One of the most recent “firsts” in online insurance transactions is the opportunity for consumers to actually bind homeowners policies online.
Homesite Insurance holds the distinction of being the first company to allow visitors to both obtain quotes and purchase homeowners and renters policies in a single visit to its Web site, Homesite.com, which went live in April 2000.
However, hot on its heels is YouZoom Inc., which expects to be offering homeowners products for online purchase through the YouZoom.com Web site by Aug. 1, 2000.
Fabian Fondriest, president of Homesite Insurance, described his company’s main marketing strategy as partnering with financial institutions, in particular, monoline auto insurers and mortgage companies: “To partner with these large companies, you need a nationwide presence.” While Homesite is currently selling in eight states, Fondriest plans to expand into 20 states by the end of July and to be in at least two-thirds of U.S. households by year’s end.
To that end, Homesite recently signed a contract with GMAC Insurance, the insurance arm of General Motors Acceptance Corporation, to be the exclusive homeowners underwriter for the company’s direct auto and home insurance business.
“Our primary business approach is the direct model, but with partners like this that operate through independent agents, we can structure a product that works for the independent agents as well,” said Fondriest, who indicated that discussions with GMAC include future plans to offer the Homesite program through GMAC’s network of approximately 15,000 independent agents.
“We have different targets for different customer groups starting in the summer. Probably by the end of July, we’ll have transacted our first GMAC-related business. They have about $30,000,000 of homeowners business right now.”
YouZoom started with a somewhat different approach.
“The YouZoom network enables independent agents to market, sell and service various forms of insurance online,” said Jerry Batcheller, executive vice president of YouZoom. “Independent agents can join the YouZoom network, and we will host their Web site. There are 131 agents live right now, able to sell auto instantly online.” The YouZoom network started in California and is expected to be in six more states by the end of 2000.
Both companies estimate that the process, from quote to application to bind, takes no more than 15 minutes.
“To get through both the homeowners and renters piece, we like to think we’ve trimmed down and simplified the process before even thinking about putting it on the Web,” Fondriest said. One major difference between the two, however, is what happens after the credit card information has been entered, and the consumer hits “Bind.” In the case of Homesite, there is a 72-hour waiting period before the transaction can be fully completed, whereas with YouZoom, the customer can bind immediately.
“If you need the policy for some reason before [the 72 hours], let’s say you had a closing tomorrow, and you forgot to get insurance, for that one you’d have to call us,” Fondriest said. “We actually go out and verify the information that was put in, particularly about claims history. That’s the one thing that’s not actually happening online that will become part of our online process…For obvious reasons we want to put in a little delay. If someone broke into your house today, you could buy something in theory after the event on the same day.”
On the other hand, Batcheller indicated that for YouZoom, the advantages to the consumer of binding immediately outweigh such considerations. “There are obviously underwriting situations we take into account,” he said. “But from a purely consumer-driven base, if someone is closing escrow on a house right now, you need insurance before you can walk away with the keys.”
With respect to the possibility of a consumer making false representations on an application, Batcheller drew on his company’s experience so far with selling auto policies online to come to the conclusion that most people “tend to be very honest when they’re putting their own credit cards in there. The reliability of the data has been very high on the auto side, and we expect that as well on the homeowners side.”
While it is still too early in the game for statistics that definitively show how quickly online sales in this line can be expected to grow, certain buying patterns are already in evidence.
For example, Fondriest notes that while many people may go to Homesite and get quotes onsite, “[w]e see that’s one place where people tend to stop. They’ll do the quote online and some people will continue and buy, but others will get off and call and talk to someone [at call center] before they’ll actually finalize it.” Fondriest added that while he’s not sure if that would be considered an online sale or not, in the strict definition of the term, for Homesite, it is a good process providing a quote online costs less than providing a quote from a call center.
On this point, Batcheller concurred. “People may not initially buy online, but they are influenced by the online offering. It becomes in essence a lead generator, or an Internet-influenced sale.”
On another point, Fondriest estimates that 75 to 80 percent of renters do not buy insurance. “That’s a market that we have a very good product for, particularly the urban market renters who, from our research, all tend to be shopping online for various products,” he stated. “Part of it’s getting the process a little more efficient, but another part of it is: where does that homeowners online purchase take place? I don’t think there’s going to be huge penetration for a company that just wants to be pure monoline, without any partners, selling just homeowners whether on or off the Net.”
Batcheller said YouZoom encourages independent agents to go out and make relationships with escrow agents or anywhere else where there’s a great need, particularly for first time homebuyers. As an illustration of the importance of doing this, he indicated that some of the larger escrow agents he has talked to estimate that about 30 percent of those first time buyers do not bring evidence of insurance when going through the sales process. This necessitates stopping the transaction, going out to find an agent, getting the insurance and then coming back at a later time to try to close.
However, if an independent agency has instant online binding capabilities, proof of insurance can be offered immediately.
According to preliminary estimates of pure online transactions, Fondriest said Homesite is currently doing about 500 quotes per week and has sold a little more than 500 policies since going live in early April.
“One of the things we’re doing is testing our systems and our rates to see how competitive we are,” Fondriest continued. “Where we want to start writing in the thousands and tens of thousands of policies is through partners because there are a lot of advantages to that in particular marketing and acquisitions costs. To get someone to come to a site, you have to spend dollars the way a lot of the dot-com companies are spending them.”
“Everybody’s working on it and trying to figure out the Internet distribution model,” Batcheller said. “There are tech issues which everybody has to catch up to. There are distribution channel conflict issues with some people…We believe that agents add value to the transaction, so that’s why we give this technology to them and let them have the value of it.”
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