QuickenInsurance: The Race to Click and Close

1
QuickenInsurance The Race to Click and Close

• Team 2

Matthew Hanafin, Gaetan Lepinois, Nancy
Reynolds, LaKesha Robertson, Adam Saulsbury,
Greg Williamson
2
Company Overview

• How It All Started
• The Internet was becoming an attractive
  alternative distribution channel for a variety of
  consumer products
• The insurance industry was slow to take advantage
  of the Internet.
• July of 1995, Steven Aldrich launched an online
  insurance dot-com.

3
FUNDAMENTAL ISSUES OF THE CASE

• In the case of OuickenInsurance The Race to
  click and close, focuses were placed on
• Market Place Business Models
• Aggregator Business Models
• Vertical Portal Models
• Horizontal Portal Models.
• After careful analysis of this case, it makes one
  ponder questions such as
• Which business model will dominate?
• What kind of investments should be made?
• What measures need to be taken to evolve the
  business?

4
Insurance Industry

• 1990s large, inefficient, and highly fragmented
  insurance industry
• 1,100 property and casualty insurance providers
• 1,200 life and health insurance companies
• Mid-1990s expenses for agent-based carriers
  often exceeded premiums
• 1995 U.S. insurance industry a mature 270
  billion market

5
Insurance Industry Cont

• 1996 growths of life and auto insurance premiums
  slowed respectively to 2.9 and 4.3 per year
• considerable consolidation
• 1999 commissions during the 1st year of a term
  life insurance policy ? to 40 to 70 of the
  revenues received
• Over the life of the policy, commissions averaged
  5 to 10

6
Insurance Industry Cont

• Significant market potential
• Auto insurance represents the majority of the
  revenues
• Estimations with Internet distribution channel,
  10 to 15 per policy per year would be saved
• By early 2000 development of online sales
  channel (by established insurance carriers)

7
Change in Property/Casualty Insurance
Distribution Channels from 1998-2003
8
Change in Life/Health Insurance Distribution
Channels from 1998-2003
9
Business Models

• Market Place
• Aggregator
• Vertical Portal
• Horizontal Portal

10
Marketplace Business Model

• Basic Features
• Sell products and services
• Do not take control of physical inventory
• Sell products with a nonnegotiable price
• Complete sales online

11
Marketplace Business Model

• Basic Features
• Sell products and services
• Do not take control of physical inventory
• Sell products with a nonnegotiable price
• Complete sales online

12
Marketplace Business Model

• Revenue Model
• Based on commission or transaction fee on each
  sale
• Costs are based mainly in IT and IT support
• Procurement and inventory management costs often
  are lower than those of retailers.

13
Aggregator Business Model

• Basic Features
• Provides information on products or services for
  sale by other channels.
• Provides comparison of features and pricing
• Does not enable buyers and sellers to complete
  final transaction.

14
Aggregator Business Model

• Revenue Model
• Referral fees Where Available
• Advertising
• Supplemental Revenue Sources
• Industry Supported
• Supported by Parent Company

15
VERTICAL PORTALS(QUICKEN.COM)

• Basic Features
• Vertical Portals are those that provide deep
  content
• They are often comprised of a variety of business
  models, all of which generate separate revenue
  streams

16
VERTICAL PORTALS(QUICKEN.COM)

• Revenue Model
• Within the Vertical Portal Model, Revenue Cost
  Models were specific the type of service provided

17
HORIZONTAL PORTALS(AOL)

• Basic Features
• Horizontal portals are those that provide gateway
  access to the Internets vast store of content
  and services.
• Horizontal portals often form strategic alliances
  with dial-up and broadband Internet service
  providers to enable revenue sharing on access
  fees
• AOL, known for being a proprietary online
  provider, operated as both a content portal and a
  network service provider before the Internet and
  maintained that model when it launched its
  Internet service in 1995

18
HORIZONTAL PORTALS(AOL)

• Revenue Model
• Advertising fees
• Also generate revenue with transaction fees
  internet service providing fees.

19
(No Transcript)
20
(No Transcript)
21
Evolution of Quicken.com

• Intuit
• Founded in 1983 as a software company
• World leader in personal and small business
  software by 1993
• Products accounted 70 of the market
• Quicken Personal Finance
• Quickbooks Small Business
• TurboTax Federal State Tax Preparation

22
Quicken.com and their Evolving Business Model

• Launched in 1996 as an information aggregator.
• Added value by gathering information and allowing
  customers to search financial topics they were
  interested in
• Revenue came from advertising

23
Quicken.com cont.

• By 1998 six focused divisions were introduced on
  the Quicken.com site changing the site to a
  vertical portal.
• Two aggregators
• QuickenInvestment
• QuickenRetirement
• Three marketplaces
• QuickenInsurance
• QuickenLoan
• QuickenBanking
• QuickenTurboTax (an online extension of the
  Intuit software)

24
(No Transcript)
25
QuickenInsurance.com

• Sold insurance policies online for insurance
  carriers
• Charged carriers through referral fees,
  commission, installation and integration fees,
  and maintenance fees
• Value to carriers came from
• Could reach larger base of customer
• Educate customers and generate leads
• Provide 30-70 cost savings
• Increase knowledge base about customers

26
QuickenInsurance.com cont.

• Provided access to information, advice, quotes
  and price comparison online
• Customers accessed this information and buying
  power free of charge.
• Customers could conveniently make educated buying
  decisions 24 hours a day.
• Customer could access a number of quotes in a
  fraction of the time.

27
QuickenInsurance.com cont.

• Cost Drivers for the division
• Hiring and retaining the technical support to
  develop and maintain the site
• Marketing and sales cost are low do to the use of
  Quicken.com as an entry way and marketing force
  for the site

28
Build the QuickenInsurance Brand?

• Should Aldrich step up efforts to build the
  QuickenInsurance brand in lieu of other
  Quicken.com segments?
• If not on QuickenInsurance, where should his
  focus be?

29
Things to Consider

• If Aldrich focuses to much on QuickenInsurance
  then it is likely that other brands in the
  business will suffer.
• Quicken.com is a vertical portal. A wide range of
  services are provided.
• The internet insurance market is one of the most
  crowded. Established carriers, big banks, and
  start-ups are crowding the market.
• Remember that most of Intuits money comes from
  software.

30
Recommendations

• Build the entire Quicken.com brand.
• Invest in all the individual brands so that they
  will have the opportunity to grow.
• Focus advertising dollars on Quicken.com
• From that point every service or product offered
  by Intuit can be used or purchased.
• To much focus on individual brands would be
  costly.

31
Online auto insurance

• Largest online insurance market segment
• Penetration and growth of the auto insurance
  business (in 2000) was slower than expected.
• Aldrich believes, future success with
• Greater choice of quoting carriers in each state
• Online purchase or call center/fulfillment
  capabilities in more states

32
Online auto insurance (Cont)

• Analysts view market should have grown faster
  than it did.
• Incorrect prediction
• maybe an error in the analysis
• additional analysis

33
Question

• What do you believe Quicken.com and
  QuickenInsurance should do about the slow rate of
  progress in signing up auto insurance carriers?

34
Recommendations

• Key factor diverse and conflicting regulatory
  agencies overseeing the auto insurance business
• Traditional insurance carriers forced to develop
  highly specialized policies to satisfy the
  regulation
• Weakness of the marketplace business model it
  must duplicate the highly diverse scheme of
  policies already existing in the insurance
  industry

35
Proposed strategies

• To adopt an aggregator model for the auto
  insurance sector
• Provide information on products services for
  sale by others
• Comparison of similar products provided, but
  cannot complete final transactions
• Revenue model referral fees advertising
• To employ 24-hour agents online to answer
  questions and quiet concerns for the customers

36
InsWeb

• Opportunity or Threat?

37
InsWeb The Aggregator

• Basic Features
• Provided quotes
• Educated customers
• Generated leads for its 36 insurance carrier
  partners
• Did not sell policies online

38
InsWeb The Aggregator

• Carrier Partners
• Automobile
• Term-life
• Individual health
• Homeowners
• Renters insurance

39
InsWeb The Aggregator

• Revenues
• In 2000, 69 of annual revenues came from
  automobile insurance quotes
• Also charged integration and maintenance fees

40
InsWeb

• Evolution
• Launched online and Web-enabled call center
  insurance agency
• InsWeb Insurance Services
• Evolved its business model from an aggregator to
  a marketplace

41
InsWeb The Marketplace

• Major Cost
• Marketing and sales, including online and offline
  advertising and fees paid to other portals
• Product development and carrier system
  implementation and integration with the InsWeb
  service Integration of an insurance carrier
  into the InsWeb marketplace typically took 3-6
  months
• Building and operating call centers and data
  centers

42
InsWeb The Marketplace

• Revenues were generated through
• Referral fees
• on every qualified lead to each insurance
  carrier
• click-through to insurance carriers sites
• Advertising
• Software integration and maintenance fees charged
  to each partner/carrier

43
OPPORTUNITIES AND THREATS
America Online

• Should Aldrich respond to the action of AOL,
  concerning the decreased support for My
  Profile, by a partner that was also in a
  position to be a key competitor?
• How should Aldrich address the actions taken by
  AOL.com to restrict Quicken.com customers in the
  use of MyProfile?
• How should Aldrich respond to the actions of
  established players like Citigroup that were also
  available as a competing financial services
  vertical portal on AOL.com?

44
Recommendations

• Approach AOL and attempt to reach an agreement
  that would benefit both parties.
• If no agreement, then sever ties with AOL
• Monitor competitor trends evaluate and
  implement ways to continue competing in a
  competitive market.

45
OPPORTUNITIES AND THREATS

• CITIGROUP AMERICAN EXPRESS
• Could Quicken.com survive an attack from these
  two financial service providers?
• Yes or No, Explain

46
Survival Strengths

• Smaller and more focused on personal finance
• Already control significant market share of tax
  and financial software
• Wide variety of tastes prevents any one site from
  dominating

47
Opportunities and Threats
Wait or Attack?

• What dot-coms are a threat?
• How much is a dot-com worth?

48
QuickenInsurance Today