Perspectives: More Consumers Comparison Shop for Insurance Online, but the Leads Generated Challenge Agents Al Slavin

Online leads have become the 21st century’s version of the cold call — except this data-driven approach has given Web-savvy consumers anonymity and access to competing quotes in minutes, if not seconds.

Search-referred auto insurance quotes increased 36% in one year to total 8.9 million in 2007, according to comScore, an Internet analytics firm. A J.D. Power and Associates survey of 8,500 recent insurance buyers indicated that 40% used an online quoting system.

While insurance shoppers increasingly visit online quoting systems, lead quality is subject to debate among producers.

TSC Direct President Penny Hart pinpoints a factor in the declining quality of online leads these days: The novelty has worn off for consumers. “At first the ones that were shopping online were savvy. Now we’re just getting a lot more tire-kickers.”

Jericho, N.Y.-based TSC Direct acquires leads from a handful of online lead aggregators. A recent analysis of those leads found that 30% had bad addresses. Another 10% had bad phone numbers. In other words, they were leads to nowhere.

Hart placed TSC Direct’s closure rate at about 2%. Still, that’s enough to continue working them, she said.

Larger carriers are fueling the demand for lead volume. They have taken up residence on the aggregator landscape, and made it more competitive.

The J.D. Power survey showed that 42% listed Progressive.com as the site of choice, ahead of NetQuote.com and Insurance.com.

American Family Insurance plays both sides of the fence. The Madison, Wis.-based insurer began buying online leads 10 years ago and now acquires more than 800,000 total leads a year from InsWeb, NetQuote and InsureMe, three large players in the online lead-generator market.

The insurer also doles out more than 300,000 leads from Amfam.com, where consumers can seek information anonymously or obtain a full quote based on a more detailed profile. All of the leads are handed off to its captive agents based on individual preferences. American Family has found the lead quality of its full quote is noticeably higher because the potential customer has seen the premium quote and has asked to speak with an agent.

As the aggregators position themselves as a marketing solution for cash-strapped agents and agencies, they face their own competitive pressures.

InsWeb CEO Hussein Enan said in late January that the declining pool of consumers had driven up consumer acquisition costs on an industrywide basis. In its most recent U.S. Securities and Exchange Commission filing, InsWeb, the only publicly traded online lead generator, reported fourth-quarter 2008 revenue per consumer for auto quotes, a category that generates 81% of the company’s revenue, dropped nearly 30% to $3.17 compared to a year earlier.

In another sign of evolution for online lead generation, InsWeb also has focused attention on its social networking oriented site, freeinsuranceadvice.com, and on insurancerates.com, which compares rates from top carriers.

As competitive pressures mount, look for lead aggregators to screen leads more carefully and begin transferring live calls to agents.

(This is an excerpt of the cover article in the March issue of Best's Review magazine. It will be available online March 2).

(By Al Slavin, senior associate editor, Best's Review)
Copyright © 2009 A.M. Best Company, Inc. Online leads have become the 21st century’s version of the cold call — except this data-driven approach has given Web-savvy consumers anonymity and access to competing quotes in minutes, if not seconds.