The auto insurance distribution network continues to experience dramatic change, and traditional insurers need to pay close attention and make the necessary adjustments or risk falling behind.
The emergence of the Internet and mobile devices as common ways to select carriers and policies, make payments and file claims — and the addition of new players in the market — means nothing will ever be the same for auto insurance companies.
“The personal lines insurance distribution network is rapidly changing because the added value that intermediaries deliver is changing,” says Martina Conlon, principal, insurance, at research firm Novarica in Boston.
“Agents used to provide product expertise and access to needed technology and systems to the insurance transaction,” Conlon says. “In this age of data super-abundance and instant access to information, consumers can get that product expertise and access to the systems in a number of places.”
They can gain this access through the channel they prefer and at any time of the day, whether it is through online agencies, direct with the insurer or through aggregators, Conlon says.
“Any distribution channel that is going to survive in this market has to offer differentiation and unique value to the commodity transaction that auto insurance has become,” Conlon says. “We certainly see the added value of technology, accessibility and price point that the national direct writers are offering. But we also see the added value of agents and writers that focus on worksite or affinity group business.”
Meanwhile, new players have entered the market for auto insurance in recent months, and that is sure to have a huge impact on the industry.
Overstock.com Inc., a discount online retailer in Salt Lake City, Utah, which provides an array of products such as furniture, electronics, clothing and cars, earlier this year added insurance to its burgeoning inventory of goods and services.
The company is providing insurance for vehicles, residences and small businesses on its online shopping site. The new service is essentially an insurance exchange that allows consumers to compare live quotes for residential, vehicle and small-business insurance products, and pay for insurance policies from Overstock’s site, according to CEO Patrick Byrne.
By visiting the company’s insurance home page, users can get a personalized, on-screen quote for insurance plans that fit their particular needs, the company says. Once they have selected an insurance plan, consumers can manage their policies online from the Overstock.com site.
The company has partnered with Insuritas, a provider of cloud- based, private-label insurance agencies, for the launch of the insurance service. Specifically, the retailer is using the Insuritas E-InsuranceAISLE technology platform to deliver the new service to customers.
Insuritas’ platform-as-a-service offering creates virtual insurance agencies that are integrated into a customer’s operating environment. It is now used by more than 3.5 million consumers and small businesses, and installed in more than 70 financial institutions, according to the company. Insuritas says the platform enables companies to provide an online insurance agency offering without the need for significant capital investments to build or buy an agency, or the inherent operational risks that can come with either of those options. A dozen of the major insurance companies in the country are underwriting the insurance offering, with more to be added soon, says Saum Noursalehi, SVP of marketing at Overstock.com. He would not identify any of the underwriting companies.
The insurance offering is Overstock.com’s latest effort to provide consumers with less costly products and services. “Overstock.com’s mission is saving people money, and it is always looking for new niches where it can do so for its large customer base,” Noursalehi says. “Many of our customers are currently buying, furnishing or refurnishing homes or apartments with the products offered on Overstock.com, so it seemed like a natural fit for us to offer a home insurance product.”
Overstock.com “has learned how to adopt the best practices of e-commerce and retailing [that] have been optimized for our site, and has applied that to our other partnerships, like insurance,” Noursalehi says. “This makes buying insurance affordable and accessible.” He says the company plans to add additional insurance options other than just the property and casualty options offered now.
WALMART MOVES INTO THE MARKET
Another new entrant into the market, Walmart, announced what it calls a “first-of-its-kind” auto insurance comparison service designed to help drivers quickly buy and save significantly on policies.
To deliver the service to customers, the retailer is working with AutoInsurance.com, which provides consumers with multiple quotes from many of the leading national insurance carriers, such as Progressive, Esurance, Safeco and The General. The AutoInsurance.com offering allows consumers to compare and buy policies in one place online.
The new Walmart service is currently available in Arkansas, Louisiana, Mississippi, Missouri, Oklahoma, Pennsylvania, Tennessee and Texas, and the company plans to offer it nationwide over the coming months.
The launch of the service followed a pilot program that Walmart conducted in Pennsylvania in 2013, in which customers who bought policies from AutoInsurance.com reported that their savings cut their annual insurance costs by $1,168 on average.
Walmart is the exclusive retailer and marketing partner of AutoInsurance.com, and its customers will be able to access the service directly from the retailer’s website. Walmart was “looking for a company that could bring transparency and competition to the marketplace, and we found that with AutoInsurance.com,” according to a company spokesperson.
“Our customers too often have to settle for auto insurance policies that aren’t the best fit and cost more than they want to spend,” says Daniel Eckert, SVP of services for Walmart U.S. With the new service, “we’re helping our customers save money on one of their largest house- hold expenses in a new, quick and easy way.”
With the AutoInsurance.com platform, within a matter of minutes consumers can receive real-time quotes from multiple carriers by entering information including their name, address, date of birth and contact information on the site, says Alex Kaufman, chief marketing officer at AutoInsurance.com. “They can then quickly and easily compare apples-to-apples quotes, choose the coverage and carrier that is the best for them, and immediately buy a policy online through the site,” Kaufman says.
Users can opt-in to have the site retrieve their current auto insurance policy data, which allows AutoInsurance.com to automatically fill in most of the necessary coverage information and provide a direct quote comparison. Within minutes, the platform provides users with multiple quotes from carriers. They can customize their coverage, including deductibles, and see those choices immediately reflected in the quotes.
PRICE RELIEF FOR YOUNGER DRIVERS
A national survey commissioned for AutoInsurance.com that queried more than 5,000 drivers showed that nearly half of the respondents felt they were overpaying for insurance, including health and auto, more than for any other recurring monthly expense. The survey showed that auto insurance premiums take a particularly heavy toll on the finances of younger drivers, who account for a large portion of online shoppers.
“Now, with retail giants such as Walmart and Overstock getting into the game, consumer will have more options that they perceive to be best deal starting points, and it will probably result in a bit more business shifting from independent agents to [the] online agencies and aggregators that these retail giants use,” Novarica’s Conlon says.
“But like [global online travel company] Orbitz, many consumers may use these sites for research and go to the direct writers for the transaction,” she adds. “I see the options for the consumer expanding, and the trend of fewer personal lines transactions coming through independent agents continuing.” From a business standpoint, auto insurers need to take steps to address the changes in the market so they can remain competitive.
“I think the call to action today is to engage directly with prospects and policyholders,” Conlon says. “Leverage big data to focus product development and marketing to the specific prospects within your appetite. Use data to better understand the context of your prospects, to improve the quality of the engagements you have with them.”
They also need to roll out online and mobile capabilities to address the demands of today’s educated and connected consumer, Conlon says, and focus on supporting all channels going forward to meet their policyholders’ needs and retain the best business.
From an technology standpoint, carriers need to invest in systems that enable easy engagement with agents, policyholders and prospects.
“But more importantly, [they need] flexible core systems that will support mobile and online technologies as well as rapid time to market of new and innovative products,” Conlon says. “The most successful insurers will also have strong business intelligence environments to support better operational and strategic decisions in this very competitive marketplace.”
Bob Violino is an editor and writer who covers a variety of technology and business topics and a regular contributor to InsuranceNetworking.com.
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