Lessons in Disruption: 'Expedia for Car Insurance' Shuts Down

Many business leaders either fear or are attempting to exploit the power of the Web. Their fears are well-founded, and their efforts to better leverage the Web to advance their businesses are well-justified.

However, even the best-sounding ideas can hit the marketplace with a dull thud. That's what just happened with one startup that was attempting to disrupt the auto insurance space, which started with a great deal of promise back in 2010, but just folded up it's tent.

As described by Carmel Deamicis in PandoDaily, Leaky, a startup hatched within the famous Silicon Valley incubator known as Y Combinator, had ambitions of becoming the “Expedia” of the auto insurance business. Consumers would be able to visit one site to compare various plans.

According to the report, Leaky has been absorbed into Navion, a California insurance broker. It's not clear how or whether Navion will continue the service, as Leaky's business model seemed to have been fraught with issues. Deamicis writes that Leaky originally attempted to scrape data from insurers' sites until it was hit with cease-and-desist orders. It then attempted to present insurance quotes based on publicly available data with state insurance filings. However, “rating segmentation has ballooned, and insurance carriers themselves have massive departments handling their own internal information ratings systems.”

The lesson learned is that not every gem of a startup idea will lead to a disruptive force within the industry. Many insurers already had counter-measures against Leaky-type competitors, in the form of their own strong web-based offerings, as well as strong agent networks (or as I like to put it, the ultimate social networks).

But this also doesn’t mean that insurers can sit back and get complacent. There are many entrepreneurs with new ideas for delivering insurance services to consumers. And, perhaps it would be worthwhile to join forces with a Leaky-type venture. Consumers and competition may demand it.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

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