5 things to know when shopping online for insurance

Online shopping is great, right? From the convenience of a search engine or favorite online retail site, we can browse any product, compare options from different sellers, and click to buy what we want, when we want it. When it comes to shopping for home and auto insurance, however, it’s a much different story. Although it’s been around for several years now, online shopping for property and casualty insurance still does not meet expectations of buyer or sellers. There are both good and bad reasons for missed expectations. The brief article covers what we consider to be the most important aspects of online insurance shopping.

1. Instant estimates are not quotes

Online shoppers expect immediate results. There are insurance shopping sites that claim to provide instant prices. More often than not, these prices are rough estimates and don’t represent actual quotes on policies that can be purchased. In order for a price to be a valid quote it must be based on a completed application that has been through some form of underwriting. If a shopper enters only contact information and the year, make, and model of their car to get back an instant price they are getting an estimate. That estimate could change drastically once driving record and credit history are checked and those can’t be checked without more information from the customer.

2. Hard referrals are hard

All the information people provide to so-called insurance shopping sites must be provided separately to the insurers. That’s because the only relationships between online shopping web sites and insurance companies are strictly for marketing services. Most sites that claim to offer online shopping for insurance are really just digital versions of familiar marketing gimmicks. That should make you wonder, “what does that insurance shopping site do with my information?”

3. Your information is sold

Always read the fine print when it comes to your personal insurance, starting at the beginning when you are ready to shop. If you do read the fine print you will see that the way most online insurance shopping sites work is by selling customer contact information multiple times. We assert that people’s information is sold so many times that it become effectively worthless to everyone.

4. You aren’t really shopping

There are some web sites operated by legitimate insurance companies that claim to compare options among their competitors. However, no insurance companies that want you to come their site in order to buy insurance from a competitor. All insurance companies know that if they are the first to engage you then you will probably buy from them no matter what. The fact that it’s hard to shop for and buy insurance has a lot to do with it.

5. You can take control

Whether we’re talking about digital marketers selling contact leads or insurance companies claiming “we’ll show you the other guys’ prices”, it should be clear by now that so-called online insurance “shopping” is really online insurance selling. Furthermore, what masquerades as online insurance shopping can undermine the interests of buyers and sellers, alike.

In order for online shopping for insurance to meet our expectations, as either buyers or sellers, it has to work the same way as online shopping for anything else. Sure, there are some things that make shopping for insurance inherently different, but we know these can be overcome. To meet expectation, insurance shoppers should have the ability to fill out one insurance application to get back many quotes. Insurance sellers should be able to offer a quoted product online without having to pay to put it in front of the customer. The products that are offered should be the products that are sold, and not resemblances of the products. When the transaction is complete, everyone should be assured that the only role of online shopping was to connect buyers with sellers in a convenient and efficient way.

That’s what we do at COMPARITY: https://www.comparityins.com

InsurTech for Insurance Agents

Agency Owners: watch to find out how we can send you completed insurance applications from home buyers for free.

Shopping for Insurance Matters

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.

confusedIn 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

Comparing Homeowners Insurance Without COMPARITY

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.


Insurance Distribution is Like a Dating Service

Insurance Distribution is Like a Dating Services

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.

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”.

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:

  1. Shopping must be easy for buyers to compare across carriers for their unique risk profile
  2. Quoting must be free or low-cost for sellers
  3. The total transaction must be seamless from application through purchase.

Put another way:

  1. Buyers must be able to fill out one application and get back multiple underwritten quotes they can easily compare
  2. Sellers must only pay for leads that convert
  3. 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.