Care for some Lemonade?

online_insurance_shopping

There was celebration in several corners of the insurance industry (particularly in the agency system) this past week as news broke that Google was pulling the plug on its insurance-shopping comparison site, Google Compare.  Carriers are certainly open to all cost-effective distribution models for the insurance products that they sell, but there still exists an uneasiness with the online distribution model that emphasizes price as they key differentiation above all else.  Commoditization of the insurance product and service is a race to the bottom, as the industry knows all too well.  Independent agents, on the front lines of the industry, know this better than anyone.  Which is probably why there was rejoicing among the independent agents I was hanging out with earlier this week at the MAIA convention when a speaker mentioned the Google Compare news.

But the story is not over.  Online insurance distribution is not going away.  CoverHound (one of Google’s partners) said that this may just be a temporary hiatus for Google Compare, allowing Google to re-tool and re-brand the online comparison and distribution service.  CoverHound itself continues to offer insurance comparisons online.  There is also comparison and purchase opportunities from the likes of PolicyGenius.  In short, it may be welcome news to insurance agents that Google, with its billions in cash and technological deep bench, has exited the marketplace, but the game is not yet over.  In fact, it’s still early in the first quarter.

Consider the birth of Lemonade as a peer-to-peer insurance carrier who coincidentally (or perhaps purposefully?) also made news this week with the hire of high-profile behavioral scientist, Dan Ariely.  If you haven’t heard about Lemonade yet, think of it as the logical extension of the peer-to-peer networked economy that has given us Uber, Airbnb, and countless other industry earthquakes.  Just as Uber totally disrupted the taxi market, and Airbnb has dented (if not disrupted) the hotel industry, Lemonade could have the same effect on insurance.  Uber and Airbnb also upset the existing regulatory framework in their respective industries, and Lemonade might do the same to insurance although they seem to be moving more cautiously than their more brash peer-to-peer brethren.  Lemonade recently announced reinsurance partners that include several industry stalwarts.

Can peer-to-peer insurance work?  Let me put it this way:  I’m not going to bet against it.  Will it disrupt the insurance market?  Absolutely.  Is it the death knell of the independent insurance agent? No way.  The insurance product is far more complex than taxi rides and overnight stays.  I believe that there will always be a place for insurers and agents who provide real risk management services (personal and especially commercial), and win business by marketing more than just a commoditized price.  Keep that in mind every time you sip your cool lemonade drink during the summer months ahead.

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