The venture capitalist Marc Andressen once famously said “software is eating the world”. Given the data-heavy nature of insurance, the industry would seem to be a prime candidate for this prophecy.
But in a world where we seem to do everything online and where every other ad on TV is for GEICO or Progressive, it’s easy to forget that the majority of insurance is still through traditional insurance agents. In fact, according to the IIABA, 92% of property & casualty insurance polices are still sold through a human agent!
While this level of human involvement may seem almost unbelievable, that figure probably understates the true nature of human touch in the process as many insurance purchases from “direct” providers like GEICO are actually completed over the phone.
Is insurance different?
Comparisons to other industries also help demonstrate the truly remarkable staying power of insurance agents. In the travel industry, perhaps the transaction that is most often compared to insurance purchasing, services like Expedia and Orbitz have taken massive share from human agents.
In tax preparation, which may actually be more disliked than insurance, software like TurboTax continues to steal away customers.
Notably, real estate agents have also largely resisted the threat of online automation, though software has also grown faster there than in insurance.
So why haven’t insurance agents faced the same disruption as many other industries?
There are undoubtedly several factors that contribute to keeping insurance agents in business.
Insurance is really complicated, making online purchases difficult. Regulation offers protection by limiting price competition. And the insurance carriers probably do as much as anyone to protect the agents because they love the competitive advantages of the agent model.
The Importance of Peace of Mind
Beyond these more obvious factors, we think an overlooked reason that holds back the automation of insurance is the fact that when people buy insurance, they really are buying peace of mind. This is a key difference from other products.
If you are purchasing insurance for your car, home, business, life, or anything else, the number one thing you want to know is that you’re “doing it right”. For someone who’s inexperienced with insurance it’s difficult to know what coverage is correct to buy and whether or not you’re missing something. And this is where the agent still shines. Just by saying “Don’t worry, you’re all set”, the agent delivers the much of the value that the customer is paying for (especially if he or she never makes a claim).
So if the agent does truly deliver a needed value in the insurance purchasing process, is there still an opportunity to deliver an automated solution? At Bungalow, we believe the answer is yes, and in our next blog post we’ll take a look at how we think this can be accomplished.