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The Three Eras of Online Insurance Shopping

Era #1: Individual Quotes Online
(Late 1990s – 2010)

Online insurance shopping got its start in the late 1990s.

Progressive claims it was “the first insurer to give consumers the ability to buy an auto insurance policy in real time online” in 1997.

Esurance was launched in 1999. Though it was not the first to offer online insurance sales. It was the first insurance company built specifically to compete online.

Though less visible these days, you likely remember a barrage of Erin Esurance commercials in the mid-2000s. That was before the internet turned Erin into a sex symbol which contributed to her demise (Google “Erin Esurance” at your own risk).

And you cannot forget GEICO – arguably the insurance company that has benefited the most from the shift to online insurance sales.

It’s not clear exacltly when GEICO sold its first policy online. But its sales figures are clear. In 1997, when Progressive sold it’s first policy online, GEICO had $3.74 billion of personal lines P&C direct written premium (DWP). By 2013, the most recent year for which I have data (someone send me some fresh SNL data!), GEICO had increased this figure to $18.72 billion – 5.00x their 1997 DWP.

GEICO has been the biggest beneficiary of the shift to online insurance shopping.

GEICO has been the biggest beneficiary of the shift to online insurance shopping.

For comparison purposes, industry DWP in 2013 was 1.79x the 1997 figure. And, of the top 20 insurance groups as measured by 2013 DWP, the next closest was Progressive at a relatively paltry 3.52x. Industry leaders State Farm and Allstate clock in at only 1.63x and 1.45x respectively.

Era #2: Comparison Quotes Online
(2010 – Present)

CoverHound lead the charge on this front. They weren’t the first to offer comparison quotes online – many independent agencies offered this capability in some form prior – but they were to first to build their agency around this concept and do so with a nice UI/UX.

Autoinsurance.com is built upon a model similar to CoverHound’s. That’s to say they’re an independent insurance agency (i.e. they are authorized to sell insurance on behalf of many insurance companies). They made headlines in 2014 when they inked a distribution deal with Walmart.

There is a variation on this model that warrants mentioning. In this variation companies don’t provide comparison quotes. Rather they provide comparison price estimates.

Some people think Progressive provides comparison quotes. It does not. It takes rate filings, documents insurance companies file with state insurance regulators that describe how a particular insurance company determines its rates, and uses them to estimate what your rates might be with their competitors (or, as when I tried this service, a single competitor who was a very poor fit for me).

Leaky tried this model before pivoting to commercial insurance and being acquired by Navion Insurance.

The most notable company outside Progressive that relies on rate filing data to provide price estimates is The Zebra.

There are pluses and minuses associated with providing quotes and providing rate estimates. But that is a story for another day.

And, regardless of whether we’re talking about quotes or price estimates based on rate filing data, the key takeaway is that Era #2 was defined by moving beyond getting a single price with a single insurance application and giving consumers multiple prices with a single application.

Era #3: Comparison Quotes & Advice Online
(Present – Future)

Comparison quotes are definitely a step in the right direction. Who would choose to get quotes from one insurance company if they knew that in the same amount of time, answering the same questions they could get quotes from five or ten companies? No one!

But comparison quotes aren’t the final answer. We’ve all had it drilled into our heads by GEICO that you can get a quote in 15 minutes. And, in truth, 15 minutes is a over-statement. Any reasonably competent person can get a quote online in under 10 minutes.

If it’s so fast and easy to get quotes online, why does Boston Consulting Group research show that over 7x as many people prefer agents to operating direct with an insurance company?

Or why does comScore research show that 80% of people who have gotten quotes online have subsequently made their purchase offline?

Online quotes are not enough.  This leads consumers to seek offline interaction.

Online quotes are not enough. This leads consumers to seek offline interaction.

One reason is that price is a bad way to compare goods and services. Right Towerstream Corporation is trading for $0.15 a share. Google is trading for $682.67. You could buy over 4,550 shares of Towerstream for what it’d cost you to purchase a single share of Google.

Obviously Towerstream is a great buy, right? Of course not!

Price is a bad measure of value.

And it’s not just value. Fit is an important consideration.

Let’s say you love shoes. You’ve had your eye on a pair that regularly sell for $150. But today you’ve found a pair on sale for $50… a great value, right?

Not so fast. You wear a size 9. The pair on sale is a size 13. Do you buy them? Hell no! You’d look ridiculous, wouldn’t be able to walk in them and develop crazy blisters all over your feet.

Insurance is the same in that you don’t just want the cheapest policy – you want a policy that fits your needs and offers great value.

But insurance is also different in meaningful ways.

While you know your shoe size, you likely do not know your insurance size and could use some professional advice to determine the right fit.

And the stakes are much higher. Get shoes that don’t fit and your wallet is a little lighter and you might develop some blisters.

Get insurance that doesn’t fit and you could lose your car, your home and all the money you’ve saved for retirement.

Clearly buying insurance is more complicated than comparing prices and selecting the lowest one.

And that’s the theme that will dominate the third era of online insurance shopping. A shift from simple price comparisons to more sophisticated comparisons based on value and fit.

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