Most insurance e-business solutions providers have long considered investments in Web-based insurance distribution outlets as bold and risk-taking strategies to enhance their corporate fortunes.This belief didn't deter Brookfield, Wis.-based Fiserv Inc., an information management systems and services provider, from acquiring Falls Church, Va.-based ReliaQuote Inc., an Internet-based insurance agency and brokerage that dabbles in term insurance. Consummated in April, the terms of the deal were not disclosed.
While some industry observers regard a Fiserv/ReliaQuote partnership as a curious strategy, others classify the deal as a compatible combination that has the potential to engender strong corporate synergies. Indeed, the principles of both companies believe that the merger will create a host of new business opportunities within the financial services segment, particularly involving banks, brokers and investment advisors.
For instance, Fiserv offers information management systems and services to more than 13,000 clients, including banks, broker-dealers, financial planners/investment advisers and insurance companies.
ReliaQuote, while offering term policies to individuals, has carved a niche at the institutional level-it provides banks, credit card issuers and mutual fund companies with a platform to deliver life insurance products to their own customers.
ReliaQuote is expected to "add another piece to our comprehensive solution set for the insurance and broader financial services market," says Leslie Muma, president and CEO of Fiserv.
Self-reliable
Industry analysts believe that ReliaQuote could have continued to remain a self-functioning entity without the support of Fiserv, but folded into Fiserv's corporate structure will enable the distribution provider to become even stronger.
"Due to a strong business model, ReliaQuote has over the years been able to prosper in difficult economic times," says Susan Cournoyer, research analyst for Stamford, Conn.-based Gartner DataQuest. "Even though Fiserv's back-office competencies, such as systems integration solutions, could conceivably strengthen ReliaQuote's own back-office infrastructure, I consider this dynamic a secondary reason for the acquisition-the primary reason is sales."
Cournoyer expects that the deal will enable Fiserv, which has developed core competencies in transaction processing, IT and business process outsourcing and software and systems solutions, to increase its universe of outsourcing opportunities now that it has entrée to ReliaQuote's customer base.
On the flipside, Fiserv can provide its own existing financial services customers exposure to one-stop shopping opportunities through ReliaQuote's insurance platform.
"This acquisition creates synergies across both companies' client pools," says Cournoyer. "Some of Fiserv's customers in the financial services field probably lacked opportunities to market term insurance, but now they will be able to effectively cross-sell and upsell products and services."
Business process outsourcing opportunities may have been the key impetus behind the deal, Cournoyer emphasizes. "ReliaQuote's financial services customers-who acquire term insurance products from them-now have exposure to Fiserv's many solutions and services, particularly in the IT and business process outsourcing realm," says Cournoyer.
"This is a huge opportunity because the growth rate of BPO is growing at better than 10% a year," she says.
Cournoyer doesn't anticipate many changes to occur with ReliaQuote's corporate culture, maintaining that Fiserv will probably assume a "hands-off" stewardship position.
In putting the acquisition in perspective, Cournoyer explains that "it reminds me of some of the activity that's occurred with CSC Corp., which had a desire to become more involved in the virtual insurance space. The ReliaQuote deal enables Fiserv to engage virtual insurance as well."
