formula X (bypassing agents) or Formula 1 (engaging and empowering agents)?
We may gain some hints by (1) seeing how several insurance startups perform over the next several months; (2) looking at one contender – Google – that has already called it quits and (3) considering developments in another big industry that also employs agents – real estate.
Proliferating startups test the insurance raceway
A majority of the new players employ Formula X. They leverage technology in the attempt to sell policies directly, bypassing human agents. They include:
The company recently raised $15 million for its online price comparison insurance brokerage. Visitors may take an insurance checkup to see what kind of coverage they may need or they may request quotes for life, pet, renters or long-term disability policies. A key aim is to simplify obtaining insurance and bring people the coverage they need.
This company also bypasses human agents, offering policies and services directly through an online platform. Policies are limited to health care. Oscar recently received a $400 million investment from Fidelity with a valuation of $2.7 billion and in 2015 they got $32.5 million from Google Capital at a $1.7 billion valuation.
As the name implies, the company also specializes in health insurance and they sell directly to the public through their online platform. They’ve raised $17.5 million in venture funding and target independent contractors and freelancers who constitute a third of the U.S. work force.
This company, targeting small business, eliminates the need for a human resources manager and expedites access to health insurance and other benefits. Their cloud-based platform simplifies benefits management and eliminates reliance on paper and fax machines. To date Andreessen Horowitz and other investors have put up $84 million and the company is valued at $500 million after a recent funding round.
Gravie, Collective Health, Navera, Simply Insured.
These and other startups also provide direct, online health care solutions for Americans through their employers. All have received substantial equity funding.
This was Google’s short-lived direct-to-consumer insurance research service. Shortly after launch, the company announced that, “Google Compare will discontinue offering its credit card, auto insurance, and mortgage comparison service beginning March 23, 2016.”
Google had made arrangements with insurance providers, such as MetLife and Liberty Mutual to aggregate their questions into a single form, saving consumers time and trouble. There was apparently no plan to engage local independent agents. (Go here for more information on Google Compare’s status.)
While the previous tech enterprises all bypass agents or give them short shift, the following two do the opposite. They employ agents by design. They’re not self-driving racecars, but racecars that are plenty high-tech (or Formula 1). They deploy the best of tech to empower agents rather than undercut them, helping them make connections and function effectively.
Rather than eliminating the middleman, the company serves as a connection point to 140,000-plus independent insurance agents offering a variety of coverage: auto, homeowners, power sports, business and professional liability.