Late this spring, customers of Overstock.com began furnishing their homes and insuring their small businesses in just one go. The retail giant launched Overstock.com Insurance Agency in May 2014 with plans to sell auto, home and small business insurance in a location today’s American consumer increasingly frequents—the Internet.
The Salt Lake City-based “e-tailer” is hardly alone. Wal-Mart made a splash in April and again in October by announcing it would offer auto and health insurance through its online platform, and more than two-thirds of current insurance policyholders say they would consider purchasing insurance products from organizations like Amazon or Google, according to a 2014 study from
Accenture.
Indeed, Accenture’s Michael Lyman—the company’s global managing director for management consulting—estimates that up to $400 billion in insurance premiums could switch over from traditional carriers to organizations like Internet and phone service titans.
All of that has independent insurance agents and brokers understandably leery.
“It seems as if many of our standard markets are welcoming any distribution channel,” said Alicia Igram, a local leader with the Insurance Office of America in Aliso Viejo, Calif. “This is a slap in the face to those of us who have spent our entire career supporting them.”
As CEO of Valen Analytics, a data and analytics provider to North American insurance carriers, Dax Craig holds many conversations with both carriers and producers. From his vantage point, he sees a situation in which carriers are anxious to maintain good relationships with their producers, but are also looking toward a future in which major tech players like Overstock will play a meaningful role in the distribution of insurance products.
“Companies like Overstock are not a significant threat to insurance carriers themselves. The threat will be to carriers’ current distribution partners—agents and brokers,” Craig told
Insurance Business America. “Carriers value the broker channel, but having said that, I think they’re very curious about these new players and what they’ll mean to them.”
With an existing group of loyal customers, players like Wal-Mart and Overstock are poised to offer carriers a captive audience. And with rumors that even bigger fish like Google or Verizon may be interested in getting into the insurance game, producers may need to do some long-term planning in order to survive.
As of yet, the threat may not be so real.
“I know these comparison shopping sites seem to be all the rage, but if you look at their production—the number of policies they’re actually issuing—it’s miniscule,” says Brian S. Cohen, operating partner at Altamont Capital Partners. “What’s happening is that individuals are visiting these sites to get a sense of a reasonable price, but they still want to go to a professional to figure out what’s best for them.”
Craig agrees there is still a place for producers in the insurance distribution platform of the future, but stresses that strategic planning and adoption of data-driven technology will be key for any agency looking to survive.
“I think the distribution system is going to change significantly, along with the rest of the industry,” Craig said. “If you’re an agent that’s small, I still think there’s a way for you to win. I really do.
“Those who are adopting more technologically driven apparatuses to help them do business are going to be the ones most attractive to potential buyers.”
Stay tuned—Insurance Business America
will be examining just how independents can leverage new technology into a permanent place in the industry all this week.
You may also be interested in: "One in four insurance agents will be gone by 2018"
"America's least-trusted industries: How does insurance fare?"
"Producers warned: Adapt for your employees or be left behind"
