Comparity is LendingQB’s official partner for home insurance. We’re integrated with LendingQB’s loan origination software to make it easy for lenders to help their clients buy home insurance and keep track of necessary insurance documentation for their closings.
It may seem trite, but shopping for insurance is important. I might go as far as saying that shopping for insurance is vital to our economy, for reasons I’ll try to explain here.
First, some background. Right now people truly can’t shop for insurance. Sure, anyone can go online, check out familiar brands, maybe fill out a few quick forms. In the case of auto insurance you might even get back some instant estimates. But this is all just marketing and to truly get even a single accurate quote you must complete a multi-page application with a credit check and motor vehicle report.
In the current market, some lead generator sites attempt to fool insurance shoppers into thinking they are getting multiple quotes to compare, side-by-side. Truly these sites sell shoppers’ contact information to eight different agents who race to be the first to reach you. Whatever information is entered with the lead generator has to be re-entered with each company selling the insurance in order to provide an accurate quote. (We call it a “hard transfer”.) Buyers hate this situation and so do sellers.
Buyers (and sellers) are then left with two choices: 1) go all in with the first company they feel good about and hope it works out, or 2) fill out the same application over and over with multiple carriers. Unfortunately for buyers (and sellers) both options have further consequences.
Option 1 doesn’t always work out. Sometimes carriers will decline to insure properties based on their current risk exposure. It happened to me when my carrier – a company my parents had been with for 30 years – could not insure a new property because it was too close to the shore and the company had suffered too many hurricane losses in the area. It turns out that going with the company your parents have, which is exactly what most people do, isn’t reliable. Even when things do work out there’s no way of knowing you ended up with the right coverage for the best price because you didn’t compare.
Going to an independent agency that represents multiple carriers is one way to mitigate the main consequences of Option 1. But going with independents still leaves out comparing options from captive carriers that are household names, offer bundling discounts, and own > 50% of the market.
It may be obvious why Option 2, filling out the same application over and over, is no good
but there’s more to it. For each application you fill out you will get back a different result, probably as an attachment to an email. Maybe you’ll make a folder on your computer to save all the attachments. When you open them they’ll all look and feel different. Different companies use different terms to mean the same things. There’s no way to easily compare options. Maybe you’ll try to make your own spreadsheet and hope you understand everything. And because you still had to contact multiple companies to get this far, they are all calling and emailing you to sell their product.
You wish you could complete one application, send it off to every insurance company, and get back valid quotes that you can easily compare through a consistent format, all while staying in control of the shopping experience and not giving your contact information to multiple sales people.
Why is this so important? Why is it “vital to the economy”? I think it should be obvious by now why the status quo is terrible and that something should be done. What’s not so obvious is how this affects a very important segment of our economy: home buying.
Every year 5M people buy homes and home insurance is a required product on every home loan. Buying a home is a time when people should shop for insurance. We evaluate every other aspect of a home when applying for a mortgage; appraisal, title, flood elevation, and the like. Why would we not evaluate the home insurance? The only reason is because shopping for home insurance is so difficult.
As mortgage processing gets faster, more automated, and more consumer-driven the need for a fair way to shop for home insurance becomes greater.
The combination of required home insurance and no reasonable way to shop is a recipe for disaster. In addition to potential underwriting issues and lack of basic evaluation, the lack of a way to shop for home insurance creates costly inefficiencies in the best cases and leads to unethical and illegal business practices in the worst cases. As mortgage processing gets faster, more automated, and more consumer-driven the need for a fair way to shop for home insurance becomes greater. How else will we balance market demand with consumer protection?
We’ve already seen what negligence and fraud in the mortgage industry can do to our country’s economy. I don’t think there’s the same potential scale for wrongdoing when it comes to mortgages and home insurance but I do see legal entities forming that undermine consumer choice and trust while attempting to maximize corporate profit. In response new government regulations are written to attempt to counter new behavior. Everything becomes more convoluted and inefficient when it could easily become simpler and more efficient. The solution is clear: provide the insurance market with a fair and reasonable way to shop when none exists today.
So that’s what we’re doing at Comparity. If you’d like to find out more, connect with me on LinkedIn and send me a message.
How you will shop for insurance in the future:
You: “Alexa, I want to shop for home and auto insurance.”
Alexa: “Ok. Since this is the first time I’ve done this for you, you’ll need to gather a few things. Are you ready to get started?
Alexa: “take your phone to your filing cabinet and get out your current home and auto policies, social security cards, and drivers licenses so you can show them to me.”
You: “Hold on. That’s sensitive info. What are you doing with it and how will I know it’s safe?”
Alexa: “I’m glad you asked. Home and auto insurance are based on your credit, driving record, and claims history. Insurers use the info to verify your identity when accessing those records. I encrypt the data as soon as you give it to me and send it over a network that encrypts my encryption. If I have to store the information you give me then it’s always encrypted and I erase it after I’m done with it.”
You: “Ok. I can get you the policies and social security cards but I don’t have everyone’s drivers license right now.”
Alexa: “No problem. Show me your drivers license if you have it and I’ll ask the others when they come home.”
You: shows Alexa the info using the camera on your phone.
Alexa: “Got it. Ok. We’re insuring this house and your current cars, right?”
You: “That’s right.”
Alexa: “Great. I have almost everything I need. I’ll get the other two drivers license numbers and shop for your insurance. I’ll let you know when I have results. Do you want to know about each result as I find it, all results at once, or both?”
You: “Let me know when you get the other drivers license numbers and when you have at least 3 results.”
Alexa: “Welcome home from school, Jane. We’re shopping for auto insurance and I need your drivers license number. Can you show me your license with your smart phone?”
Jane: texts you “Hey, Alexa just asked for my driver’s license number for insurance. Is that right?”
You: “Yes. It’s safe to give it. Thanks for checking.”
Jane: “Alexa, here’s my drivers license.” shows drivers license to Alexa
Alexa: “Hi, Joan. Hope you had a good day at work. We’re shopping for insurance and I need your drivers license number. Can you show me your drivers license with your phone?”
Joan: “Yep. One sec.” shows drivers license to Alexa
Alexa: “Ok, I have everything I need to shop for insurance. I’ll let you know when I have at least 3 quotes to compare.”
Alexa: “Great news. I have insurance quotes for you to compare. Would you like me to put them on the TV so you can take a look?”
You: “Yes, please.”
Alexa: puts comparison on TV “Ok. Your comparison is up on the TV now.”
Alexa: “Do you see any you want to buy?”
You: “I think so, but I’m not sure why XYZ Agency only quoted $50K less than everyone else on dwelling coverage.”
Alexa: “Would you like to contact the agent yourself or would you like me to do it for you?”
You: “Would you mind?”
Alexa: “Not at all.” Calls agent, no answer, leaves voice mail. Sends email.
Alexa: “I called the agent and left a voice mail. I also sent an email. I let you know when I get an answer”
You: “Please also let me know if you don’t get an answer by this time tomorrow.”
Alexa: “I heard from the agent at XYZ Agency. He said it was based on their rebuild cost estimate of $125 sq/ft. Are you ready to buy insurance?”
You: “Yes. I’ll go with ABC Agency.”
Alexa: “Ok. I’ll let them know you want to bind the policy. Your new service agent will contact you next.”
You: “Thanks, Alexa.”
Alexa: “My pleasure.”
Image: CC0 Public Domain
One of CB Insights’ recent most shared stories came from the headline “Insurers put financial backing behind insurance-distribution startups”. So that got our attention.
— CB Insights (@CBinsights) August 26, 2016
Distribution is the most crowded sector of #insurtech, by far. Venture Scanner tracks 242 companies in a “Comparison/Marketplace” sector, 29 companies in “P2P”, and 61 companies in “User Acquisition”.
— Florian Graillot (@FGraillot) August 29, 2016
It stands to reason that distribution is the most active venture space. After all, the very nature of insurance requires effective distribution (of risk).
Without effective distribution, risk carriers can take on too much risk in a particular category, such as weather. Here in coastal Virginia some carriers restrict by proximity to tidal water, for example. Good luck getting some of the most prominent carriers to cover anything within a mile of the Atlantic Ocean or Chesapeake Bay.
Distribution sectors as defined by Venture Scanner are just one way of looking at insurance distribution. CB Insights seems to look at the space a little differently. Peer-to-Peer, On-Demand, and Digital Agency are their apparent groupings. Never-mind for a moment that within any of these categories the differences among what the companies actually do are vast. It’s not as if they are all competitors of one another, except, perhaps, for VC dollars.
Given all of the funding and activity flowing into distribution we can’t help but wonder: why isn’t anyone getting it right?
Admittedly, we don’t know most of the 300-odd companies in Venture Scanner’s #insurtech categories but we pay attention to what and who everyone else is talking about. There’s a gaping hole where we fit. As far as we can tell, no one is focused what we think is most important factor in insurance distribution: the shopping experience.
Peer-to-peer, just-in-time coverage, and a better web+mobile strategy may have value but they don’t address distribution at scale and insurance is massive. Practically everyone has property and casualty insurance. Assume a few million friends and family decide insuring one another is a good way to go. Assume a few million want to itemize their property and buy insurance a la carte or only when they need it. Assume all insurance agencies will be successful at going digital (and those who don’t won’t survive). Of these three models, only peer-to-peer helps buyers decide who is best to cover them. Every year in the U.S. five million people buy a home. When people are juggling 50 things associated with a buying and moving into a new home, do they want to consider the existential nature of insurance or do they just want it to be easy to compare options and buy? You can probably guess what we think.
To disrupt insurance distribution at greater than niche scale, a radical, new model for the shopping experience is needed.
Specifically, three things are needed:
- Shopping must be easy for buyers to compare across carriers for their unique risk profile
- Quoting must be free or low-cost for sellers
- The total transaction must be seamless from application through purchase.
Put another way:
- Buyers must be able to fill out one application and get back multiple underwritten quotes they can easily compare
- Sellers must only pay for leads that convert
- There can’t be brokers or “middle men” who collect only part of an application and can’t complete the transaction
To most people we speak with these seem like impossible requirements to meet. Surely some part of the market will reject it, they’ve said. But there’s a good reference model. We think key to effective insurance distribution at scale is match-making. Buyers and sellers want to get to know more about each other before they commit to marriage. Moreover, when buyers and sellers are empowered with better information about one another and have some level of individual control over the commitment, they both make better decisions. Like a dating service, but for insurance.
Go ahead and call us crazy. But think about it:
Insurance carriers (sellers) want to know that each person seeking insurance is, in fact, insurable by the carrier according to the carrier’s underwriting restrictions. I touched on restrictions above with coastal restriction – just one on a long list of what some carriers can’t insure. Every carrier has their own list of restrictions and restrictions change over time. Mass media advertising and billboards are terrible at targeting ideal customers, and worse in the case of insurance because of underwriting restrictions. Lead generators who sell contact information in exchange for estimates are awful, too. Imagine an agent buying a lead that’s been sold 8 times, racing to get the client to fill out their application first, only to discover a loss claims history disqualifies the client. Effective targeting is vital.
An insurance buyer wants to know that they’ve seen all of their best available options and are getting the appropriate coverage for the best price. This is practically impossible in today’s marketplace (without Comparity, that is). There’s no way for a prospective customer to fill out one complete application, not have their information sold a dozen times, and get back multiple underwritten offers that are easy to compare.
What buyers and sellers both need is a simple, efficient, and transparent way to get to know one another through an exchange of basic information. Buyers and sellers also want control over how their information is used in this exchange and control over the buying decision. We think there’s a straightforward way to give both parties what they want in a way that can transform the entire marketplace for the better. Providing buyers and sellers with better, more actionable information about one another will enable smarter policy transactions that will benefit everyone.
Separate but related: Another important factor in risk distribution is the number of risk carriers. Risk is most distributed in a market that supports the most risk carriers. Any trend toward fewer carriers requires an accumulation of risk. Our approach is to level the playing field for everyone and enable smaller, niche carriers to participate more effectively.
May we talk about insurance advertising for a moment? I’m not a fan. It’s insulting to our intelligence. Rather than promoting what matters, insurance ads divert our attention through base humor and lowest common denominators. Insurance advertising is like political advertising that never goes away.
My hat is off to the advertising firms, though. Insurance ads are among the most memorable of any industry. Insurance ads are also ubiquitous, with billions of dollars spent annually to make sure the promoted companies never have an opportunity leave our conscience.
Silly mascots make the industry look like some kind of anthropomorphic zoo; talking lizards, pigs, elephants, ducks, dogs, zebras. What’s next? I have nothing against animal mascots, per se. (My favorite mascot is a turkey, after all). But if we’re banking on people choosing insurance because they think a squealing pig is weird and funny then we shouldn’t be surprised when the industry becomes a total mockery and all its value is eroded.
One auto campaign running right now shows people standing in front a famous landmark describing their terrible experiences dealing with insurance companies. Citing generic, cynical stereotypes, the ads undermine the credibility of the entire insurance industry before claiming the advertised company is different. I could understand the company using specific criticisms of competitors. Instead, these ads basically say, “Insurance is bogus. Buy our insurance.” WTF?
Despite all the insurance ads, and obviously because of some of them, insurance is one of the least liked industries.
So it’s not unreasonable to wonder: what real value is eroded when billions of dollars each year are sucked away solely for the purpose of making dumb ads? (And that’s just the brand awareness piece. Billions more are spent by insurance agencies to acquire new customers through various forms of lead generation.)
Lead conversion is terrible, too. Never mind barely-actionable TV ads featuring neanderthals and nasally waterfowl that only exist to promote a brand. Even when potential customers do convert every carrier has a built-in filter called underwriting that makes sure carriers only write policies for the acquired customers they actually want. Believe it or not, carriers, don’t want all the fish that are caught by mass-marketing dredge nets. Basic ad acquisition and contact selling can’t determine who is close to a shore, has aggressive breed dogs, has a pool with a diving board, has made too many claims, has faulty credit, has a home business, etc., etc. Keep in mind that any acquired customers effectively arrive at just one company, mainly because they like the quirky waitress best, and those customers have no easy way to get and choose from comparable options. (To say nothing of how poorly educated most buyers are about insurance.)
This just all seems insane to me because nearly everyone must have insurance! Few people would voluntarily opt out of insuring their homes and cars – even when they don’t fully understand what they are buying – but if those homes and cars are bought with borrowed money then having insurance or not isn’t a choice. Insurers are gonna get theirs no matter what. So why do they need to spend so much on advertising and why is that advertising so often trivializing or irrelevant to the need and product?
What if there is a better way to make sure buyers and sellers find and become optimally matched with one another? Can we create a new marketplace where buyers gain the ability to easily and objectively compare policies while providing sellers a no-cost ability to access and filter the entire market in order to potentially acquire only the customers who are a good fit with underwriting? Can we recapture the billions of dollars that are annually diverted from insurance into senseless advertising? I’m sure there will always be a place for brand awareness, humor, and mascots. At best, that place is secondary in a market that is healthy, competitive, and fair.
Competition won’t go away in our new marketplace because even though most carriers are niche oriented there are still plenty of insurers out there whose underwriting rules and target audiences overlap. In fact, competition thrives when companies know their potential customers are comparing options. In today’s insurance market competition isn’t happening among the products at all. Competition is primarily among ad campaigns, at the wide, shallow top of the sales funnel. The sizable competition that exists at the possible point of sale is among agents vying for customer attention after they’ve bought customer contact information sold eight times over. That is what’s bogus.
It doesn’t have to be this way. We’re building a better market for insurance at Comparity. Our mission is to simplify insurance shopping so everyone wins.
Email me if you’d like to learn more about it.
Earlier this week I was chatting on LinkedIn messenger with my friend Alexander Tran, who happens to be a UX Designer at Embroker. Alex and I met when we worked together at Code for America. I pinged him when I realized that we were in the same industry again. It was surprising to us both that we would go from #civictech to #insurtech.
But then we realized we were both bringing many of the same motivations with us from one field to another.
This got me thinking about empathy and insurance. Is that weird?
I’m new to this industry, starting in 2014. Two things I learned in my first couple weeks have stuck with me ever since:
- Everyone needs insurance
- Most people don’t understand their insurance
Mainly I’m referring to property and casualty insurance though I’m sure this applies to all insurance. I could go as far as saying no one understands their insurance because I’m confident that I could surprise anyone with things they don’t know about their own policies. Every day we hear customers exclaiming, “wow, I didn’t know that!”
That just seems wrong to me. How can so many people be uninformed about something they are required to have and that has a huge impact on their most valued possessions? Righting that wrong is a big part of what drives me – us – at Comparity.
I don’t blame the insurance industry (for selling something nearly every single person must buy when there’s no practical ability to compare options) though it would be easy to do so. Carriers are in the business of writing good insurance policies, not making it easier to shop.
Unfortunately, lead generators in the space are just selling and reselling contact information for someone who has said they want insurance and leaving it to agents to race to the customer. Read lead generators’ fine print. What buyer wants eight insurance agencies calling and selling them? BTW, agents hate it, too!
But the fact is that home insurance is complicated. There’s no other way to put it. Home and auto insurance with a family, a couple of teenagers, maybe a minor infraction is exponentially more complicated. It’s not just hard for buyers but sellers, too, including carriers and their agents.
This is the vibe that attracted me to insurance technology even before I fully realized it. Insurance is a massive marketplace affecting hundreds of millions of people, it’s an industry where simple technology applications can have exponential impact, and it’s desperately in need of technologists who have empathy.
There’s plenty of talk around #insurtech about disruption, with camps both favoring and marginalizing the idea. Sensors, big data, drones are all the rage. I get it. Those things are cool. But they don’t do anything at all to address the main problem with insurance: people don’t like it and don’t understand it even though they must have it. I certainly don’t want “empathy” to become insurance buzz d’jour but I would like to see more of it in #insurtech.