Competition watch: Turnkey insurance agencies
Insurance agents will need to work harder to earn customer loyalty as new entrants encroach on traditional distribution channels. Research earlier this year shows that up to 67% of insurance buyers express openness to buying policies from nontraditional sources like Google and Amazon. (See: The "Switching" Economy: Consumers Open to Buying Insurance from Google, Amazon, Verizon)
Worse, the threat is not a future one: Walmart recently began selling auto insurance online. While policies are currently only available in 8 states -- Arkansas, Louisiana, Mississippi, Missouri, Oklahoma, Pennsylvania, Tennessee, and Texas -- Walmart says it intends to expand, both geographically and in the number of carriers that it represents. According to the Insurance Journal article, "The new arrangement provides an auto insurance comparison service through the AutoInsurance.com website from national insurance carriers that include Progressive, Esurance, Safeco, Travelers, and 21st Century."
And this past month, retailer Overstock announced that it is selling small business, auto and home insurance through a partnership with Insuritas, a provider of private-label insurance agencies. In Insurance Journal, Amy O' Connor's articleÂ Insurance Agents Urged to Follow Overstock.com, Insuritas Online Sales Model reports in that:
Coverage is provided through major carriers, including Safeco, that have been secured through Insuritas, which handles all of the agency and policy details for Overstock, including the technology, call center and policy binding.
Insuritas has been providing insurance agency functions to banks and credit unions nationwide for the last 15 years but this is the first retailer it has worked with. Jeff Chesky, CEO of Insuritas, says what is different about this arrangement compared to its partnerships with banks and credit unions is that Overstock.com owns the agency and policies while Insuritas provides the backroom services, operational infrastructure and products.
In Agency Checklists, Owen Gallagher takes a closer look at how Overstock.com was able to set up a nationwide insurance agency in under 120 days in his article, Will "Turnkey" Agencies Hurt Local Independent Agencies? He delineates the services that Insuritas provides to Overstock and looks at Overstock's prior failed foray in the insurance market. He also discusses the Costco model, Costco Insurance Agency, a multi-year distribution agreement with Ameriprise Financial to market personal lines insurance to customers in 43 states.
There will be many eyes watching these efforts - early successes or failures may set the trajectory for future efforts. One thing appears clear: Insuritas does not plan to slow down. CEO Chesky says, "We will learn how to do adopt the best practices of e-commerce and retailing from Overstock and apply that to other partnerships."