on September 14, 2014 by admin in Insurance Industry, Comments (0)

Meet The Small Business Hoping To Shake Up America’s Insurance Industry

Could a new small business finally give millions of U.S. consumers access to price comparison services that operate across the insurance industry – something consumers in other countries have been taking for granted for years? PolicyGenius, the firm in question, certainly hopes so.

Let us rewind a little. To consumers outside of Britain, the concept of ‘peak meerkat’ will be unfamiliar – in the UK, however, we must be reaching that moment. To the uninitiated – and this takes some explaining – the humble meerkat has been adopted by the marketing department of a financial services company: Compare the Market (market-meerkat – see what they did there?).

The company’s blanket advertising features an animated meerkat who expounds the virtues of what Compare the Market does for a living: the firm offers an online price comparison service that enables consumers to quickly find the cheapest prices for financial services and utilities such as gas, electricity and the phone.

Britain’s highly developed online price comparison industry is a marketplace where the barriers to entry are low – the technology is relatively simple – and as such winning share is essentially a matter of advertising spend and efficacy. Hence the ubiquitous meerkats.

Could this fellow be coming to the US insurance sector soon? (Photo credit: Wikipedia)

Could this fellow be coming to the U.S. insurance sector soon? (Photo credit: Wikipedia)

What’s remarkable, however, is that we haven’t seen price comparison services develop in the same way in the biggest financial services market of all, across the Atlantic. In particular, the U.S. insurance sector has no online price comparison service surveying it all, other than in healthcare.

It’s not as if there is no demand for such a tool. EY, the accountancy and consultancy firm, reckons 40% of U.S. consumers see price comparison services as the most important sources of information when they’re shopping for other types of financial service. And 39% say that the U.S. insurance industry is a laggard when it comes to service.

Enter New York-based start-up PolicyGenius, which reckons it has spotted a gap in the market. It has just launched the first shopping platform for pet, life, long-term disability and renter’s insurance and is promising to add new types of cover to the platform soon.

Jennifer Fitzgerald, the company’s chief executive, says the failure of the U.S. insurance sector to move towards the price comparison model is a legacy of its traditional modes of operation. “Insurance companies in the U.S. have historically relied on a huge network of agents to distribute their products,” she says. “They’ve been slow to embrace online distribution channels to avoid competing with these agents who drive their growth.”

Time is running out for the sticks-in-the-mud. “The agent salesforce that insurance companies have traditionally relied on is losing reach and relevance with its target audience – the average age of a life insurance agent today is 56 and about eight in 10 households in the U.S. don’t have an agent,” adds Fitzgerald. “So there’s now a burning platform for insurance companies to make online engagement easier.”

PolicyGenius hopes that burning platform will force insurers to engage with it – it needs their co-operation in order to successfully commoditize the policies they offer and, most importantly, to pay the firm commissions for the business they generate.

It will certainly help that Fitzgerald, whose CV includes a stint at McKinsey Co working with leading U.S. insurers, has established relationships with these firms. But she will also have to win over U.S. consumers who are more sceptical than many groups about online financial services.

The size of the prize, however, is worth fighting for. And if PolicyGenius can develop a model that works, competitors are likely to follow. We might even see those meerkats jump on a plane.

Article source: http://www.forbes.com/sites/davidprosser/2014/09/09/meet-the-small-business-hoping-to-shake-up-americas-insurance-industry/

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