A combination of unfulfilled promises from the dot-com heyday, the buttoned-up nature of the insurance industry, and technological question marks are all to blame. But a trio of dot-com survivors are trying valiantly getting it right, and success in their niche could pave the way for broader adoption. These vendors, including Financial Keyosk, InsuranceZone, and InsuranceNoodle, offer software and services that enable banks to sell insurance, primarily property and casualty, to their small business customers.
During the Web boom, companies like eCoverage claimed they were going to rewrite the rules of how insurance was sold, but failed to deliver. The staid, conservative nature of the insurance industry didn't help.
But there's also the nagging question of how banks and insurance companies should logically work together. Even, some of the vendors' executives admit to being unsure of whether an agent-based model, a Web-based model, or some combination of the two will ultimately work best.
A reasonable courtship
"Banks are panting for this," says John Dawson, CEO of Financial Keyosk, which provides software and services that help banks sell property and casualty insurance to small businesses. "They look at the profitability of agencies and want to balance their interest income with non-interest income so that when one ebbs, the other flows."
Financial Keyosk offers what it calls "Agency in a Box," basically a way for a bank to have a branch employee sell insurance and be part of the bank's infrastructure. It uses the Web to connect the agent to the offerings of 30 insurance carriers (including the company's owner, Zurich Financial Services).
Its technology uses a concept that's gaining momentum in the insurance industry--for independent agents, at least--called SEMCI (single-entry, multi-company interface). This allows an independent insurance agent (that is, one not affiliated with a specific carrier) to enter information once and get coverage quotes from multiple carriers, rather than having to type the same information again at each Web site.
One of Financial Keyosk's customers is Union Planters Bank, which in a pilot program deployed agents in branches in Memphis and St. Louis; it plans to deploy 20 more in 2003. "It's been a real success for us because we have a licensed agent who sits with our commercial lenders. She works within our bank environment, yet she has all the resources of Financial Keyosk at her fingertips," says Joanne Collins, Union Planters' corporate director of insurance.
Owned by the agency
Unlike Financial Keyosk, competitors InsureZone and InsuranceNoodle are owned by independent insurance agencies. A division of the Fort Worth-based Higginbotham & Associates, InsureZone has partnerships with Chase, Wells Fargo, and National City, but each of the partnerships works differently, according to Rusty Reid, InsureZone's president and CEO. At Chase, bank employees refer small-business customers to InsureZone's toll-free number or to Chase's Web site, where customers can click through to InsureZone's site. At National City, as at Union Planters, there's an in-house agent that's an actual National City employee.
Getting it right
Matthew Josefowicz, an analyst with Celent Communications, which advises financial services firms on IT strategies, concurs that companies trying to bring these two industries together are on an uphill climb. "The Web doesn't bring anything new. It's just a new tool for the old business models."
But it took a couple of years for insurance companies to finally see that the Web can bring them a new measure of operational efficiency.
Financial Keyosk's Dawson maintains banks and insurance companies have yet to find the right combination. "Before the dot-com boom, you just had people. During the boom, you just had technology." For the system to work today, he believes, a successful company has to combine people, process, and technology to make it work. "The timing is right for what we're doing," he insists.
The vendors still have their work is cut out for them. It's too early to tell at this point whether they'll be able to chip into the stronghold agents currently have, and none of the Web-based models are making a profit today. "It costs money to develop software and change how people buy products. And banks aren't going to lead us to their best customers until we prove ourselves," Dawson says.
However, the software vendors are doing one thing right--they're starting small and not trying to rewrite the rules of how insurance companies or banks deal with their customers. They're trying to smooth the process, not replace it, and that proves they've learned something from the last two years.