Update on E-Commerce and its Use by Insurers

CAS 2000 Spring Meeting

Las Vegas

Tony Alfieri, eCoverage

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Introduction

Insurance industry has survived the onslaught of new technology practically unchanged…until now

First it was online trading and other financial services. Now online insurance is expected to take off as well

Who will be the winners and losers?– Consumers will reap big rewards

– New pressures on industry already enduring unprecedented price competition

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

What do the experts say?

"Online offerings are increasingly important to financial services institutions, with consumers conducting a significant and growing percentage of all financial transactions online. There is a substantial opportunity for the player who can put the right ingredients together to create a truly powerful Internet insurance offering.''

Booz Allen & Hamilton

3rd Annual Internet Insurance Survey

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

What are the opportunities?

Recent study by Booz Allen & Hamilton estimates that the internet and technology could cut expense for insurance companies up to 60%, particularly in areas of distribution and customer service

Estimates for online sales vary; recent Forrester report estimates $14B online market by 2004

No dominant online brand today

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

“Online insurance is wide open.”- Ben Black, Harris Interactive

84%

58%

54% 53%

48%46%

42%40%

20%17%

15%

57%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Books Auctions Music/Video Software Hardware Travel Electronics Clothing Toys Health Fitness Insurance

Is there a dominant brand?Among online users, percent who could name a web site by product category

Source: Harris Interactive

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

What is happening today?

Brick and Mortar companies discover the web (finally)

Insurance Marketplaces

New Challengers

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Brick and Mortar Companies

Informational Only

Lead Generator– Application is forwarded to agent for quote

Online Quotes– Referral to agent for binding of coverage

Online Quotes, Binding of Coverage, and Claims– Progressive as an early leader

– Allstate

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Brick and Mortar Companies

General consensus among analysts is that most large personal auto carriers will be offering online quoting within the next 12 to 18 month

Unclear as to how many will be offering coverage binding online during that timeframe

In general, most carriers business plans only consider the web as simply an additional distribution channel

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Insurance Marketplaces Quote aggregators and lead generators

Often more than just personal auto

– Homeowners– Renters– Life– Annuities

Examples:

– InsWeb– Quicken Insurance– Insurance.com– Quotesmith

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

New Challengers

Internet Only Carriers– View the internet as more than just a distribution

channel

– See opportunity to build more efficient ways to sell and service insurance products

– Changing the paradigm of control in the insurance purchasing process

Examples:– eCoverage

– ePolicy

– Esurance

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

A Challenger’s Perspective: eCoverage

Formed about 1 year ago Based in San Francisco Began selling personal auto online in California in

September, 1999 Currently offering auto product in about 8 states Plans to offer product to approximately 25-30 states

by end of Q2 Blue Chip Investors and Board of Directors

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

SOFTBANK Venture Capital

E*TRADE Group

RRE Ventures, co-founded by Jim Robinson III (American Express)

David Coulter, (Bank of America)

Ken Langone, (EDS, Home Depot)

Chris Larsen, (E-LOAN)

Accel Partners

Investors & Board

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Business Model

Issuing Carrier

Brand Name Reinsurer

MGA

Captive

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

What is eCoverage doing?

Complete overhaul of traditional insurance company processes

Building company around the technology and business practices of the internet

Staffing with innovators from within and outside of the industry, willing and motivated to break the mold

Key Point: Innovation can only happen if you provide the proper platform to

support it.

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Three Key Areas:

It is critical that a company have ownership of 3 key areas of the business:

1. Technology

2. Customer Experience

3. Product

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Technology

Core technology developed entirely in-house

Seven patents filed on technology allow for unprecedented flexibility in product and business development

Superior data quality and accessibility

APL not spoken here

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Customer Experience

eCoverage takes responsibility for the customer experience, from quote to claim

Licensed, non-commissioned professionals online or by phone 24x7

eCoverage branded claims process

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Product

Unique sales environment brings new challenges

Current industry products assume agents touch

Proprietary personal auto product designed exclusively for sales over the internet

Superior understanding of data facilitates continuous updating of risk management operations in order to minimize risk and maximize profitability

CAS 2000 Spring Meeting, Las VegasUpdate on E-Commerce and its Use by Insurers

Conclusion: Who will win?

Consumers, for certain (better customer service, lower prices)

Companies who can :

1. Differentiate themselves via Superior Customer Service and real value-added product innovation

2. Leverage new technologies to create more efficient and cost effective processes throughout entire organization

3. Keep up the pace in a continuously evolving environment