There is a harsh fact of life all auto insurers currently face on the Internet: the vast majority of online shoppers seek more than one price before buying, and the close rates for insurers online is well under 10%.
In other words, having spent upward of $30 just to lure a shopper to their website, and then killing themselves to capture the shopper’s attention long enough to gather the valuable information needed to present a quote, insurers watch the shopper walk away more than nine times out 10. Worse, this prospect, now confirmed as determined to buy a policy, walks back into the great maw of the Internet taking with them all the value the insurer has generated through so much money and effort.
The search for ways to minimize this inefficiency is spawning a wide range of strategies, and each requires insurers to answer a tough question: Once I recognize that I am unable – or don’t want to – win a prospective customer’s business, am I willing to sell that lead to another insurer better equipped to close the sale? Even more to the point, am I willing to facilitate this sale directly from my own website?
This week we explore two of the more prominent ways insurers can answer this challenge: the rapidly maturing MediaAlpha Exchange, and the newly minted TransUnion Quote Exchange.
The MediaAlpha Exchange enables insurers who aren’t confident they’ll close a sale to sell advertising space on their website to other insurers, who bid for the right to compete for space, hoping to lure the shopper their way. With this gambit, the selling insurer can at least capture some value before an online shopping prospect, unlikely to close, chooses to walk away. It’s hard for insurers to offer advertising space on their own website to competitors, so there are more insurers looking to buy these advertisements than there are insurers looking to sell these opportunities, but the marketplace is moving toward better balance, and some of the largest auto insurers are engaged in the exchange.
If it’s hard to offer advertising space to a competitor, what about offering that competitor’s price? That’s even tougher to process emotionally, not to mention technically, but intellectually insurers realize that this is also a potentially effective way to capture the value of a departing prospect.
Presenting competitive prices is the goal of TransUnion’s Quote Exchange, which just a few weeks ago opened its doors, with the added twist of enhancing the lead with TransUnion data.
Taken together, the TransUnion and MediaAlpha exchanges, along with the efforts of Bolt Solutions (see AIR03/28/16), showcase just how rapidly the distribution of auto insurance is changing. (At the sold-out Auto Insurance Report National Conference in two weeks, we’ll hold a panel discussion of leaders from these three marketplaces to discuss how they think future will unfold.)
In order to sell access to prospect information, an insurer has to be smart enough to figure out when a customer who has spent time entering information into a quote engine is not likely to buy from them. When the prospect comes from a state where the insurer does not operate, the conclusion is easy to reach. If the customer is in a risk class the insurer avoids, the choice to sell is not much more difficult.
But the real challenge comes when the insurer looks at the customer and realizes that although it will be able to offer a price, the customer is not likely to take it. That may be because, aware of competing prices, the insurer knows the customer would find a much better price elsewhere. Or perhaps a really smart insurer would realize that the prospect is at the start of the shopping process, and thus likely to continue shopping elsewhere regardless of the superiority of the first price being offered.
There are also customers the insurer wants and might win, but data shows the close rate will be higher if these prospects are presented with advertisements or quotes from competing insurers, giving them the feeling that they have shopped around.
Figuring all this out isn’t easy, but a number of insurers are already making these determinations, and they are using the revenue from the sale of leads to help subsidize their broader marketing efforts, or just fatten their bottom line. Considering that it takes hundreds of dollars to successfully secure a new customer online, anything that can help defray the cost should be considered. If an insurer can abide such innovation, the sale of a lead that was going to walk out the door anyway can be found money. Of course, the insurer must have the stomach for offering up unused prospects to competitors. That’s a step that isn’t for everyone, at least not right now.
MediaAlpha and TransUnion’s exchanges serve to facilitate this process. An insurer, once determined to offer up prospects, places them on the exchange.
In the MediaAlpha Exchange, other insurers are offered the information the shopper entered to get a quote. Thus informed, insurers bid on how much they would pay to have their advertisement shown to the prospective customer. The selling insurers may only be willing to show one advertisement, if they’re feeling modestly confident of capturing the customer on their own. Or they may chose to show multiple advertisements if they believe they don’t stand a chance at closing. All of these decisions are made automatically after the selling and buying insurers preselect their preferences and price points.
The price of the advertising is set by auction, which is exactly how online advertising is priced elsewhere, such as for Google AdWords. But in this case, the lead is much more refined than anything available from online search engines. Complete with underwriting information, the lead is confirmed as someone committed to buy.
MediaAlpha is an advertising technology company that learned about aggressive online price shopping when supporting the travel industry, where consumers will search 20 to 30 times for a flight before booking. Travel sites such as Kyak, Expedia and Travelocity have found value in selling leads to one another. In 2011, MediaAlpha, based in Los Angeles and Redmond, Washington, sold off its travel business to focus on insurance. Starting as an insurance lead generation site (www.quotelab.com), MediaAlpha saw the need for an insurance advertising clearinghouse, and encouraged by at least one large online direct insurer, pivoted in that direction. It helps that privately owned MediaAlpha now counts White Mountains Insurance Group as a majority investor. Today, 16 insurers sell advertising opportunities on the exchange, and more than 200 carriers buy advertising space across auto, home, life and health insurance products. According to MediaAlpha, at least one of those selling insurers recaptures about 25% of its online marketing costs through the exchange.
In the TransUnion Quote Exchange, the process of offering up the customer is similar to the entry point of the MediaAlpha Exchange, but it gets more complex from there. TransUnion takes the underwriting information from the selling insurer and then appends enhanced information, such as TransUnion’s credit score; its Driver History database of court records, which substitutes for motor vehicle records; and fraud detection through its Risk Verification Platform. Only then do insurers start bidding to show their price to the customer, usually alongside the host insurer. The buyers of the lead see far more than they would even from prospects on their own websites. It stands to reason that the auction price for the right to present a quote to this customer would be higher than currently paid for almost any other online lead.
(Side note: There is a future where many, if not all, prospects receive this kind of enrichment, but that day isn’t here yet. See AIR 3/23/15.)
There are significant technical challenges involved in the platform. The selling insurer must be able to take underwriting information from its own website and pass it through to TransUnion, which enhances the data before sending it to the insurers who have signed up to bid. The insurers need to consider the full data set, and return a price, which TransUnion then works with the selling insurer to show to the shopper. All of this takes place in 15 seconds or less. Anyone who says this is easy hasn’t tried to do it. But such transfers are not out of reach, and TransUnion has learned a few strategies to minimize the challenge, including working through third parties with which carriers are already connected.
For now, the exchange is open only in Florida, with one insurer offering customers for auction and two bidding to buy. But TransUnion hopes that by the end of the year it will be operating in more than two dozen states (with Texas next up), and with many more insurers creating a robust marketplace.
We’re not suggesting that insurers will wake up tomorrow and find a marketplace where everyone is selling off prospective customers to one another. Just as we have never suggested that tomorrow morning all consumers will be flocking to comparison shopping sites. (AIR 3/7/16)
OK, we did proclaim that Google was going to be a big deal in online insurance shopping (AIR 3/16/15) before we had to report that they weren’t (AIR 2/29/16), because sometimes we get carried away.
What we are suggesting is that online insurance shopping is a rapidly evolving marketplace right now, requiring emotional, intellectual and technological flexibility that is not a traditional hallmark of personal lines property and casualty distribution.
For those who can keep an open mind, and wisely test the waters, there will be new opportunities that could provide a significant advantage over more timid competitors.