Creating anything less than an online agency directly offering bindable insurance rates from a limited selection of carriers won’t cut it for technology companies trying to disrupt insurance distribution, an instech executive said recently.

Speaking at the Casualty Actuarial Society’s Spring Meeting in Seattle on Tuesday, CoverHound Chief Executive Officer Keith Moore provided some tips for disrupting insurance distribution, including narrowing down carrier choices for consumers. During the session, which was live-streamed to an online audience, Moore also revealed that CoverHound, an online agency for auto, home and small business insurance representing over 30 carrier partners, is working to develop an online presence to deliver cyber insurance—a line flooded with carrier and policy choices—to small businesses.

Moore suggested that innovation in insurance distribution isn’t about changing existing channels and isn’t even about offering digital insurance quotes without advice, noting at one point that consumers not only want someone to whittle down carrier choices for insurance policies but also to help them make the final carrier and quote selection.

Starting his presentation with a list of distribution channels that haven’t changed in 50 or 60 years—direct-to-consumer, agents, MGAs, brokers and captive agents—Moore said, “I don’t see these changing, [but] what I do see changing are consumer expectations and how people engage.”

Like many speakers on the insurance conference circuit these days, Moore said that customer expectations are being shaped by the Amazons and Netflix’s of the world. But the specifics about the Amazon customer experience Moore cited were a bit different.

If Amazon said the price of a hammer was $9 while an online shopper was loading his cart, and then hiked the price to $33 at checkout, that customer probably wouldn’t come back, he explained. He also imagined a frustrated customer who booked a hotel on Expedia at an offer price of $400 per night, which later turned out to be $900. “That’s a horrible shopping experience,” he said. “That’s exactly how auto and home insurance is working today on the web.”

Moore noted that one reason for this is that more than half of online shoppers (52 percent based on a CoverHound study of its quote volume for two years) provide incorrect information during the shopping process. It is not necessarily because they are lying but simply because “they don’t know how to answer the questions accurately enough to get to a bindable rate.” (See related Insurance Journal article, “Half of Insurance Shoppers Giving Inaccurate Information.”)

To combat the problem, online insurance agents can use third-party data sources, such as DMV reports. Although this gets expensive, it prevents putting customers in a situation where they fail, Moore said. “Don’t ask them how many claims they’ve had. Just get them to verify how many claims they had. Don’t ask them how many tickets they had. Just get them to verify how many…That makes for a better customer experience.”

Four Trends

“Having a bindable rate” is one of four trends that distribution disrupters are following, Moore said, as he showed a slide also listing the other three:

• Continued Mobile Growth
• Ability to Cross-Carrier Bundle
• Highly Integrated Purchase Process

“We’ve got to be mobile-ready as an industry. If we don’t make this transition within the next year, a lot of carriers will suffer,” he asserted, noting CoverHound’s ability to do that for carriers that find they can’t move fast enough.

At one point during his presentation, Moore revealed that CoverHound delivered over 250,000 quotes in conjunction with a GoogleCompare partnership that was in place between March 2015 and March 2016. “Nearly 60 percent of those shoppers coming from Google were mobile. The reason we were able to convert at such a high rate—five- or six-times more than anybody else that was performing on the platform—was the fact that we had a very mobile-first built product,” Moore said.

Referring to the ability to bundle insurance across carriers, Moore said that customers “don’t understand if you’re an independent agent or you’re a captive agent, why can’t you have one transaction with multiple carriers involved.”

Like booking a flight, hotel and rental car from an online travel booking site, “if I have a great auto insurance offering from one carrier, a great home insurance offering from another carrier, and small business [or] umbrella from another, [then] being able to bundle the three and make it one seamless transaction is what customers expect today.”

“If they don’t get that, they get very upset…We know that because we get zeroes on our net promoter scores as soon as that’s not possible,” he said, referring frequently to NPS as the measure of success for online agencies.

Explaining the reference to “highly integrated purchase options” on the list of distribution trends, Moore gave the example of a car-buying customer of AutoNation using the auto retailer’s AutoNation Express online tool to buy a car without ever having to talk to a sales person on the sales lot. “They want the option to buy insurance as part of that transaction. They do not want to speak to somebody about that,” he said, explaining that online insurance agents need to customize experience of potential market partners like AutoNation. “These marketing partners…don’t want you to disrupt their current marketing funnel, but they also want you to add value to the current transaction,” he said.

Moore noted that CoverHound has a partnership with Redfin, a web-based real estate company. “If you’re on Redfin and looking for a mortgage or a new home, that insurance shopping process is going to be very different from someone that’s just on Google and typing home insurance as a search term,” he said, explaining that online insurance agents with the very flexible systems and powerful application programming interfaces will soar ahead of the pack—making questions for consumers and third-party data populations “very seamless and very behind the scenes so you can transact with the consumer whether it’s on a smartphone, at a desktop level or in a call center.”

From Lead Aggregators to Online Agencies

Referring throughout the presentation to his own personal past experiences as an executive for IAC/InterActiveCorp. (which has had ties to online lender LendingTree and to Expedia) and to lessons learned at CoverHound, Moore began his talk by distinguishing three different types of aggregators in the current insurance distribution landscape: lead aggregators, insurance search engines and online insurance agencies.

The existing channels (direct, agency, etc.) have used aggregators for nearly two decades, he said, scoring the three different types of aggregators on three dimensions:

• The availability of multiple providers, common to all three.
• Real-time rates, available from insurance search engines and online agencies only.
• Direct fulfillment with bindable rates, available only from online agencies.

Lead aggregators basically sell phone calls and data leads to an independent agent channel, a carrier direct channel, or MGAs and brokers and captive agents. For the customer, the “experience turns into 18-20 phone calls literally within 24 hours of hitting submit on a website.” Or a customer that gets a call from a call center asking if he or she is interested in switching and saving on car insurance might end up “getting 18 calls from agents,” some of whom represent the same carrier.

Turning to the “insurance search engine” aggregator category, Moore offered his firsthand knowledge of GoogleCompare as an example, noting that CoverHound was part of the 2015 GoogleCompare launch and “enabled 80 percent of the technology that allowed that platform to go live for insurance.”

“We ended up writing the majority of policies that were coming through that platform,” he said. (GoogleCompare went dark earlier this year. See related article: “Exclusive: Google Reportedly Will Shut Down Online Insurance Site.”)

“The good thing with the insurance search engine is you go a little bit further into customer expectations. They’re actually starting to see rates,” he said. But the GoogleCompare/search engine idea didn’t quite hit the mark on bindable real-time rates “because the interview process is not as deep and not as detailed as the consumer is expecting.

“So a lot of rates that they’re seeing, for about 60 percent of consumers that get those rates, end up changing anywhere from 20-80 percent on the back end. [That’s] still not a great consumer [result] considering the expectation they have from an Amazon or a Netflix or a Zappos,” Moore said.

CoverHound was founded on the concept of being “a trusted advisor for curated choice,” he said. “We don’t want to inundate a shopper with too many choices,” he said. “Even though we work with a great number of carriers on the back end, we curate that choice down to two to four,” Moore said, recalling his experience at Lending Tree. “The No. 1 thing that shoppers would say to us [at Lending Tree] was ‘thank you narrowing down from 600 lenders to four. But the thing I want you to tell me is which one should I select. I see the options that are here, but I still don’t have an idea of who I should select.”

Moore continued: “This is where predictive modeling and behavioral economics comes in to [advise customers that] shoppers like you are making decisions like this. And that is where CoverHound nails it from a car insurance, home insurance and soon small business perspective.”

As “a side note,” Moore revealed, “we’ll be launching a new brand later this year called CyberPolicy at cyberpolicy.com,” which will be “specifically focused on cyber insurance and the needs of the small business owner in a digital world that it’s exposed to.”

He went on to talk about the biggest value that CoverHound brings to customers as an online insurance agency. “Our bread and butter [is] online binding and end-to-end fulfillment.

“Even though we represent multiple carriers on the back end, we feel like having that full end-to-end experience that we can consistently deliver the exact same experience over and over and over again regardless of the carrier that’s on the back end [is] important to us because our No. 1 metric is our net promoter score.”

Moore listed NPS-driven cultures as one of six success factors for building a digital insurance agency of the future.

Expanding on some of the others, he said that CoverHound works to develop a “proven end-to-end experience” by giving carriers direct feedback from marketplace data and from transaction and process data, allowing them to discover “how to better deliver e-documents” or auto insurance ID cards, for example.

The customized experience concept on Moore’s success factors list relates to his AutoNation and RedFin examples. Since CoverHound doesn’t have a multimillion-dollar advertising budget—”like the top six carriers in the auto insurance space”—the only way we build a brand is through customer experience. That customer experience is not only an extension of our own website, but it’s with the marketing partners we work with,” he said, noting that CoverHound could potentially vary interview forms and online experiences “1,000 times across 1,000 different marketing partnerships.”

Building an NPS Culture

At the end of every shopping experience or policy purchase, CoverHound asks what Moore referred to as “the ultimate question”—How likely are you to refer us to friends and family?—to determine net promoter scores.

Providing the actuaries with the NPS calculation shown below, Moore said that NPS data provides insights allowing CoverHound to fine-tune its processes, change questions asked (or not asked) of customers, and even decide which third-party vendors to use to fill in policyholder data.

NPS = (# promoters – # of detractors)/ total #of respondents, where promoters score 9 or 10 (out of 10) and detractors between 0 and 6.

“Being an NPS company is not easy,” he said, listing five key strategies to deliver great NPS results:

1. Build an NPS culture.
2. Hire true believers, or people that want to serve and exceed customer expectations.
3. Incentivize properly from management down to an agent level. “Everything you incentivize for has to be NPS-driven,” he said.
4. Close the loop. In other words, use the NPS data and flow it through to product, marketing and technology teams in real time to optimize the website and customer experience.
5. Put NPS data points in front of everyone in the company equally and make them highly visible.

Offering some other measures of success for CoverHound, Moore said that the online insurance agency sold over 60,000 policies in the last two years and that the fastest quote-to-bind time was 109 seconds on the web.

With all the quote data, he added, “we’re able to build really robust APIs and web services that can quickly give marketing partnerships estimations and quotes for auto insurance, home and ultimately small business.” At one point, Moore noted that CoverHound-estimated rates for auto insurance are also available on Twitter.

“If you tweet to CoverHound and just put in a few data points, we’ll literally deliver back a real estimate in 25-60 seconds,” he said, noting that the Twitter tool doesn’t generate a lot of sales. “It’s fun to show off at events like this,” he said without actually demoing it. He did show a slide that indicated the data points requested by the Twitter engine: year, make, model and style of car; ZIP code; and yes or no questions headed, “Home Owner,” “Married” and “Clean Record.”

(Editor’s Note: Testing this estimator out on CoverHound’s website, Carrier Management found that each answer moves the needle on an estimated rate/month gauge that looks like a speedometer. But a customer would have to click a “compare rates” flag below the questions to be asked for more information—ownership, use, miles driven, etc.—to get to bindable rates.)