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


(reprinted with permission from the October 2001 issue of ci Canadian Insurance Magazine)

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
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 (www.marketscout.com)
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 (www.inslogic.com),
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.”