Article by Kevin Savetz

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Copyright © by Kevin Savetz


A growing number of Web sites allow consumers to shop for insurance online. By letting their mouse do the walking, customers can seek out the best rates while researching firms and policies. At the same time, online shoppers can reduce the burden on agents and other customer-service personnel.

Customers can get quotes on health, life, auto, home, and other types of personal lines, sometimes within seconds of entering their information. All of the sites we looked at provide quotes to consumers for free. So how do these sites support themselves? They all earn revenue, in one way or the other, from insurance companies. Many receive a fee for each lead generated, or a commission on sales. Other sites are operated by traditional independent agencies as a way to generate leads.

InsWeb (www.insweb.com)

"Comparison shopping for insurance traditionally has been a difficult process. You've got to make numerous calls and talk with many people before you get a single quote," said Greg Berardi, vice president of public and investor relations at InsWeb. "So the one form, one time, multiple quotes process has really helped simplify the method of getting insurance."

After the potential customer enters his information, InsWeb instantly displays quotes from participating insurers. (Rate information is provided by those carriers, and resides solely on InsWeb's servers or is shared by the carriers and InsWeb.) Today, the company offers quotes from 21 automobile insurance carriers, 10 term life carriers, and 5 health insurance carriers.

The customer can press a button to forward the information to the insurance company that interests her. When the information is forwarded, InsWeb receives a transaction fee from the insurer. The company will not disclose the price it is paid per lead.

Leads may go to agents or directly to carriers. "It depends on the carrier's distribution strategy," Berardi said. "This is not about replacing agents-we help agents by delivering to them consumers that are ready to buy. They're not there to browse or surf, they are there to make a decision." Allowing the customer to enter her own personal information cuts down on inaccuracy and customer service time, he adds.

"Instant quotes are going to be the way the top sites provide information to consumers. Right now not everyone does this," according to Berardi.

"[Insurance-shopping] is well-suited for the Internet because insurance is a research-intensive product," he said. "Consumers feel more comfortable with purchases when they understand what the terms are and what the jargon is."

Insure One (www.insureone.com)

Not all quote sites generate leads to hand off to other companies' agents. Insure One is an online independent agency that uses its own agents.

"We're an insurance agency that has a complete relationship with insurance companies. Not only are we giving a rate, we can actually complete the transaction," according to Jim Hallberg, President/CEO of Insure One. The site allows Insure One to minimize the use of agents for the sales part of the equation. "The agent is there still to verify the transaction. He will make sure the underwriting is done and the coverage is bound," Hallberg said. For some transactions, the shopper doesn't know that a human agent is involved: "As we progress over the years it will become seamless," he said.

Hallberg believes the value to the consumer is the ability to shop for insurance from many companies without having different agents or lengthy forms. "What we believe people want is the ability to close a transaction without having to wait for an agent to call them or fax them information." Insure One expects to offer this service within 18 months.

"We get paid in two ways," Hallberg said. "One would be the traditional way: being paid by the insurance company on a commission basis." In these cases, Insure One remains the customer's agent. For companies that don't rely on outside agents, Insure One gets a one-time referral fee. The amount is usually a percentage of the policy premium--5 percent is typical.

"Some companies want us to remain as the agent. Other companies are looking to deal directly with the customer," he said. "There will probably be a lot of different types of relationships with insurance companies as we progress."

The site's database uses rate data provided by insurance companies or the Department of Insurance in various states, and verifies the information with a rating vendor. "As we progress over the next year, we'll probably be listing every company that we're licensed to write. Whether we have a relationship with them or not, we'll be quoting them," Hallberg said.

Creating quick, online quotes is not easy for all types of insurance. "Term life is the easiest to quote-there are just fewer variables," said Phil Moeller, publisher of Insure.com. On the other hand, "Auto insurance can have up to 250 variables influencing the quote for a particular consumer." Because of this, many sites offer varying support for automated quotes, depending on the type of policy the customer desires. (For instance, Insure One currently provides online quotes for auto, home, and life policies. It is not yet using the Internet to provide health coverage quotes.)

NetQuote (www.netquote.com)

While some quote services try to limit buyers' exposure to agents, NetQuote goes the opposite way. Instead of providing instant quotes via the Web page, NetQuote passes client information to human agents, who can send quotes via e-mail in as little as ten minutes.

According to Keith Lawton, NetQuote's president of operations, technical reasons make the site shirk from instant online quotes. Different insurance agencies' computers need data in different formats to compute a quote. Rather than creating an elaborate series of filters to make the data fit the needs of various systems, NetQuote passes it to more flexible human agents. "It's not in our interest to tune our computer to one company. Why bother when the agent force is out there already?" Lawton said.

NetQuote contracts with individual agents and directly with insurance companies. Companies and agents specify what geographic areas they cover. (NetQuote guarantees that no two agents selling for the same company will receive the same leads.) The number of quotes a customer receives depends on her location-customers receive a minimum of three quotes, with an average of about five. NetQuote's clients include 4,500 agents across the United States. "It's a slow growth thing. It takes a long time to get the whole U.S. covered, but it's growing," Lawton said.

Lawton's company was started in 1989, offering insurance quotes over the telephone. In 1995, the company moved to the Internet, which Lawton called the "next logical step." Like many of the other services, NetQuote does not sell advertising on its Web page.

For each lead generated by NetQuote, insurance companies or agents pay a fee of $3.00 to $9.00 depending on the quality of the lead; each customer is assigned a rating on a scale from one to ten. Agents can choose the quality of the leads they'll receive, focusing, for instance, on the best or worst drivers.

Quicken InsureMarket (www.insuremarket.com)

"The customer doesn't want to be a lead, he wants a policy. An insurance company doesn't want a lead, it wants a policy," Steve Aldrich, president of Intuit Insurance Services says. His site, Quicken InsureMarket, works with another service, Quotesmith, to offer instant quotes. But they aren't content to just provide leads. Neither site receives payment until the customer signs up for a policy-then Quotesmith receives a commission, part of which is passed to Quicken InsureMarket through a revenue-sharing agreement.

Quotesmith works directly with insurance companies or with agents. It uses rate tables provided by carriers and from public sources.

"Auto insurance can be purchased online because all the data you need to judge the risk is available electronically-the driver's claims history, credit history, and so on," Aldrich said. "Eventually health insurance will be the same way, as underwriting moves from a physical process to a data-driven process."

"What's difficult is explaining to the customer all of their options-there are deductibles, co-payments, and a whole realm of very difficult decisions that each customer has to make," he said.

Just as the Web has changed markets like books, music, travel, and securities, it seems poised to make some major changes to the way people-and companies-purchase insurance. These four companies represent only the tip of the iceberg. Major changes are clearly on the way. For now, though, online glossaries and help menus won't replace the helpful guidance of a flesh-and-blood agent.


Articles by Kevin Savetz