To the list of jobs threatened by the Internet, add one more: insurance agent.
Technology startups and companies from the insurance industry are introducing Web sites that sell or promote a range of insurance, including auto, homeowners and small commercial policies. These portals, which promise savings by showing consumers many price quotes so they do not have to shop site by site, are putting pressure on insurance agents, who collect 10 percent or more of their policyholders’ payments.
Online insurance comparison is still a nascent business, and it has yet to make a dent in the armies of intermediaries that are the backbone of the trade. However, people in the insurance industry and Silicon Valley say it is only a matter of time. Even Google is getting involved.
“There are 40,000 agencies in the US, and you could absolutely imagine them shrinking by a quarter, and the ones that are left will deal with more complicated needs and more affluent customers,” said Ellen Carney, an analyst who covers the insurance industry for Forrester Research.
The idea of selling insurance online is not new. Lately, though, the boring, but lucrative trade has been attracting big names. The most recent is Google.
Its Google Compare auto insurance site — basically a search engine for auto insurance prices — has been operating in Britain for two years, and Google is working on something similar for the US. Google is licensed to sell insurance in about half of the states, according to research by Carney.
Google has formed a partnership with Comparenow, a US auto insurance comparison site owned by Admiral Group, a British car insurance company that has operated a European price-comparison site for more than a decade. The venture will give Google access to insurers in Comparenow’s network.
Admiral Group introduced Comparenow about a year ago. Not long after, Overstock.com, an online retailer, started selling insurance, including auto, homeowners and small business policies.
Then there is Wal-Mart, which does not sell insurance, but recently formed a partnership with AutoInsurance.com. The insurer leases space in Wal-Mart stores, giving it access to the 140 million people who shop at Wal-Mart each week.
These companies are joining startups like CoverHound, a San Francisco company that allows consumers to compare and buy auto insurance online, and PolicyGenius, a Brooklyn company that sells products including life, renters’ and pet insurance.
Some of these companies, like CoverHound and PolicyGenius, are online insurance agencies. Others, like Comparenow, send traffic to insurers and get a finder’s fee whenever someone buys a policy. However, in all cases, they are pressing Main Street agents by automating the process and showing insurers’ prices side by side.
“A lot of people are waking up to the fact that it’s a massive industry, it’s old-fashioned, they still use human agents, and the commissions are pretty big,” PoliceGenius founder and CEO Jennifer Fitzgerald said. “It’s ripe for — I hate to use the word — disruption.”
Insurance is a fat target. In 2013, insurers wrote US$481 billion in premiums for property and casualty insurance, which consists of mostly auto, home and commercial insurance, according to the Insurance Information Institute, an industry group.
That would place a rough estimate of agents’ commissions — including commissions to small-time agents as well as to brokers who sell large commercial policies — at US$50 billion. And while it might seem like an odd match for Google, whose projects include driverless cars, delivery drones and a pill to detect cancer, the key to insurance is having lots of data about people’s backgrounds and habits, which is perhaps the company’s greatest strength.
“They have a tonne of data on where people drive, how people drive,” said Jon McNeill, chief executive of Enservio, a Needham, Massachusetts, company that makes claims-processing software. “It’s the holy grail of being able to price auto insurance correctly.”
D.J. Rodrian, a second-generation owner of Rodrian Insurance in Brookfield, Wisconsin, is at least paying attention.
“It should worry any agent when a megacompany like Google, with all the personal information that they have about people, is getting into your industry,” he said.
While Rodrian said he was not worried about going out of business, he said his most vulnerable customers are the quarter or so of policyholders who only carry auto insurance. Many of his other clients have comprehensive policies that are woven into everything they own, which makes them far less likely to leave.
“Consumers don’t have a great understanding of insurance,” he said. “They don’t find it an interesting thing to educate themselves about. They do get comfort in the advice of a professional.”
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