A Dot-Com By Any Other Name

New-and-improved dot-coms – however they choose to call themselves – are bringing a host of opportunities to brokers

By Sally Praskey

(reprinted from ci Canadian Insurance Magazine, Oct. 2001)

It wasn’t long ago that pundits were predicting the demise of the “middleman” – no matter what the industry – at the hands of the deep-pocketed dot-com “pure plays.” The word “disintermediation” was frequently bandied about, bringing a chill to the hearts of brokers everywhere.

But in the wake of the dot-com meltdown, it is the traditional players who have prevailed. No longer is the Internet an end in itself as in the heady days of the pure plays. Rather, it has morphed into a vehicle – under a variety of monikers – to help all parties operate more efficiently and effectively. Many of the successful models that have risen from the ashes of the dot-bombs, or reinvented themselves along the way, are bringing new opportunities to brokers. Far from being disintermediated, brokers are now right in the thick of this “e-volution.”

Part and parcel of the Internet shakedown has been a shift on the part of many of the pioneers from a B2C (business-to-consumer) to a B2B (business-to-business) model.

Take, for example, InsurePoint, a Pasadena, Calif.-based online veteran that has transformed itself from a B2C play serving the high-tech industry to a B2B e-marketplace dedicated to the small commercial market.

InsurePoint moved to its current model just this year, after operating as a B2C business since 1997. As co-founder Rob Davidson explains, the new model allows original financial backer/underwriter Atlantic Mutual to maximize its investment, while offering agents a choice of quotes, thanks to the addition of Kemper Insurance as a lead investor, and CNA and AIG providing product. “We’re anticipating that we may have as many as six or seven carriers ultimately that are all part of this marketplace, and we think that will allow us to achieve critical mass,” says Davidson, a former producer at Bolton and Company agency who back in 1995 began posting questionnaires on his fledgling insurance Web site. He describes the new incarnation as a “private exchange” for BOP (Business Owners Policies), not unlike the SABRE airline reservation system. As a “transaction broker,” InsurePoint makes money on the savings it generates for both parties, charging a higher percentage to the carrier than to the agent.

Unlike some of the early players, InsurePoint has always kept its focus on independent agents. “Agents are really central to our success,” says Davidson. “That’s always been our philosophy, even when we were a B2C company at the very beginning. We were agent-centric, because for every piece of business that came in from the Internet, there was always an agent assigned to service that account. That’s really important. I’ve seen a lot of dot-com companies that have flip-flopped and changed their models around, first of all coming out and thinking they could disintermediate the agent, and then finding they couldn’t and trying to re-adapt their model. We’ve always been very consistent believing that the commercial insurance transaction is something that has to have agent involvement. That’s why we pursued the model we did.”

Primary targets are agents who are appointed by the carriers in the InsurePoint marketplace and those who want to pursue the small commercial strategy in the most efficient way. “It gives agents faster turnaround on quote requests, better competitive positioning via providing multiple quotes rather than just one quote, and more efficiency by completing a single application rather than multiple applications,” says Davidson. “That’s going to naturally select a certain group of agents.”

InsurePoint now offers property, general liability, E&O, workers’ comp, umbrella, and commercial auto insurance in all 50 states. Currently in development is an “intelligent” application that will dynamically match up with the carrier that has the appetite for that particular risk. At this point, the company does not operate in Canada due to regulatory differences. “It’s going to happen,” vows Davidson, “but it’s going to be down the road.”

By contrast, The Consumer’s Guide to Insurance (www.insurancehotline.com), a B2C quoting service, has been funnelling business to Canadian brokers since 1995. While the service originally operated only by telephone, a Web site was added last fall. It currently boasts about 35 participating insurers, for both life and auto insurance.

Brokers participate by signing up for specific territories, for which they get exclusivity. They pay a flat fee to Consumer’s Guide if, in any given quote, they are the broker representing the company with the lowest rate. If they are second or third on the list, there is no charge, even though those quotes would also be passed on to the consumer. “What I do is basically make the match and I leave it up to the broker to follow up with the consumer,” says Lee Romanov, president and founder.

“I’ve tried to create this company to support the brokers and the insurance companies, and yet, to try to take the suspicion out of the insurance industry for the consumer,” says the former Safeco underwriter. “I keep on saying [to consumers]: “It’s not your broker’s job to find you the lowest rate, because they don’t represent all the companies. They represent their selected companies that they want to work with, just like a retailer.”

While she admits she basically “starved for four years” getting Consumer’s Guide off the ground, the service now receives between 500 and 1,000 calls and Internet visits a day. Romanov has boosted her promotional budget, spending about $30,000-$40,000 a month on advertising and promotion, including ads on CBC and Newsworld and a new television show on City Pulse 24 that launched this fall.

She says those who use her service save on average $539. Asked about the potential risk to consumers of basing their choice of insurer strictly on price, Romanov counters: “People say that, but every one of the insurance companies gets referrals. Every one of the insurance companies at some point is the lowest.”

Brokers are also integral to another Canadian B2C quoting service, Kanetix.com (www.kanetix.com), which launched in late 1999. Kanetix.com, which bills itself as a “full-service online insurance marketplace,” offers quotes from more than 30 companies – both direct and broker – for life, auto, property, and travel insurance across the country. According to Gregory Ellis, co-founder, the site attracts “thousands of visitors a day.” While he declines to provide exact figures, conversion rates are, of course, much lower – “not that different from other e-commerce models on the Web,” he says. Nonetheless, the firm is ahead of plans to double its traffic for this year, and he expects the growth to continue. “You have to have a fairly large critical mass in this business for it to make economic sense,” notes Ellis, who formerly headed up the technology and business operations of then Canada Life Casualty (now Primmum Insurance Co.).

In the case of broker companies, Kanetix.com directs business to the designated broker for a specific location. While brokers do not have exclusivity, “we have limited it to a small number,” given current volumes, says Ellis. Therefore, the companies that provide quotes must be markets that the broker brings, since it is the broker who drives the posting of company rates.

The service is free to consumers, and, like many of the current models, Kanetix.com charges on transaction services – per saved quote and per transfer – “when we’ve actually connected somebody with a company,” explains Ellis.

Consumers who request a quote on the site will get a chart with several companies listed and ranked in order of price. “At that point, it’s either a buy online or a call,” says Ellis. “The call is to Kanetix. We facilitate that transfer” to the broker who handles the business in that area. The broker can then see the quote detail that has been provided by the consumer.

While Ellis describes Kanetix.com as an “information services company,” he says, “we’re really a gateway. We’re consumer-focused. All our energy goes into consumers, and the whole site is designed with consumers in mind. All we’re doing is empowering them, enabling them to make insurance decisions on their own. Once they have decided they want to talk to a specific company, then we facilitate that transfer.”

Ellis says brokers have been behind the concept since the day Kanetix.com opened its virtual doors. “The first calls we had from brokers were: ‘how do I sign up and be part of this’?”

Still other dot-coms that have cropped up of late don’t fit so neatly into the e-marketplace or B2C mold. For example, California-based programbusiness.com (www.programbusiness.com), which went live in September, 2000, is an online tool to help “the 42,000-plus independent retail agents across the country and Canada find alternative or specialty markets more easily than ever before,” according to a corporate press release.

Under this model, carriers, MGAs, and wholesalers can purchase so-called “storefronts” to advertise their p&c programs, products, and services. Agents can then perform searches by state, keywords, business name, program, or coverage from the database of 1,000-plus wholesalers. Unlike the transaction models, programbusiness.com makes its money strictly from advertising revenues and storefront purchases. While those who have purchased storefronts come up first in any search performed by agents, all other wholesalers/companies appear as a “white page,” explains Jeff Neilson, president

Currently, the site attracts an average of 298 “visitor sessions” per day, says Neilson. He aims to have “75 to 100 paying storefronts by December of 2001,” about double the current number.

MarketScout is another relatively new B2B initiative that is playing in the same cyber ballpark as programbusiness.com. The company, which went live in spring of 2000, describes itself as “the property and casualty industry’s first online insurance portal designed to assist retail insurance agents in locating insurance markets, researching data, and providing technical expertise in specific industries or coverage classes.”

Unlike programbusiness.com, which features those who pay a fee, MarketScout selects what it calls “Best of Class” providers for each of its industry segments – only one insurer per product – to service the agents who access the site. According to Krista Tankersley, executive vice-president, “MarketScout will only license insurance companies and their designated specialists who have proven capabilities and a record of success in competitive situations. We have a tribunalization committee that analyzes each carrier’s program, number of years in the program, loss ratio, customer service procedures, financial stability, claims payment history, A.M. Best rating, and overall status from the agents’ viewpoint. Once appointed, the licensees will take command of their portals and begin responding to online inquiries from retail agents.”

MarketScout receives an annual licensing fee from each carrier for the exclusive “Best of Class” position. “Our job is to connect agents and carriers through an efficient transaction process,” says Tankersley, who, along with the MarketScout CEO and CFO, previously ran the U.S. division of Lambert Fenchurch US Holdings. “For that, we receive a percentage of the written premium and the agent continues to receive the standard commission, and many times, the commission is greater.”

Agents can access MarketScout free of charge, but before they can transact business, it verifies the agency’s licenses and E&O certificate, along with each individual’s licenses and credentials. If a request is received directly from a consumer, MarketScout refers him/her to an agent. “MarketScout will not conduct business without an independent insurance agent in the process,” says Tankersley.

Currently, MarketScout has some 67 carriers representing over 700 classes of business, and continues to add companies and products, says Tankersley. While Canadian agents can use the system to access U.S. coverage for clients, MarketScout currently operates only in the U.S. But maybe not for long. “We do plan on expanding into Canada in 2002,” says Tankersley.

Another dot-com with its virtual eye trained on Canada is Columbia, S.C.-based InsLogic, which went live with a “B2B2C platform” in 1999. Described by its president and CEO Peter Berczi as a “technology/operations outsourcer who is licensed as a broker,” InsLogic builds and operates custom insurance agencies on behalf of other brands, such as banks, car dealerships, and affinity groups. Berczi, who has Canadian roots in call-centre and customer management, says: “We think of us as an ‘agency in a box.’ We’re an invisible intermediary.” In this role, it provides a turnkey solution, including Web site and call centre, to its clients, as well as brings the insurance companies to the table.

That raises a few eyebrows in the insurance community, particularly among the traditional brokers. “Right now, they’re not sure if they love us or hate us!” Berczi admits. “We’re in constant discussions with the larger brokers. We bring a service to them that they don’t have on their own. They don’t have a scalable Web- and call-centre-based personal-lines-type solution” for home, auto, and life insurance. “They don’t have a way to tackle banks; they don’t have a cost-effective way to tackle huge affinity groups very well. So they look at us as someone who could potentially bring that platform to them and they could still be the broker of record. Large brokers are absolutely target clients for us, but there is no question that there is also a little bit of concern – are they a competitor or not?” InsLogic has not signed any deals yet with brokers. “I think it’s going to take a while,” says Berczi. “But we have no problem with them owning the customer, owning the book of business. Some of the fundamental things that a brokerage can be demanding still fits into our business model, which is proof that we ultimately don’t really compete with them. We’re really an enabling firm.”

Whatever they choose to call themselves, there’s no question that today’s dot-coms have come a long way from those pioneering days in 1995 when Rob Davidson posted consumer questionnaires on his agency’s Web site. And brokers are better for it.

Sally Praskey is a freelance writer and editor of Insurance-Canada.ca, founded in 1995 and currently referring to itself as an “Internet gateway to insurance information.”

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