As one Inc.com interview with Jeff Bezos explained, “Back in 1995, when Amazon was still a bookstore, Bezos started experimenting with customer reviews. After some time, he received a letter from a book publisher telling him that ... the platform shouldn't display negative customer reviews, because it would result in fewer sales. After thinking about the advice, Bezos felt that the publisher had misunderstood what Amazon was trying to do. The goal was not to make money through selling things, but to make money through helping people make purchase decisions.”
There is an old adage that many insurance industry insiders are familiar with: insurance is sold, not bought. The underlying meaning is that consumers have limited options available to them, or don’t take the necessary time to learn about their options. Neither interpretation reflects the reality of insurance. When I started my sixth insurance startup, we identified a glaring and unmet need in in the lack of objective decision support available to insurance consumers. Insurance is sold, not bought, because consumers have never had access to a true customer-first buying experience.
But many newly launched insurtech startups, including Thinksurance (a technology distribution platform for business insurance) and Hippo (which delivers insurance policies to homeowners), have attracted massive amounts of funding. And a few have successfully acquired new customers by building a more user-friendly front-end quoting interface that really sits on top of the same old insurance policies and products.
Today, many of the funded insurtech companies gaining the most traction have effectively improved the user experience, especially the front end "get a quote" functionality. Lemonade Insurance has proven extremely effective at converting digital shoppers into customers by building a front-end quoting interface. They have made it hassle-free and simple to get a quote. This sounds easy, but many insurance companies stand up digital forms that require users to key in dozens of personal data points.
Some insurtechs have partnered with carriers through API integrations to improve the price-quoting process by offering binding prices. Answer Financial is an online digital agency platform with API integrations with several household insurance brands. This seemingly obvious improvement to the user experience saves some of the hassle and discontent many users could feel when they instead receive "price indications," not consistent with the ultimate price they wind up paying.
Other car insurance insurtech upstarts are changing the way consumers are charged. Metromile and Root are focused on telematics apps that consumers can download to a mobile phone to save significant amounts of money by allowing the app to track driving behavior, or by only paying by the mile. Customers may save significantly on their introductory car insurance rates; however, the sustainability of those lower rates may depend upon their monitored driving behavior.
Navigating Today’s Confusing Insurance Landscape
When searching for car or home insurance online, it’s immediately clear that search results are dominated by noise and confusion – including sponsored insurance company ads, lead generation companies that promise comparative price quotes, and personal finance sites that provide “editorial” advice and guidance that aligns with existing affiliate partnerships that pay the site for clicks.
As of 2011, Wordstream (via VentureBeat) reported that the insurance and finance industry had paid Google $4 billion for advertising.
Addressing Insurance Profit Drivers
A key profit motive and driver for agencies and brokerages involves meeting premium “bogeys” (dollar thresholds) with the insurance companies that "appoint" them. This is often referred to as “override” compensation and supplements the guaranteed commissions that insurance companies pay to agents or brokers irrespective of whether they achieve those thresholds.
A reputable agent or broker takes the long view when it comes to building trust with customers. Unfortunately, there is often no meaningful way to independently validate the reputation of an agent or a broker due to disorganized review data. Insurance reviews tend to skew disproportionately to the negative on most of these platforms.
But new tools are emerging, including Social Survey and Little Dog, an insurance-agency-focused social media marketing platform to help agents proactively manage their online reputations through review collection and publication of positive customer feedback across multiple social media channels.
What I believe Jeff Bezos understood well before the rest of the consumer retail market is that gaining consumers’ trust by providing review data to help support the decision making process, combined with a superior user experience, is how you win the long game to increase market share and repeat customers.
The insurance industry is just starting to wake up to the realization that consumer expectations have shifted. Call it the Amazon effect. If a consumer can buy a Tesla online, consumers should expect to buy insurance without the friction and confusion prevalent today.
The future of the insurance industry belongs to the innovators willing to put the customer's best interests ahead of the antiquated buying modalities that prioritize opaque pricing and proprietary distribution relationships. I believe there will be Amazon-esque buying experiences for insurance consumers. It's not a matter of if, but rather when and who.
