Which U. S. P&C insurance company will be the first to use a social network as a platform to transact insurance?

Feb 3rd, 2012 | Posted by

Part of the hype involved with the Facebook IPO this week is the vision of its founder to establish it as a platform for people to use when interacting on the internet. To me, this means not simply linking from the S.N. to another site, but to actually complete commercial transactions on the social network itself. For insurance, this would have a minimum benefit of avoiding tedious data entry of demographic information that the network already knows about you, age, sex, address, etc.

If you don’t think transacting insurance on a site other than that of the writing company will happen, you can stop reading now — you won’t be interested in the rest of this post. If, however, you are game to consider that a company will try this, read on and get ready to post a comment and make your pov known.

What would be the characteristics of the first U.S. P&C insurance company to use a social site as a platform for its business? Here are some considerations:

Product – Will be one of the commoditized, less differentiated products such as personal automobile, motorcycle, or dwelling: In these lines of business, price and service separate the offerings. Being able to ease the process of obtaining and maintaining insurance will be a driver.

Segment – Likely youthful: The companies first attracted to a S.N. platform will be those with prospects who are most comfortable with the environment, aggravated by traditional insurance distribution and less concerned about personal privacy.

Channel – Direct: As this new way of doing business will involve first-mover risks, it is likely that companies with intermediated distribution will pass on using the platform in the beginning. Upsetting their existing agents with a direct social network approach will be too much to bear.

Culture – Innovative: There will need to be some match between the value system of the insurer and that of the social network company. Stepping into this unknown territory will require that both parties are comfortable with their partner. Thus, insurers which have a reputation for being more innovative will be more likely to reach acceptable terms with the platform provider. Since this will probably be either Google or Facebook, the insurer with the vibe closest to “do no harm” or “hacking” will likely prevail.

Size — Not necessarily the largest: I do not think that the first S.N. insurer will need to be a billion+ organization, but I am sure that the network provider will demand some fairly steep rent and this will restrict the number of insurers able to pay the freight.

Technology – Probably not a barrier: The investment of many insurers in core system renewal should position most of them to take advantage of the open standards that a S.N. is built on.

Regulator view – The wildcard: The most likely insurer, in my view, is one that has a good reputation with the regulators and a decent reputation at addressing their concerns in past market conduct reviews and inquiries. As the response of regulation to this new way of doing business is such an unknown, the company willing to take this step will be confident in its ability to respond to its overseers.

Given these parameters, does anyone come to your mind? In days past, I would have identified the company with the pink-haired lady mascot as a leading possibility, but its recent purchase takes them off the table. It also could be one of the specialty auto insurers targeting the youthful driver market as well.

Post a reply, or email me at mfitzgerald@celent.com, or contact me on LinkedIn or Twitter and let’s knock this around a bit.

  1. Ganesh
    Feb 4th, 2012 at 09:15
    Reply | Quote | #2

    Mike
    Interesting thoughts. Though I am unable to come up with who could be the first insurers, I would like to offer my thoughts on what type of products might come first in the market. I think the products will be of following nature:
    1. Short-term / Event based / one-time: for example: I plan to visit Super Bowl and am worried about my car being vandalized.
    2. Low risks / low premium: Example, i procure an ipad and want a quick coverage from MY Insurer (I am not interested to buy insurance from the merchant selling it)

    I am interested to hear from you on the above.

  2. Pensioner Insurance
    Feb 8th, 2012 at 20:24
    Reply | Quote | #3

    This is an interest point, not only for the insurance sector, but almost every sector whom does business on the internet. Facebook has connected the Western world, in a network never present before.

    Most importantly for the Facebook, for advertisers and connected businesses, Facebook has a personal profile of a real individual, rather than a made-up username like Twitter. Users self-regulate themselves– knowing that their peers know everything about them, so a lie on their profile would be a lie to their friends.

    My immediate concern is ensuring the security of the network: Facebook is taking on a momentus scale of being able to integrate every facet of our lives, and services that we need. Games, video chat, jobs, ads are one thing, financial transactions and services are another.

    I think the network would need to adopt some sort of individual require for credentials, like a bank, for say, your passport number.

    I do consider the potential of Facebook to be incredible, as long as Zuckerberg is at the helm.

    It is a watershed moment for the Facebook however, on two fronts: 1) The IPO: How will it affect the transparency, operations, monetization and vision of the enterprise; 2) Connectivity: Will they continue to connect to website via facebook connect, or will they begin to attract more integrated services, and websites are their platform.

  3. James
    Feb 13th, 2012 at 06:09
    Reply | Quote | #4

    How about a followup blog on what it would take to enable a policy administration system to participate in social networking transactions…

  4. Jen Overhulse
    Feb 15th, 2012 at 14:58
    Reply | Quote | #5

    Hi Mike,
    I agree it’s coming. Let’s go out on a limb here and say maybe a company like USAA with a younger demographic policyholder, and also a rather closed potential and existing customer base (military personnel and families).

    USAA has already recognized the potential of mobile and social as a means of connecting their their highly-mobile customer base, and they certainly do sell some of the commoditized insurance products you mention above.

    If not USAA, could be a Progressive or a GEICO, or one of the pay-as-you-drive auto insurers like MileMeter for example.

    BTW, since word on the street is that a fully-completed Facebook profile contains 40 or more unique pieces of personally identifiable information utilizing this S.N. in particular for the purpose of conducting and concluding insurance transactions would seem the straightest line between two proverbial points…:)

    Also agree it will have to be a company with a fairly youthful audience already in tune with social networking. This younger generations, Millenials, is comfortable sacrificing a certain amount of personal privacy for convenience. I’m going with USAA.

    What’s your guess?
    Jen

  5. Mike Fitzgerald
    Feb 22nd, 2012 at 17:44
    Reply | Quote | #6

    Jen, I’m going with SafeAuto.