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The comeback: after 12 difficult years, InsWeb has become profitable and secure as a leader in he online insurance market.


When InsWeb developed its motto "Lower your insurance costs. Not your expectations," it never imagined how much the latter part of that statement would hold true for turning the once struggling firm into a profitable major player in the insurance marketing space.

While many early competitors came and went from the market once the dot-corn bubble burst, InsWeb stood steadfast, never lowering its expectations, and weathering 12 years of storms.

Now, after a total of $300 million contributed by investors, InsWeb is operating at a profit for the first time in its history.

The story began with a vision by Chairman and Chief Executive Officer Hussein A. Enan to bring insurance buying to the still-young entity known as the Internet. Enan is a former general partner with reinsurance intermediary E.W. Blanch and the founder of Enan & Co., one of the largest reinsurance intermediaries in the western United States.

Inspiration came to him one day as he watched his son purchase a CD over the Web. Enan thought: Why not create a similar shopping marketplace for insurance purchasers?


In February 1995, Enan, a native of Egypt, created an online insurance aggregator to enable consumers to shop and obtain insurance company-sponsored quotes for products such as automobile, homeowners and term life insurance.

But that was the easy part. Selling the concept to carriers and convincing them that the Internet wasn't just a fad was the first of many hurdles the company faced, he said.

Not only that. During the dot-com boom, InsWeb and other companies had "inflated expectations and a lack of understanding of consumer behavior in an unknown world:' said Matt Josefowicz, managing director of Celent's global insurance practice.

Financial gain was a slow road. InsWeb's early business model didn't allow it to "capitalize much of the value it was creating because it would only get paid if consumers purchased insurance through the company," said Josefowicz. "More often than not, consumers would go to their site, get information and then buy insurance offline with an agent or direct-to-carrier."

Even an early injection of capital from two carriers, a $65 million investment by the Japanese telecommunications and media corporation SoftBank Corp. and nearly $90 million raised by an initial public offering in 1999, couldn't move the forlorn company out of the red. Still, the company continued operating with investor support.

"Like the management team and our carrier partners, investors firmly believed that the Web would play a key role in changing consumer behavior. And they believed In Hussein. He's the glue that kept things together" said InsWeb President and Chief Operating Officer Jaimie Pickles.


In 2004, the tide began to turn.

"We never wavered in our belief that this is something that had to work,' said Enan."There was no reason not to, but we were missing something. Then, we finally found it."

Part of the answer was bringing agents Into the loop.

"Until 2004, we were working under the prevailing conventional wisdom that consumers who came to you over the Internet wouldn't entertain doing business with a local agent; said Enan.

InsWeb decided to test that theory with one of its competitors, NetQuote, to see if consumers were interested in being referred to local agents.

"It became that was what most wanted, and we had been cutting ourselves from a very significant revenue source by not selling agents leads" Enan said. "We should have come to that conclusion earlier, given that American Family Insurance had been distributing our leads to their agents for years."

In 2005, the company built AgentInsider--a serf-service technology platform that allows it to do business with thousands of agents.

"We felt it was important to allow agents flexibility and when and how often they want to be presented with consumers meeting their criteria" said Pickles.

"We built in functionality to allow them to turn the program on and off, and calibrated it so they can receive only a certain number of consumers daily" Pickles said.

Agents can select the types, quantity and geographical locations of competitively priced, high-caliber leads. They also can set the price they're willing to pay for leads, achieved through InsWeb's proprietary bidding system.

About 80% of agents usc some form of lead generation services in their marketing, according to InsWeb surveys. More than 50% process from 50 to 250 leads per month, while 93% are looking for immediate delivery of leads, InsWeb reports.

MetLife Auto & Home has been using Agentlnsider since 2005. Today, an estimated 60% of its employee agents use the site to purchase nearly 6,000 automobile and homeowners leads a month.

"It gives us an opportunity to contact a consumer whenever they're ready to buy and allows us to explain our value offer to them, which is a combination of service, product features, financial stability and cost," said Stephen Haran, director of sales operations for the Warwick, R.I.-based company's agency distribution.

Not only did AgentInsider increase InsWeb's revenue-per-consumer, but "direct carriers were still achieving the same level of productivity-per-consumer, and closing rates didn't change," said Pickles.


"Consumers coming to our site are looking for a choice on quotes and how they prefer to buy insurance," Pickles said. "Today, we estimate that eight out of 10 of our consumers buy insurance from a local agent"

Still, InsWeb has barely scratched the surface with its agent partnerships, he said. "We only have about 4% of the 125,000 P/C agents out there today. We're constantly working to get more agents onto the platform."

A Proven Model

The InsWeb concept is straightforward. Consumers log onto its Web site and answer several routine questions. About 65% of applicants qualify to complete a 30- to 40-question insurance application.

Information is then sent real-time to direct carriers and local agent partners for the lowest-priced quotes. Pickles said the distribution of leads is limited and are never delivered to more than one agent from the same carrier. Consumers receive an average of four quotes, he said.

Nearly three out of four customers looking for insurance use the Web at some point during their process, according to a recent Celent survey.

The Internet remains a viable medium for online insurance sales, with about 10% of total auto sales now purchased online, said Josefowicz. Six million consumers begin the quote process at InsWeb annually, said Pickles.

However, the majority of online business remains what Josefowicz calls "Web influenced," where consumers conduct initial shopping online but buy through offline channels.

One of the biggest changes in the online market over the years has been consumer behavior, said Pickles.

"Consumers going online now are either specifically looking for insurance or they're receiving e-mails that spur their attention," he said.

Carrier Connection

Carriers play an integral role in the InsWeb model. But convincing providers that the Internet was a viable medium was another challenge InsWeb had to overcome.

In 1997, American International Group, Amica Mutual Insurance Co. and American Family Insurance became the first carriers to jump on board. Since then, 12 of the top 14 personal lines insurers now partner with InsWeb to provide consumer quotes.

"It's a place where consumers can shop for insurance, much like the mall in the physical world" said Bruce Maynard, senior assistant vice president of Amica Mutual. "You can either get consumers to come to you or you can go where they are. InsWeb is a reasonable, well thought-out approach. It doesn't make unrealistic promises, and gives consumers the right amount of options"

Maynard has been pleased with the results."It's a piece of a bigger picture" he said."There's no silver bullet, so you need to put yourself in front of consumers in different places, and this is a good venue to reach customers"

Black Ink at Last

In 2007, after 12 years and an investment of about $300 million, InsWeb finally become profitable, said Pickles.

The company moved into the black by shrinking its direct marketing costs, trimming operating expenses and widening its distribution scope. The moves have paid off with impressive 2007 results.

First quarter 2007 revenues reached $8.1 million, and net income climbed to $0.3 million, or $0.08 per share. In October, InsWeb announced record quarterly earnings, with $9.2 million in revenues and $464,000 in net income, or $0.10 per share. The company has had three consecutive profitable quarters in 2007.

"This has been a pivotal year for us because we've finally been able to make our model work and prove to the world that we aren't a fly-by-night company. There's life in us and plenty of it" said Enan.

"We've been doing this a long time and learned a lot, making many changes along the way," said Senior Vice President and CFO Kiran Rasaretnam. Those changes included relocating the company from San Francisco to Sacramento, he said, and creating sponsored Web links that add to the company's revenue stream.

"We also continue to focus on things that work and pay attention to those that don't" Rasaretnam said. That included exiting two marginal operations over the past three years: their term life and auto agencies.

But even with newfound financial success, "we can't rest there and be satisfied," said Rasaretnam. "We're on a journey. Capitalism demands we be better the next quarter and the one after that"

Enan said InsWeb's culture was a central factor that held the company together during its darkest days.

"It's the thing I'm most proud of," he said,"because it enables our team to work hard, respect everyone's opinions and gain strength from one another"

"Many lessons must be learned on the fly," said Rasaretnam. "Being cognizant of what everyone else is doing, paying attention to the little details and sharing information has been critical to our success."

He said, "We're too small to work in silos. We work closely as a group and everyone is involved. It's an open environment. We challenge each other and aren't afraid to ask questions."

Perseverance also abounds.

"When the going got tough, we never thought about giving up" said Enan. "Many of the would-be competitors in the early days quit because they found the market too difficult or ran out of money. We never stopped believing in what we were doing"

Brand and history set InsWeb apart from its competitors, said Josefowicz.

"Many marketing agreements have created brand equity for the company," he said.

"There aren't many other companies doing what we do," said Rasaretnam. "We've made many mistakes and learned from them. We also have a robust technology platform, established great relationships with key Internet companies to acquire consumers and invested in the right things, like data and technology.

"We continue to be very aggressive, think outside the box and try new things," he said. "Some things won't work out, but that's the whole point of taking risks"

The company also is very data- and metric-intensive, he said. "There's an ROI attached to every marketing dollar we spend, every partner we do business with"

After more than a decade, InsWeb believes it's finally on the path to success in what many call a flourishing market.

"Shopping online is here to stay," said Amica Mutual's Maynard. InsWeb is betting on it.

"We see consumer behavior continuing to evolve such that the Internet is their primary tool for doing many sorts of activities related to insurance" said Pickles.

The company hopes to grow by expanding its lines of business and adding more direct carriers and agents.

Pickles said the company is focused on expanding its reach to independent agents who are "well behind the direct and captive agency carriers with respect to achieving an online presence."

Until now, InsWeb has been undervalued in the market, said Enan. But he sees that changing. "We're a company with big ambitions and huge potential," he said.

Inside InsWeb


Founded: March 1,1995

Headquarters: Gold River, Calif.

Employees: 59

Web sites:; www.agentinsider.corn

Leadership: Hussein A. Enan, founder, chairman and chief executive officer; Jaimie Pickles, president and chief operating officer

Products offered: Automobile, homeowners, term life, renter's, condominium insurance, home warranty, recreational vehicle, motorcycle, critical illness and health insurance

Number of online consumer visitors per year: More than 15 million

Number of carrier partners: 15+

Number of agent partners: More than 5,000

Third quarter 2007 financials: $9.2 million in revenues; $464,000 in net income; more than 23% in one-year revenue growth

Source: InsWeb

Marketing in cyberspace

In 1998, marketing became a central focus for InsWeb. Today, the company spends nearly 60% of its revenue on marketing efforts.

All of the spend now is focused online, said Brad Cooper, senior vice president of marketing and advertising. "Advertising online gives you instant results," he said. "We're able to tell, down to the individual campaign, whether or not it's performing.


"InsWeb's strategy is to get in front of as many consumers as it can, catching them with a message that speaks to them, said Cooper. "There are two main messages that online consumers are looking for: cost savings and time savings," he said.

"When you market yourself" on the Internet, you're not just competing with immediate competitors and carriers but also with everyone for space," said Senior Vice President and Chief Financial Officer Kiran Rasaremam. "We have to be more creative in getting consumers to our site."

"It's important to be willing to invest money and understand what works with messaging, layout, design, and how to speak to customers, advertising in different areas of a portal, while being flexible and creative," Cooper said. "At the end of the day, we're all offering the same things and helping consumers with insurance. There's no silver bullet. We can't make insurance sexy.

"The industry goes through cycles," he said. "It's easier to get consumers to shop insurance when they open their bill and see premiums rising."

Cooper said InsWeb continues to struggle with its consumer marketing costs. In 2005, InsWeb spent an average of $3.31 on direct marketing for each consumer who began an application. Current costs have dropped slightly, to about $3.20 per consumer.

Everything the company does is ROI-based, Cooper said. In 2006, InsWeb made a big marketing and advertising push to become profitable. "We always took the approach that if we spend $1 on advertising, we better be making more than $1 in return."

RELATED ARTICLE: Making IT InsWeb's 'It' Factor

InsWeb's technology helps set the company apart from its competitors, said Chairman and Chief Executive Officer Hussein Enan.

Its AgentInsider platform, along with several licensed and patent-pending technologies, are part of the mix.

"Technology has made it easier for consumers to search through an overwhelming amount of information pertaining to specific insurance needs and put it in a friendly format using browsers they're familiar with," said John Cadigan, senior vice president and chief technology officer. "Our technology gives consumers choice."


He said one of the most significant advancements to InsWeb's system is its rating application, which makes real-time rating calls to carriers. "It eliminates the need for us to update and maintain multiple rating engines locally in the computer room," Cadigan said. "Technology has reduced the amount of maintenance required for giving online quotes and gives consumers more accurate rates."

InsWeb also has filters in place that take a profile and winnow out all carriers not interested in quoting a particular consumer.

Cadigan said the biggest benefit of being an online operation is round-the-clock access. High traffic volume to the site, he said, generally occurs around 8 a.m.

"In the online marketplace, the windows of opportunity are small and keeping in front of competition is essential," he said."We're constantly looking for and testing new development platforms"

Cadigan said InsWeb recently adopted an open source architecture as part of its IT deployment. "This is an extremely competitive market, so you have to keep refreshing your site and technology to stay ahead of the competition," said Cadigan."Our biggest advantage being in the online market is our focus on the back end, working with carriers, agents and other entities that have data we need or contribute to. Dedicated resources within our team continuously work with technology counterparts in each carrier company."

While Cadigan said security remains a deterrent for some consumers to shop online,"the degree of concern is less with each passing year and we take every measure to secure and keep consumer information safe."

He said one of the biggest lessons learned has been to continually apply technology wherever possible.

"Consumer behavior is unpredictable and one of our challenges is trying to forecast that behavior to maximize the benefit of our application."

* At Issue' InsWeb has had a rocky road to success in the online insurance marketplace.

* The Situation: Part of its success came in 2004 when the company changed its approach to sell leads to agents.

* The Payoff: After 12 years and $300 million from investors, the company finally achieved profitability in 2007.

Learn More

Amica Mutual Insurance Co. A.M. Best Company # 02162 Distribution; Direct

MetLife Auto and Home Group A.M. Best Company # 18552 Distribution" Work-site program, independent agents, MetLife career agents and direct marketing

For ratings and other financial strength information visit
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Title Annotation:Technology: Company Profile
Author:Chordas, Lori
Publication:Best's Review
Article Type:Company overview
Date:Dec 1, 2007
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