Silicon Valley is building the new-world insurance agent. By doing so, they are disrupting all layers of the insurance supply and demand chain and changing the value proposition. We have been talking about online innovation here on the blog in the healthcare sector for a long time, but now it seems venture capitalists are taking aim at the tried and true personal lines industry too.

We’ve known for some time that the old fashioned way of conducting business in insurance – through the person-to-person buying experience of working with an agent (imagine that) – is going away as everything increasingly goes digital. Companies like Esurance target millenials and boomers who are increasingly tech adept, to buy and service their insurance online. The upside? Better savings, quick and easy service, no wait times or agency office waiting rooms. Insurance carriers who lack urgency when it comes to their online presence and functionality will have difficulty capturing future, younger buyers who won’t give the time of day to companies that don’t offer Internet-based transactions.

So let’s take a look at the industry, its main challenge (it won’t be a surprise) and the new players that are turning the industry upside-down.

Fraught with issues, ripe with opportunities

The insurance industry accounts for 7 percent of U.S. GDP, with more than $1.1 trillion of net premiums paid annually. Insurance agents are under the most visible attack because the profession has not changed or adapted since your grandfather was in the business of buying a policy. Buying a policy is predominately still a pre-PC experience- from quote to contract.

So how far behind the times are insurance companies? In a study of the top insurance websites, just over half of the websites helped to locate an agent.  None offered an online chat function with an agent, and only 10 percent offered a visitor online chat functions with a customer service representative. Carriers are definitely missing out on a tremendous opportunity by not offering self-service on websites.

So what does the agent industry look like today?

There are 1 million insurance agents in the U.S. today, notably the most in history. This despite the fact that the profession is largely replaceable using software. And software that works remarkably well, mind you. Why are agents still of value? Agents sell nearly 100 percent of commercial policies. And, on the personal lines front the numbers are still quite high, selling 95 percent of home policies and 70 percent of auto policies.

Why haven’t brokers gone by the wayside yet? The answer is simple: channel conflict. Carriers cannot turn their backs on the agent and go direct-to-consumer without the risk of offending their agent networks. And, based on the numbers above, with good reason. Not only is existing business at stake, but there is the ever-important referral-business. Insurance is still in large part, referral-based, with the insurance company of a family usually being passed between generations, and claims experience handling being a continued driver of referrals (when all goes well). The issue of carriers not wanting to offend this essential channel is so important that most carriers do not allow consumers to purchase insurance online making them purchase through an agent instead. As many of you already know, to keep the peace with agents most carriers will provide an online quote, then direct you to the nearest agent – not an online checkout.

Driving a consumer from online to a retail location can be a nerve-wracking experience for a consumer. Especially when they can start a quote online, but then need to wait for a designated agent to call them back to complete the process. That’s an experience that just happened to me when buying a new car. I required my new insurance card to pick up my car and when unable to get one that same day it delayed my picking up my brand new car, resulting in a very unhappy customer.

Online engagement opportunities that still involve the agent

Direct sales may cause friction with the agent base, but that doesn’t mean insurers shouldn’t be thinking of a way to engage customers in a hybrid or semi-direct way to encourage increased sales. Carrier websites are still more informational than transactional with regards to marketing and sales. Real-time online is not the norm. When’s the last time a window popped up on a carrier-site asking consumers, “How may I help you?” Nor have insurance carriers embraced self-service for basic functions such as address changes or online billing. Portals offer only limited functionality.

There are new sales opportunities for carriers who are afraid to alienate the agent population. These could be opened with more robust agent engagement through effective lead generation created by online help, and by offering to find an agent for prospects through agent contact and chat sessions – much like most online retailers today.

Online intermediaries

Insurance carriers’ channel conflict is technologys gain. Online intermediaries like PolicyGenius, The Zebra and Insurify have emerged with venture funding and a mission to sell insurance online. With 50 percent of consumers beginning their insurance research online, this is a natural fit. See the sidebar below for more information about this important research period and why it’s important you pay attention. These online originations actually have a much cheaper cost of acquisition than an insurance agent, allowing the carrier to compete with lower prices and higher underwriting losses. But these originators cannot yet transact policies directly, and still pass the consumer to the respective insurance provider to complete a purchase.

Look overseas and you’ll find plenty of examples where online policy origination is slowly taking over in other countries, so this may be in our near future. In the U.K., for example, more than 50 percent of auto policies are originated online, and India has adopted a largely direct-to-consumer model with much success.

On-demand insurance?

But policy comparison is not the only place where online is playing an important role in the industry. Some new players are vowing to shake up our stodgy industry by offering new and innovative ways to quote and write policies, or even micro-policies, just when they are needed.

Cover built an app that quotes insurance for any personal property (jewelry, car, house, drones, etc.) based on a picture of the object. It’s a compelling solution that lets consumers interact with insurance in a very different way. “Today’s brokers are not suited for mobile-sourced customers who expect instantaneous results from interactions: namely quotes and the ability to convert,” says Cover CEO Karn Saroya. “Our goal is to do more for the mobile consumer, because they expect more. If they have downloaded our app and entered their information, their intent is very strong and we want to satisfy that intent.” Saroya also mentioned some fun and creative requests that Cover never envisioned, like people taking selfies to try to get a life insurance quote or insuring a racehorse with a snapshot: a glimpse into the possible future.

Soon, with the introduction of on-demand insurance, you’ll be able to insure your laptop, skis, bicycle or other possessions, for however long you like, with a single swipe in the app. Trov is an app that keeps track of the aforementioned valuable possessions. Now Trov has built an entirely cloud-based, end-to-end mobile insurance platform.  Premiums for these micro-duration policies are paid in-app, and claims are filed using a simple, mobile chat interface. Now available in Australia, the site will launch here early next year.

Trov CEO Scott Walchek explains, “Trov’s on-demand insurance gives unprecedented control to the mobile generation — empowering them to protect just the things that are important to them, whenever they want, and for as long as they need — entirely on their smartphone.” This is only the beginning of what could be possible after on-demand insurance is introduced in the market. In the future Trov might enable people to insure their things by date, (skis are insured during winter), locality (laptop insured when it leaves the house) or by event (golf clubs insured when traveling). Fascinating stuff!

This spotlight is on consumer insurance, but commercial insurance also presents a large opportunity. Embroker is a tech-enabled commercial broker built on the premise that it can serve small and medium businesses better than the status-quo insurance broker. “Broker workflows and processes are all manual in nature. Because manual processes don’t scale, smaller customers receive worse service outcomes,” says CEO Matt Miller.

Embroker is currently focused on improving efficiency, transparency and user experience of commercial insurance for SMB clients. “Brokers serve as market makers, but each individual broker manually calls or emails carriers based on their intuition about which one will be a good match. It’s an extremely inefficient market,” says Miller. Embroker uses predictive analytics to recommend coverage and optimize pricing. Clients save time and money, and get coverage that is better suited to their actual risks.

In closing

As reported by TechCrunch, incumbent carriers are asleep at the wheel of innovation and will likely stay asleep for the next few years. But taking a selfie to get life insurance is not far away. The innovation will need to come in order to meet the demand. New carriers will be born out of this need and incumbent carriers will be forced to catch up, innovate, or be left in the dust.

Sidebar: Insurance research, it starts online and why mobile is key
As reported above, very few insurance-related conversions happen there since most companies will not direct write online. But it’s important to note that mobile and smartphones were a critical element in the consumer research process.
Let’s look at the facts:

  • 50 percent of consumers begin their insurance research online
  • 40 percent of insurance research time was spent on mobile devices (smartphones, tablets)
  • 25 percent used mobile devices exclusively in their research


  • Not optimizing your website for mobile and tablets could have devastating consequences for your new policy acquisition rates.
  • Marketers neglecting mobile search, whether it be organic or ads, are potentially missing out on leads and opportunities to reinforce their brands and messaging with mobile and mobile-first users.

With some reporting from Tech Crunch and Peter G. Colis.