Don’t close your briefcase just yet…
by John SarichMr. Sarich is VP of Strategy at VUE Software. He brings over 25 years of insurance industry experience to VUE Software. Visit here.
Business is in a constant state of innovation and change, and companies that can’t keep up or adapt will inevitably lose, in every sense of the word. They will lose customers, market share and ultimately close their doors. With the growing dominance of massive companies like Google and Amazon taking over in all facets of business, could insurance be next to on the list?
Large retailers selling insurance is not a new concept. In the post-WW2 era, Sears, Roebuck and Company was by far the dominant retailer. Witnessing their market dominance at the time, they eventually decided to dive into the insurance business and created Allstate. Along with Allstate, came a market-changing sales model: place Allstate insurance agents in Sears stores, and as Mom shops, Dad can buy insurance. Together, Sears and Allstate were very successful in selling everything from clothing, kitchenware, appliances, sporting goods, and yes, insurance. In short, Sears was the Amazon, the Walmart and the Google of the post-war era.
If it happened then, why not now? In short, times have changed. The insurance market is regulated, capital intense, low margin and commoditized. If you look at Amazon or Google for example, their business model is based on a high volume of transactions, where regulation isn’t a problem, and large amounts of capital is not tied up in the business. One area where Amazon and others excel is in how they handle commoditized products, which happens to be the area where insurance companies are struggling.
A varied product line
Insurance-selling varies when it comes to the product. An average person needs car, home and life insurance. By using a simple “dial-a-quote” model, it makes it very easy to sell these types of products on commerce sites like Amazon. However, other insurance products does not lend itself well to this approach. For example, some require a professional insurance agent or advisor who digest the needs of a client and suggest the right amount of coverage that is required. These agents work on a level of trust with the client that a big corporation such as Google or Amazon cannot achieve.
This side of the insurance business isn’t commoditized, rather it is highly specialized and requires specialized underwriting, products and service. It is highly doubtful that someone would trust anyone other than a professional insurance advisor to develop their estate plan. Or, for example, when legislative mandates like the Affordable Care Act bring about changes within the industry, agents are inundated with calls about plans, coverage or deductibles. Essentially, when an insurance plan becomes complicated, customers want to hear from an advisor or agent, not Amazon or Google.
Overall, shifts in buyer behavior show certain personal lines and voluntary life and health insurance are products that can be mass marketed, as they have been for many years. But, for an Amazon or a Google, they would have to need to personalize the business by drastically increasing their level of staff, which would essentially be departing from what has made Amazon and Google successful in the first place. However, that isn’t to say that changes in how insurance products are distributed isn’t in the future. Certainly, Sears proved that it could be done. In fact, the insurance company they created ultimately had more value than did the retail side of Sears. Could it happen again?