Two recent announcements suggest that on-line retailer competition for consumers’ mind and wallet share is trending towards insurance. They are using the most potent weapon in the consumer market arsenal: Data. And they are targeting one of the central value points of independent distributors: Choice.
There is a glimmer of hope, interestingly offered by a facilitator from the retail takeover movement. Warning: it would be a radical shift for existing practitioners. We’d like to know your thoughts here.
Walmart – Rollback on auto insurance …
Last week, the world’s largest retailer announced a partnership with Autoinsurance.com, an on-line comparative rater, which will run the on-line offering. According to a report from the New York Times, Walmart will provide its logo for the site, will cross link to Autoinsurance.com from its website and promote the website in its stores. In exchange, Walmart will receive a monthly fee.
Overstock.com – buy your furniture and insure it too …
Overstock.com began life selling overstocked items from retailers and wholesalers. It has used it’s on-line, low-price model to expand into all manner of consumer items. On the same date as Walmart made its announcement, Overstock began selling automobile, homeowners, and small business insurance. Overstock has set up its own agency, and has contracted out its back office systems to Insuritas, which provides insurance agency functions to banks and credit unions. According to the Insurance Journal, this is the first agreement for Insuritas with a retailer.
All the choice you need (or want) …
Both Walmart and Overstock sites offer comparative quotes on behalf of multiple of carriers. The model both reference is on-line travel services like Expedia.
Walmart tested the single carrier model in an early pilot and found that consumers preferred choice. In an interview with CNBC, Autoinsurance.com’s founder Joshua Kazam sees lots of opportunity, noting that 90% of consumers comparatively price airline tickets and other services, but only 20% of consumers comparatively shop for insurance.
As significant, both organizations stress the no-hassle value of the on-line service. Jeff Chesky, CEO of Insuritas, told Insurance Journal that the organic growth he sees in his organization is testament to the consumer’s desire for service on demand. “The traditional agency system doesn’t make sense to customers…The relationship has gone digital,” Chesky said. “Agents keep saying their model will work but they are tone deaf to this radical transformation. Consumers are voting with their fingers.”
Data driven …
Overstock, like other on-line retailers, lives and dies by the data. According to Insuritas’ Chesky, the Overstock customer profile is attractive to the insurers because they are primarily female, in the 34-55 age cohort, with high credit scores. Chesky says, “Our carrier partners are thrilled to underwrite the customers of Overstock.com,” adding, “Carriers are increasingly recognizing credit score as indicator of claims risk.”
Walmart is careful to note that it will not have access to individual customer data from Autoinsurance.com. However, it will have access to data from referrals and aggregated data from conversions. Given the sophistication of Walmart’s analytics, they will be able to monitor results at a fairly granular level.
What does this mean for independent distributors?
Overstock’s founder, Patrick Byrne, says there are no expectations for the first year, and feels there will be a few years before the agency takes off. Walmart is only operating its offerings in eight US states. However, brokers and agents should not get too comfortable. The independent distributor is clearly the target.
Interestingly, Insuritas’ Chesky has some encouragement for independents who recognize that there needs to be a radical change in agents’ structure and function:
“The successful agents will lead the transformation. They will listen to what the consumer wants and deliver that experience to them rather than listen to what the carrier wants. The new generation of agents needs to say that it doesn’t have to be about me or my name and will make a wonderful living by installing their products and their business in someone else’s store.”
What do you think?
This looks like a lot of competition. But is it really? We’d like your thoughts.
The providers here are big and powerful in the on-line retail space, but will this carry over to insurance? Do you see these operators, or others, starting a committed foray into the regulated environment in Canada?
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Walmart tried this here in Ontario already. They pulled the plug after a couple years. Question is, are the American Walmart shoppers really that different from Canadian Walmart shoppers that it would make this a success for all parties concerned?