InsWeb: Insuring Its Own Success
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It's the so-called necessary evil: insurance. Yes, it's one of those products that you buy and pray you'll never have to use.
Insurance, though, is a complex thing. It's pretty easy to fall asleep when thinking about such things as unappropriated earned surpluses, band grading, stop-loss provisions, or such somber things as accidental death and dismemberment riders. The complexities make it awfully difficult to comparison shop.
So, it is no surprise that there are wide differentials in insurance rates. For example, according to the California State of Insurance, several major metropolitan areas had price differentials of 160 percent for homeowners policies and 408 percent for auto policies.
Also, the insurance industry has been known to engage in high-pressure tactics, perhaps selling products you don't need.
The model is similar to Auto-By-Tel. That is, when searching for an insurance policy, you fill out a form (indicating such things as if you smoke and so on).
Then, InsWeb will search out different policies for your needs. You will then indicate if you want to be contacted by any of these insurance firms. For this service, InsWeb gets a referral fee.
InsWeb has also been smart in developing an XML (Extensible Markup Language) standard to allow its insurance carriers to more effectively communicate with each other. Also, the XML system will make it much easier to add new features. In all, 40 insurance companies are part of the network.
InsWeb provides services for automobile, term life, homeowners, renters, and individual health insurance, and even motorcycle insurance and fixed annuities. Actually, the largest part of InsWeb's revenues derive from its auto policies.
The site also has lots of content, such as background information on carriers, glossaries, articles, and interactive tools.
According to Forrester, the market for online insurance looks bright. In 1998, the Net generated $1.5 billion in premiums. This is expected to grow to $11.1 billion by 2003.
InsWeb has also been aggressive in distributing its presence across the Web, signing deals with ZDNet, Yahoo!, Snap.com, and E*TRADE.
What's more, the company plans to spend a minimum of $75 million over the next two years on marketing initiatives. InsWeb will advertise on "Monday Night Football" and other prime-time programs.
Finally, InsWeb recently launched its so-called eCare customer service system, which is staffed by service reps. With eCare, you can ask general questions about insurance. This is absolutely critical for generating a strong customer base.
InsWeb sells at $23-1/8 and was as high as $44. The market cap is about $755 million. In a market that values Net leaders in the billions, InsWeb definitely looks very cheap by comparison.
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