Abstract: It has become widely accepted that financial services convergence and the popularity of the Web will almost certainly create change for the insurer-agent relationship. It is the acceptance of that notion that led Answer Financial Inc., a licensed insurance broker in 50 states, to build a complete digital front end that links consumers directly to the products of 57 insurance companies over the Web or the telephone. AFI is pioneering what may be a new breed of tech-savvy brokers that can offer carriers electronic bridges to new distribution.
Full Text: Broker builds an e-commerce infrastructure for insurers to offer their wares, reports Virginia Kean.
It's become widely accepted that financial services convergence and the popularity of the Web will most certainly create change for the insurer-agent relationship.
It's the acceptance of that notion that led Answer Financial Inc. (AFI, Canoga Park, CA), a licensed insurance broker in 50 states, to build a complete digital front end that links consumers directly to the products of 57 insurance companies over the Web or the telephone.
Founded in 1997 to address the problems consumers face when buying financial services, AFI is pioneering what may be a new breed of tech-savvy brokers that can offer carriers electronic bridges to new distribution.
Last October, AFI launched the Insurance Answer Center (IAC), its Internet- and call centerbased insurance shopping service. The IAC's Web site is the only insurance site that is tightly integrated with a toll-free customer call center staffed by licensed insurance representatives who can provide complete pre- and post-sales service.
Through the IAC, consumers get unlimited free quotes and can do side-byside comparisons on prices, companies and insurance company ratings. "For the first time ever, consumers can get realtime on-line product information and comparisons across the auto, life and homeowners insurance and annuity marketplaces," says Alan Snyder, AFI's chairman, president and CEO.
"The IAC is acting as the nexus between the consumer and insurance providers," he says. "We're giving consumers enormous amounts of information, plus the ability to comparatively and competitively shop 24 hours a day, seven days a week over the Web or telephone." AFI markets the IAC to large employers and affinity groups, while soliciting the participation of carriers. "We're the only company that does on-line quoting for annuities and auto in all 50 states for all the different carriers," contends Snyder. "Nobody in annuities can listen to the consumer, take what they want to a database of annuities and give them choices in rank order in real time." And, unlike other insurance Internet sites that require customers to contact the insurance company directly, IAC's full-service team represents the customer's interests through the entire process, from pre-sale needs assessment to purchase of a policy and post-sale service.
The IAC's NT-based platform was built with the help of Sapient Corp. (Cambridge, MA) and Hewlett-Packard (Palo Alto, CA). Sapient developed the proprietary software that acts as the connective tissue that integrates customized software with existing vendors and agency management packages.
At present, the IAC site has more than 2,900 pages of content and more than 20,000 user-specific bits of information. It incorporates more than 450 "Frequently-Asked Questions," as well as 900 insurance-related dictionary terms.
The IAC site can provide real-time quotes within seven to 12 minutes. Customers get personalized information "pushed" to them as they go through the quoting process. The IAC also can accommodate more than 1,200 agents, handle approximately 300 calls per hour and support distribution of non-insurancebased financial products, such as mortgages and mutual funds. It also is able to simultaneously integrate carrier updates into the quote engine, the Web site and the call center application.
"IAC is setting the standard for electronic delivery of insurance products," says Doug Chisholm, insurance industry manager in HP's Financial Services business unit, which is providing the HP NetServer systems to support the service.
And, according to Snyder, AFI's model will radically change how Americans evaluate and buy insurance. In his view, the question for insurers is how to regain market share and grab greater mind share of the consumer-areas where insurers are losing ground to other financial intermediaries. "The cost structure is cumbersome, expensive and unfriendly," explains Snyder.
"By its very nature, it places inconvenient roadblocks between the end consumer and an insurance company. "Escalating costs are compressing profit margins," he continues. "So if you base your price on higher costs, you'll further weaken your market position vis-a-vis other financial institutions." In Snyder's view, the alternative is to use technology not just to change unit cost, marginal cost and absolute cost structures in the industry, but to pass the benefits of those cost savings as well as the resulting process improvements on to the consumer.
Gary Craft, electronic commerce research analyst at BancBoston Robertson Stephens (San Francisco), agrees. "Pricing is the most effective weapon to win market share," he claims. "Approximately $54 billion in distribution expense is pure waste across the industry, but the Internet will allow the pricing structure to migrate to more low-cost providers." [IMAGE PHOTOGRAPH] Captioned as: Insurance Answer Center can save life and annuity firms 30 to 40 percent on expenses, says Answer Financial's Alan Snyder.
"Insurance companies, affinity groups and employers are moving quickly to sign up," claims Snyder. "Employers and affinity groups get real benefits for their constituents with no direct costs, while insurance companies are gaining entree to the efficiencies of workplace marketing and the cost savings of advanced technology." AFI selects insurance companies based on product, independent third-party rating, customer service quality and technological capability.
What's in it for insurers? There's no charge for participating. And besides a digital front end, they get an integrated platform with full digital back-end processing-a network with end-to-end EDI. "With this interface, life and annuity companies can save approximately 30 to 40 percent on expenses," claims Snyder, "while property and casualty providers can save eight to 10 points out of their combined ratios." [IMAGE CHART] Captioned as: The IAC's NT-based platform was built with the help of Sapient Corp. and HewlettPackard.
Perhaps more importantly, AFI's 57 insurance carriers get access to hundreds of thousands of potential customers. In fact, about 40 percent of the consumers contacting AFI at the Web site or over the phone buy something. "We're not interested in hits, but in how many people actually transact business with us," says Snyder.
As Craft sees it, IAC is the first agent to take advantage of the Internet, tightly coupling it with a customer call center. With the ability to quote across 57 carriers with a breadth of product lines, AFI's model may disintermediate the traditional agent. "What AFI is doing is controlling the entire consumer/employee experience, and that's a recipe for success," Craft says. Snyder, however, feels that the market is big enough for both approaches.
"Traditional insurance agents will always play a role, but will have to do more and be better," he says. As Internet delivery becomes more accepted, both expect an upswing in competition.
Today, there are just two other players competing with IAC.: Consumer Financial Network (Atlanta) and Insurance Holdings of America (Beverly, MA). "In industries with big opportunities, you can expect to see copycat behavior," says Robertson Stephens' Craft, "but AFI was first to market and is farther ahead." One constraint everyone faces is bandwidth on the Web. Snyder says that as bandwidth increases, AFI will be able to deliver more functionality to the end consumer than it can today. He also maintains that when it comes to financial purchases, nearly everyone wants to talk to a live person to corroborate what they've done.
Now, just one-third of the IAC sales start on the Web, and everyone ultimately makes contact by telephone. But, as it becomes easier to access and navigate Web sites, he says, the Web will simply attract more people.
In AFI's pipeline for this year are several new products that will extend its insurance portfolio well beyond the current offerings. It plans to launch insurance for long-term care-a market where comparative choice, Snyder believes, and the information to understand what you are buying are especially critical-and health insurance by the end of the year.
AFI also plans to add enhanced EDI, combined with the introduction of straight-through processing. The real challenge, according to Craft, is just to keep pushing ahead at the same pace. "It's really a race for market share-a landgrab right now. He who goes out and signs up the most employers wins." Snyder sees a sizable business at hand. "When we first conceptualized the business, we figured it would take 12 months to find 100,000 members of affinity groups that would join us. Now, we think we'll be north of 3 million in the nine to 12 months since our September pilot.
"With a pool of 140 million working Americans, 50 percent of whom belong to more than one association, we can reach an enormous number of people by tending to our knitting." www. insurancetech.com ANSWER FINANCIAL AT A GLANCE Answer Financial Inc. (Canoga Park, CA) KEY CONTACT: ALAN SNYDER, chmn./pres./CEO REVENUES: Privately held.
KEY TECHNOLOGIES: Answer Financial's Insurance Answer Center (IAC) currently offers auto, homeowners, renters, life insurance and annuities nationwide through a platform that integrates Internet, direct response and call center distribution channels.
CLIENT BASE: TOTAL CUSTOMERS: 160,000 users have access to the IAC, with more than 1.5 million in the process of being rolled-out.
TOTAL INSURANCE CARRIERS: 56 carriers, including The Chubb Corp., The Hartford, Jackson National Life Insurance Co., The St. Paul Companies, Progressive, Protective Life Corp., and Zurich Personal Insurance.