The New Age of Insurance Aggregators
Tech innovation is coming to insurance, but where and when it strikes is uneven. Auto and health insurance have been facing serious disruption, for instance, but for very different reasons (self-driving cars and telematics, vs. the ACA and hospital mega-mergers). Life insurance and commercial P&C are only now feeling it. Reinsurance and annuities are following behind.
To see trends, then, it can be instructive to focus on specific insurance functions rather than the type (market vertical).
Distribution — that is, sales and marketing — is one area that has been especially active compared with other functions such as underwriting, risk, investments, admins/support or claims.
Why disrupt distribution?
It’s where the money is. In general, when a P&C or Life insurer gets $1 in premium, 40 cents goes to distribution (marketing/sales costs, i.e. the agent) and 50 cents goes to everything else (underwriting, claims, service/support, risk, fraud, product, executives, etc.). Only 10 cents is profit. The largest distribution cost is usually agent commissions, which range from 50% to 130% of a policy’s first year premium.
It’s easy for carriers to work with alternative distribution channels. Insurance carriers are used to third-party distribution. They have been using independent agents, wholesale agents, and affiliates (e.g., sales through AARP) for years. Systems are already in place to easily take on new distribution outlets.
.The rise of insurance aggregators
Aggregators are simply comparison shopping sites — like kayak.com for insurance. They allow consumer to easily compare product features, carriers, coverage and price. They aren’t the only distribution disruptors, but new developments are making them more potent.
Comparison sites come in three general flavors: Lead generators, call-center based agencies and digital agencies. From their websites, it can be difficult to tell them apart, but they operate differently and appeal to different investors.
Lead generators — such as InsWeb, NetQuote and Insurance.com — use a comparison shopping format to entice insurance shoppers to provide personal information. They then sell these leads, often to traditional brick-and-mortar insurance agencies. Lead generators specialize in either gathering lots of leads cheaply, or curating data to sell fewer but higher-value customer referrals. Lead generation is a specialized technique, an art even. But it’s mostly unrelated to emerging technology. It is difficult for non-lead-gen e
via seedingtech.com