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.
The company also caters to businesses, farms and ranches and private practices as well as consumers. Investors have put more than $50 million into the portal.
Founded in 2015, this web-based platform offers non-biased guidance for Americans seeking insurance products online. Usually referred to as “the Yelp of the insurance community,” it directs visitors to agents, not to policies.
Visitors may search by location and insurance type including auto, critical illness, health, homeowners, life, long-term care and Medicare supplements. Targeting America’s seven million active insurance agents, the company already has 275,000-plus registered subscribers. After closing its seed funding round in January, 2016, the company has now begun fundraising for Series A institutional investments.
All the above contenders, of both types, are in startup or early expansion mode. It’s too soon to know how they’ll fare. We’ll have to wait and see, but we can make some guesses. Which broad strategy (Formula 1 or Formula X) seems more promising?
Google’s disappointing experience may offer a hint
In the U.K., a precursor to Google Compare in America worked well. Then, it flopped here. Why? Industry observers point to national differences. American insurance is more complicated with myriad regional regulations, multiple carriers, varying features and prices and differing customs.
In the U.S., a knowledgeable human expert seems necessary for making sense of it all.
Does the real estate industry point the way?
The leading web-based real estate marketplace Zillow might, at first glance, seem to encroach on what local brokers and agents do: offer a selection of homes or other properties available in an area, complete with lists of features, home values, community facts and other information. But when buyers find a property that interests them, Zillow doesn’t close the deal. Zillow refers buyers to local brokers, agents or lists of agents.
Rather that bypassing live human help, Zillow empowers it. In fact, Zillow has an “agent finder” function for visitors who wish to check out alternative representatives in the target area before proceeding. Agents receive star ratings (up to five) and may accumulate client reviews.
Zillow has grown rapidly and is now listed on NASDAQ. After going public in 2011 with a valuation of $540 million, Zillow has zoomed, with a current market cap of over $4 billion.
Two smaller players in web-powered real estate, Trulia and Realtor.com(also the official website of the National Association of Realtors). Both sites also offer direct buyers to local agents and “find an agent” listings with star ratings and reviews.
Most of the tech-enabled real estate services do not attempt to bypass real estate agents. A few, however, do. The leader is ForSaleByOwner.com, which claims to have saved sellers more than $1 billion by helping them bypass brokers and their commissions. Founded in 1999, the company was acquired in 2006 by Tribune Digital, a division of Tribune Companies.
If high-tech insurance marketing follows real estate’s lead, “Formula X” may have a future. But “Formula 1” will do better. Insurance buyers will welcome technology as far as it goes, but most will want to connect with agents at some point.
What’s the bottom line?
Google’s experience suggests that Americans may continue demanding human help with complicated purchases like insurance. The same goes for the intelligence offered by the real estate industry, possibly the best bellwether for insurance.
The biggest high-tech insurance winners may be agent-empowering companies like Trusted Choice and Agent Review, especially if they also provide the best educational, policy-building, and service features of companies like Policy Genius and Oscar.
Agent Review, the newest contender, may have an edge. Trusted Choice does a good job of listing agencies based on zip code, but lacks Agent Review’s star ratings, reviews, testimonials, video and image posts and other tech-enabled features.
But only time will tell which vehicle and companies prevail. And there can be many winners. Enterprises that don’t come in first can still place or show.
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