Tag Archives: InsWeb

The Insurance Lead Ecosystem

In today’s online insurance shopping environment, many lead sellers and buyers work well together toward the same goal of delivering a great customer experience. But, it hasn’t always been this way.

For example, in the mid 1990s, when InsWeb sold the first data lead produced from an online insurance quote form, our industry was a lot less focused on customer experience and a lot more focused on selling as many leads as many times as possible to anyone that would buy them.

As you might imagine, the self-interest of lead generators, lack of industry standards being adopted and increasingly complex privacy regulations meant the industry would struggle to survive. Many learned the hard way (consider the demise of Bankrate Insurance, outlined further in this article), while others developed technology and standards to drive a better customer experience and are thriving today.

The Beginning of the Lead Seller-Lead Buyer Relationship

The relationship between online lead sellers and lead buyers began as a very simple one, over 20 years ago. The lead seller was also the lead generator and dealt directly with the lead buyers. At the time, aggregators did not exist.

In the early 2000s, small and medium-sized publishers realized they could make money by generating leads. They would sell these leads to the larger lead generators who had direct relationships with the lead buyers (the insurance brands). This was the start of lead aggregation. And it appeared to be a logical business decision that was good for all parties involved: the generator, aggregator and buyer.

The problems began to emerge when buyers and sellers started to exchange leads without any central record of the activity. Without third-party certification, and no industry standards, some lead generators and aggregators were driven more by the incremental monetization opportunity than by win-win-win relationships where lead generators, lead buyers and consumers all benefited. What’s more, the ping-post process evolved to allow an unlimited number of sellers and buyers to come together. On the surface, this should have created an efficient market with a variety of options for the consumer. In reality, without any standards or third-party verification, consumer information began to travel to dozens of lead buyers, creating an overbearing, intrusive consumer experience rife with fraudulent transactions. This is when the wheels came off the bus.

See also: Insurtech Ecosystem: Who Will Eat Whom?  

The End of the Beginning

By 2010, relationships between sellers and buyers became very strained. Rules were in place to protect all parties: the lead generator, aggregator, lead buyer and the consumer. Some examples included:

  • no selling of leads beyond a certain number of buyers
  • no manipulation of the consumer’s data (many times, manipulating data would lead to higher monetization)
  • no recycling/remarketing of leads at a later date
  • no fake leads
  • no leads based on incentives
  • no unauthorized sales to stated end buyers (i.e., no selling of the lead to a captive agent that already bought the lead)

Unfortunately, these rules were not always followed, and there was no way to effectively know who was compliant, let alone how to enforce them. As a result, many carriers and agents experienced a noticeable decline in lead quality. While some of the aggregators and generators played by the rules, a few meaningfully sized “bad actors” wreaked havoc, making it difficult for the honest providers to survive. The industry went through a period of contraction, with several acquisitions resulting in less transparency, less trust and more gaming of the rules to benefit bad actor sellers over the customer or the lead buyer. Insurance carriers (the lead buyers) lost control, and the situation became dire.

The industry tried to self-regulate. Some lead sellers discussed sharing data about the origin and history of a lead, as well as proof of compliance. In other words, each lead seller was expected to follow a set of standards loosely agreed upon by multiple parties and documented by parties like the LeadsCouncil. There were a lot of good folks trying to create valuable customer experiences, but the bad behaviors by some were making it difficult for everyone.

For example, bad actors were selling leads to multiple insurance providers or holding leads to sell again and again—in other words, recycling leads. Other sellers were aggregating leads and misrepresenting this fact, while others would acknowledge they were aggregating but would misrepresent the actual origin. Simply put, by 2010 our industry lacked transparency and accountability. Consequently, the inability to identify and eliminate old, recycled, dupe, fake and no-intent leads led to the deterioration of lead quality.

We were witnessing the beginning of a downward spiral where carriers and agents were directly affected by the decline in quality. Many carriers reallocated budget to hedge on the lead generation channel, and thousands of agents discontinued buying leads altogether.

Pushing the Reset Button

By 2011, the industry realized that self-regulation would not work. A new solution was needed. With advances in technology coupled with the widespread belief that a third party was required to certify leads, the problem certainly seemed solvable.

It was at this time that a concept called LeadiD (the company that is now Jornaya) led the effort to leverage technology and data to promote confidence, clarity and trust in the lead generation space. The concept was simple: Lead generators placed a simple script on each page of their lead funnel. Each time a consumer arrived on the website, a unique LeadiD token was created for the lead event, and key data about the lead event was captured in a privacy-friendly manner by an independent, third party. No consumer data and no proprietary lead generator data was at risk while independent third-party validation was provided to rebuild both the trust and transparency of lead generation across the industry.

The LeadiD token served like a Vehicle Identification Number (VIN) for the lead event. When a lead was presented to a prospective buyer, the LeadiD token was also included. The buyer could thus query Jornaya, an independent, third party. Similar to using a VIN with CarFax, buyers were able to validate in real time the key attributes about the origin, history and proof of TCPA compliance associated with each lead. The factual data provided by an independent observer, Jornaya, allowed the buyer to validate the lead’s value and minimize TCPA risk. The process effectively cleansed the waters made toxic by bad actors, unenforceable standards and lack of third-party certification. Lead buyers began to buy more volume programmatically, with the trust baked into the transaction. Lead aggregators used the same LeadiD technology to ensure transparency with their affiliate lead sources.

The good actors, such as All Web Leads jumped on board immediately, and many followed. For others, it took some convincing. While many eventually began creating and passing LeadiD tokens, there were a few large holdouts. Which raised the question from carriers, why hold out? Implementing LeadiD was free, and sharing LeadiD tokens was also free. With firms like All Web Leads, ReviMedia (now PX), Quinstreet, Apollo Interactive and Hometown Quotes working together to require and share LeadiDs, there was a clear movement underway. An industry course correction was beginning to happen.

A Lead Generator “Verified” Solution Fails Spectacularly

Not long after LeadiD tokens started flowing throughout the ecosystem, Bankrate Insurance, one of the largest sellers at the time, created its own “verified” solution—providing data elements such as lead age and consumer consent (for TCPA compliance purposes). For its larger lead buyer customers, the company would also provide “exclusive” access to other attributes of the lead event to make buying decisions.

I’ll never forget a meeting with senior management at a large insurance carrier alongside Bankrate executives. The carrier was listening to Bankrate discuss why the carrier did not need a third party solution, because Bankrate’s approach would solve all the problems. The vice president at the carrier asked, “Why would we trust you instead of an independent third party?” What’s more, the executive stated unequivocally: “Even if you are trustworthy, it’s very clear it’s not working for each lead provider to be self-regulating. We support a single, industry solution, with independent certification, and we’re wondering why you wouldn’t support the same.”

This executive understood that while the Bankrate Insurance “verified” solution may have been technically viable, a lead seller taking necessary steps internally to clean up and verify its own traffic was actually a terrible idea fraught with problems. This solution never gained traction and did not last very long. Here are five reasons why an in-house “verified” solution provided by a publicly traded lead generator did not work:

  1. Buyers had no way to independently verify the accuracy of the origin and history data contributed by the seller. “Because I said so,” simply wasn’t good enough.
  2. In considering a lead, buyers could not confirm consumer consent to their approved TCPA compliant language (and font size/contrast requirements) across hundreds of websites owned and operated by the seller and accessed by millions of consumers across multiple device types.
  3. For TCPA complaints and lawsuits, no independent, objective verification of a consumer’s consent to be contacted existed. Simply put, defense amounted to relying on attorneys or the courts to believe the lead generators, once again, “because they said so.” In contrast, independent certification has proven successful in mitigating TCPA risk time and again.
  4. Because they didn’t receive the “exclusive” access to certain data, smaller lead buyers were not playing on a level playing field. Exclusive data sounds good until others realize it’s not actually exclusive and that it’s not possible to identify or stop this behavior. Already rejected leads often ended up back with the buyers because the leads are aggregated and sold to them by a different lead seller, without the buyer being able to know this is occurring.
  5. The temptation to falsify the data was enormous in the face of revenue and profit margin guidance and expectations, and many cases of false data were identified with a third-party solution, but were very difficult to identify with self-regulation.

It quickly became apparent to lead buyers that the primary purpose of those unwilling to pass LeadiD tokens was to handicap the transparency process and increase their own revenue and profit margins. Buyers equated the approach to “the fox guarding the hen house.” Consequently, lead quality of these sellers continued to decline. Some sellers exited the business altogether, while others were acquired by companies willing to create and pass LeadiD tokens. An efficient market was starting to grow built on trust, standards and transparency.

Like a stock market, the lead generation marketplace can, and should, thrive when buyers and sellers offer transparency and both sides use independent, standard and trusted insights to make data-driven and consumer privacy-friendly decisions. As a result, everyone can win. Well, everyone willing to embrace true third-party transparency and industry standards.

Here is a checklist to help understand in-house “verified” solutions versus an independent, industry-wide, third-party solution.

Where We Are Now

Today, Jornaya witnesses the vast majority of insurance lead events. We are in this privileged position because of the forward-thinking lead generators and aggregators who have embraced Jornaya as the third-party certification source for the industry. Thousands of lead buyers (aggregators, carriers and local agents) rely on the independent transparency of lead origin and history that a LeadiD token enables. With that transparency comes trust, better lead seller/buyer relationships, stronger performance, TCPA compliance and a smarter and safer consumer experience.

See also: How to Build an Innovation Ecosystem  

It’s been a fascinating journey, and we reinforce this story often with our customers. Many have experienced this journey alongside us and have witnessed the trials and tribulations of the evolution. Our partners and customers across insurance, mortgage, banking, real estate, home services, automotive and education appreciate that LeadiD tokens flow freely throughout the ecosystem and have programmed their lead bidding and buying technologies accordingly, expecting a LeadiD token just like any car evaluation system would expect a VIN.

The collective voice of lead buyers and like-minded, collaborative lead sellers will assure we maintain an ecosystem with trust and transparency. I don’t say that just as GM of insurance at Jornaya, I say it as someone who has cared deeply about improving the insurance consumer experience and insurance provider productivity since we all started creating and exchanging leads over 20 years ago.

Frans van Hulle, CEO and co-founder of PX (formerly ReviMedia), sums it up nicely in his recent article: “If you have something to hide, you’ll fear transparency. If you don’t, you won’t.”

Most lead sellers have benefited by participating in this journey with us, and many insurance carriers have helped us get to this point. We all gain by being able to transact leads using a single, trusted currency (LeadiD tokens) that ultimately creates valuable consumer experiences. As such, we also enjoy playing the role of connecting like-minded lead sellers and buyers because we know how beneficial it is for all involved.


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 disruption. 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 consumers 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 generatorscall-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 InsWebNetQuote 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 experts to assess the quality and sustainability of lead-gen platforms.

Call-center agencies can develop leads or purchase them; in any case, their call centers employ licensed insurance agents who make sales. A classic example: SelectQuote, founded in 1985 and known for its early TV ads, is now the largest direct channel for life insurance. Goji is doing this well in the auto insurance space and now has several hundred licensed call center insurance agents. Call-center agencies are also great businesses. Their core competency, however, isn’t technology. It is HR hiring and training. Hiring and training a large sales force and managing its churn is growth-limiting. A commissioned call center sales force might reach 300 agents, but it is almost impossible to get to 1,000 or more high-quality agents. Crucially, too, the model does not leverage technology, so margins depend on commissions remaining high.

Digital agencies allow customers to shop and buy entirely (or nearly so) online. Without a human sales force, they must create well-thought-out user experiences that make the process of buying insurance transparent and understandable. Typically, this requires building sophisticated interfaces into multiple carriers’ systems so that the customer experience is unrelated to the company selected. In general, digital agencies hire developer talent rather than sales talent. Esurance, one of the first successes in the space, was bought by AllState for $1 billion in 2011. A more recent example (and AXA Strategic Ventures portfolio company) is PolicyGenius, which is bringing this digital model to life and disability insurance.

I believe digital agencies are the future. They focus on technology to sell policies without the aid of a commissioned human agent. This is a crucial distinction because, while both call-center agencies and digital agencies generate income from commissions, call-center agencies have to split that commission with their licensed call center agent while digital agencies do not. This means that, at scale, digital agencies should have higher profit margins. In fact, it is likely that digital agencies will actually look to lower commissions to drive sales and to provide more competitive pricing than human agents or call-center agencies.

Insurance Aggregators 3.3.16.png

Insights from the U.K.

The U.K. insurance markets adopted the aggregator model earlier than U.S. carriers, which gives us a window into their potential future. What’s happened there shows us three things.

First, aggregators have captured a material share of the insurance market and are continuing to grow. A recent Accenture survey found that, in the U.K., “aggregators account for 60% to 70% of new business premiums in the private automobile insurance market” and that French aggregators have seen “18% average annual growth for the past five years.“ We’re already starting to see this in the U.S.: Oliver Wyman recently reported that “the number of insurance policies sold online has grown more than 400% over the last eight years.” Swiss Re said, “More than half of consumers say they are likely to use comparison websites to help make purchase decisions about insurance in the future.”

Second, aggregators eventually will compete with one another across all personal lines of insurance. U.S. digital agencies today focus on one type of insurance (life or auto or home), though they might claim to offer a few others. But almost all U.K. aggregators compete across all personal line insurance products.

Third, insurance carriers will get into the aggregator game. Two of the top three U.K. aggregators sold to U.K. carriers; GoCompare was purchased by esure, and Confused.com was purchased by the Admiral Group. Only MoneySuperMarket remains independent. And carriers are looking to create aggregators from scratch. Accenture’s report noted that 83% of U.K. carriers are “considering setting up their own aggregator sites.”

Start-ups, tech giants and carriers in the ring

Still, it’s not totally clear how digital distribution will play out here. Multiple start-up digital agencies have raised significant capital. PolicyGenius and Coverhound have raised more than $70 million, $50 million of it just in the last six months. This represents a fraction of what a major tech player (say Google or Amazon) could put toward an effort to enter this market. Interestingly, Google purchased the U.K. aggregator BeatThatQuote in 2011 and launched the California auto insurance aggregator Google Compare less than a year ago, but just announced it was shutting it down. That could be because Google Compare functioned as lead-gen for CoverHound and Google decided the fee it received per lead was cannibalizing its ~$50 per click ad-sense revenue from auto insurance search terms.

Long-term success in insurance requires focus, deep knowledge of the industry and deep knowledge of the consumer. Insurance is very different from most e-commerce products, and Google’s experience could be indicative of the difficulty big digital brands will have trying to crack the insurance aggregator market.

Finally, most large American carriers haven’t decided what to do. Purchasing an aggregator creates strange incentives, potentially driving customers to a competitor. At the same time, it also gives the insurer the opportunity to quietly select the risk it wants to keep and pass off the risk it’d prefer to give up. Progressive has had mixed success.

Final thoughts

I think the U.S. will see trends and dynamics similar to the U.K.’s, and soon. Within three years, the major digital agencies will start to compete fiercely, and, within five, one or more will have been purchased by a carrier.

More digital agencies also will tackle the complex insurance products: annuities, permanent life insurance and commercial insurance. Right now, start-ups are trying — Abaris for annuities and  Insureon and CoverWallet for commercial insurance — but their offerings aren’t yet as developed as Policy Genius or CoverHound.

Finally, I think the rise of digital financial advice platforms (a.k.a, robo-advisers or “robos”) give digital insurance agencies an interesting channel to consumers that will help at least one of them mature and grow to an IPO.

I asked two digital agency CEOs what they thought the future was going to bring. Here is what they said:

Jennifer Fitzgerald, PolicyGenius’ CEO, said, “Consumers are much more self-directed in the digital age, so the focus is giving potential insurance clients the tools they need — instant and accurate quotes, transparent product recommendations, educational resources — so they can go through the process at their own pace. Then it’s important be there for them with an intuitive, easy-to-use platform and service when they’re ready to buy. That’s the basis for the new wave of insurance education tools like the PolicyGenius Insurance Calculator, and is reshaping how consumers look at insurance.”

Matt Carey from Abaris said, “I think we’ll soon see a new wave of made-for-online products. Carriers have always gone to great lengths to create products that made sense for a specific channel.  The Internet will be no different. In our business, that probably means very simple lifetime income products that are subscription-based and have low minimums. Until then, I don’t think we’ll reach a tipping point in the migration from offline to online.”

Is Change Really Happening So Fast?

Lots of people are saying these days that the insurance industry, after essentially not ever changing, is suddenly moving too fast to follow — for instance, the recent ITL article, “Feeling Like a Keystone Cop.” But in my 37 years in the industry, insurance has evolved continuously.

Insurers have changed from the days where syndicates consisting of individuals provided insurance coverage through the Lloyds market; today, China Re with a majority ownership by China’s ministry of finance, has a syndicate at Lloyds. Today, a large number of insurers are owned by multinational conglomerates.

Other types of evolution include Berkshire Hathaway’s use of insurance premiums as a means of financing its investment interests. Similarly, Fairfax Financial Holdings of Canada uses premiums collected from its insurance companies around the world to finance investment interests.

Financial services groups such as Suncorp Group in Australia now offer insurance through a number of brand names, such as Shannons (classic car insurance), APIA (Australian Pensioners Insurance Agency) and AAMI. Rand Merchant Insurance Holding Group of South Africa offers insurance in Australia under the name of Youi (https://www.youi.com.au).

In addition, some insurance companies, like Progressive, are taking a technology-only approach to offer motor vehicle insurance in Australia without a “brick and mortar” presence. Apart from the option of reporting a claim by phone, all other communications are through email or a web page. With this approach, Progressive in Australia will only attract those who use technology. Here is the link http://www.progressiveonline.com.au/car-insurance.aspx

People talk about Google, Walmart, Amazon and others possibly entering the insurance market — again, this isn’t something new. Brand names have been used by insurers for many decades. Coles, a large supermarket chain in Australia (https://financialservices.coles.com.au/insurance) (similar to a Safeway or Ralphs here in the U.S.), offers various insurance polices to its customers that are underwritten by Insurance Australia Group.

Whether Google, Walmart or Amazon actually decides to underwrite risks, act as channels for insurance or simply provide a means to compare insurer premiums remains to be seen, but, regardless, none of this is new. For example, InsWeb has offered car insurance price comparisons since the mid-1990s. Here is the link: http://www.insweb.com.

One thing that is certain, however, is that the insurance market will continue to be driven by price and service, especially service at the time of a claim. In his 2013 annual report, Warren Buffett made the following comment, “GEICO in 1996 ranked number seven among U.S. auto insurers. Now, GEICO is number two, having recently passed Allstate. The reasons for this amazing growth are simple: low prices and reliable service.”

Over time, risk types change, and insurance coverage follows. Boiler explosion insurance for example, was a major type of insurance through the 1800s and into the mid-1900s. It still exists but is only a very small percentage of the insurance market.

We will see changes to vehicle insurance coverage when driverless vehicles appear on our roads, as mentioned in the recent ITL article titled, “Beginning of the End for Car Insurance.” There are many risk coverage issues for potential exposures with driverless cars. Imagine if a child runs onto the street to retrieve a ball without looking (a common occurrence for those living in the suburbs). With advanced technology built into driverless vehicles, the vehicle would be programmed to make a decision about which action to take in the best interest of all parties (i.e. the child, occupants in the vehicle or nearby vehicles as well as pedestrians): (1) brake but still hit the child or (2) brake and avoid the child but possibly hit another object such as another vehicle or lamppost, injuring the occupants of the vehicles as well as nearby pedestrians.

All this will need to be addressed by laws and road rules when driverless vehicles are introduced, with insurance following on. Premiums and who pays are the least of the insurance complexities involved with driverless vehicles. If a manufacturer is required to obtain insurance coverage or volunteers to obtain insurance coverage, the premium would be factored into the price of the vehicle; otherwise. it would be paid by the owner of the vehicle. Regardless, insurers will receives premiums from one source or the other.

Another evolving insurance coverage relates to a disability occurring from a work-related, motor-vehicle or non-work-related incident. While U.S. jurisdictions ponder whether coverage for a work-related injury or illness should be through a workers’ compensation policy issued by a property/casualty insurer or through the opt-out option (a hot topic in the U.S. at the moment), Europe, Asia and Australia are focusing on what people with a disability can be doing and deciding on how best to achieve this, including funding. In this case, the evolution relates to who will pay the premiums. Will employers continue to pay for work-related injuries, or will individuals buy personal injury coverage to cover their recovery costs, no matter whether associated with a work-related, motor-vehicle or non-work-related incident?

In the evolution of insurance, technology has always played an important role in areas such as deciding which segment of a market companies want to attract, meeting reporting obligations and improving processing efficiencies. In workers’ compensation, a number of U.S. carriers have chosen to outsource many of their claims functions, as I outlined in my last article. Whether this practice continues remains to be seen, but something needs to change in the way the workers’ compensation insurer or its representatives (e.g.. third party payer) handle claims, because clearly what they are doing is not producing the desired outcome for the injured worker or the employer, and no form of state legislature or technology change will address this shortfall.

Products like IBM’s Watson and Saama that are able to use unstructured data in addition to structured data to perform analytics are part of the technology evolution, and there is high probability of success. But we saw something along the same lines during the early 1990s, when all the buzz was about neural networks.

In closing, I don’t feel as if I’m a Keystone Cop when it comes to professional development, either relating to insurance or the technology used now or offered in the future. I also don’t think the major players in the insurance industry (like Berkshire Hathaway, Fairfax, Suncorp and others around the globe) feel they or their personnel are operating like Keystone Cops. If they were, I’m sure their share prices would not be as high as they are.