Overstock.com Brings Insurance Sales to Retail Site, Agents React

Customers of Overstock.com can now furnish their home or office and insure them through the same source. The online retailer this month began selling small business, auto and home insurance along with furniture, rugs, beauty products and electronics.

The mega-“etailer” launched Overstock.com Insurance Agency through a partnership with Insuritas, a provider of private-label insurance agencies whose CEO believes online shopping is replacing traditional insurance agencies because it is what consumers want. He urges agents to start installing their services in other businesses.

According to CEO and founder of Overstock.com, Patrick Byrne, the Salt Lake City-based company’s mission is saving people money and it is always looking for new niches where it can do so for its large customer base.

“A lot of our customers are home buyers and are either buying, furnishing or refurnishing homes or apartments so it seemed like a natural fit for us to offer a home insurance product,” says Byrne.

Now listed at the top of the Overstock.com website is an “Insurance” tab where customers can click and receive a personalized auto, residential or business insurance quote. Insurance purchases are paid for in the same shopping cart as other Overstock.com home and beauty products. Customers can also manage their policy through their Overstock.com accounts.

Coverage is provided through major carriers, including Safeco, that have been secured through Insuritas, which handles all of the agency and policy details for Overstock, including the technology, call center and policy binding.

Insuritas has been providing insurance agency functions to banks and credit unions nationwide for the last 15 years but this is the first retailer it has worked with. Jeff Chesky, CEO of Insuritas, says what is different about this arrangement compared to its partnerships with banks and credit unions is that Overstock.com owns the agency and policies while Insuritas provides the backroom services, operational infrastructure and products.

Customers will connect with Insuritas’ agents in its call center in Hartford, Conn., but the policies will come from Overstock.com Insurance Agency. Insuritas will be compensated by the retailer a portion of the gross income of the agency.

Carriers on Overstock will be paid directly by the consumers who purchase a policy from Overstock.com and then remit the commission to the retailer.

Overstock announced its insurance venture the same week that giant retailer Walmart announced it would be offering insurance through its website.

Unlike the Overstock deal, Walmart will not own the agency; it is simply directing customers to the website AutoInsurance.com through its own website.

Chesky of Insuritas says it was no problem getting its carriers to sign up because Overstock’s customers are primarily women between the ages of 34-55 who have high credit scores –a prime target group for insurers. “The customers we bring in for insurance shopping are very attractive risks to carriers,” he said.

“Our carrier partners are thrilled to underwrite the customers of Overstock.com, just like they are thrilled to have us distribute their products in banks and credit unions because [the financial institutions] are giving them loans so there is a good claims risk there,” Chesky said. “Carriers are increasingly recognizing credit score as an indicator of claims risk.”

Chesky thinks Overstock customers are more desirable to insurers than Walmart’s.

“We are looking for very attractive segments of the marketplace that our carriers have a very strategic appetite to write,” he said, adding that he is “not sure how Walmart will align its customer base” with carriers’ models.

As for consumers, Chesky says they are not only looking for but also demanding the “no-hassle” online insurance shopping experience like Insuritas and Overstock.com have created. He says this is being proven by his company’s organic growth.

He believes the traditional insurance sales model of customers sitting down with an agent and discussing policies is dying. “Consumers don’t want a relationship with an agent or even a carrier,” says Chesky. “They just don’t want to spend money on something they didn’t use but still want to protect their investments and assets.”

Overstock founder Byrne says his firm doesn’t have any set goals for the first year and expects it could take a few years for the agency to take off. Overstock.com also plans to expand into life and health insurance later this year through the Insuritas system.

Insuritas is prepared to offer any and all insurance that is available, says Chesky.

“The consumer is looking for a store or aisle in a store where the shelves are stuffed with every risk management product they need and that’s what we will keep doing for Overstock,” he says.

Agents and brokers reacted strongly to Overstock.com’s decision to sell insurance, but especially to Chesky’s comments about the current agency system becoming irrelevant:

<em>AgencyEquity says:</em> The problem with this kind of thinking is that one size does not fit all, it misses the point of providing advice and presumes that insurance is all the same. There are different market segments out there, there are also hundreds of different types of insurance policy types. Some people want to do things online, others have more sophisticated needs and demand professional expertise. This is especially true with higher net-worth personal lines and almost all of commercial lines. Most insurance by agents is submitted online, if it were that easy, they would be able to transfer the portal from agent to consumer. But it’s not happening because there are a number of variables that make it very difficult, including the knowledge, professional advice and account management that is needed to make sure things are being done properly. Lastly, America is a marketplace of options, that is what makes us great, for one person to say “this is the only way to do it” is not accurate as this has never been the case in America.

<em>Libby says:</em> Equity, while I want to agree with you I’m not so sure. With the huge numbers of millenials coming of age, they like to do things online. And they don’t care if it’s a big ticket item.

In addition, you are forgetting that the customer WILL be dealing with an agent. I’m sure they don’t just spit out a number and walk away. They more than likely give several options and follow up by phone or email.

I’m thinking this is a slick idea for personal lines/BOP business. I’m pretty sure it won’t work for middle-market commerical business, though.

<em>farmerjohn says: </em>Well, at least it sounds like the personal lines opportunities we’ll be missing can be replaced by increased opportunities in the E&O world!

<em>Insexpert says:</em> Some independent agents have to prove their worth, or lose their business to set ups like these. Too many independents commoditize their products, swapping folks from cheaper carrier to cheaper carrier without taking time to explain the differences, and why you get what you pay for. If the only value you bring is a cheaper rate, you will be easily replaced. The best agents’ clients stay for the agent; not the price. Let’s face it. The vast majority of shoppers are shopping price. That’s a fine start, but a good agent redirects the conversation to “value”, of the product and the agency, based on the stories they tell. Make your clients stick for the reasons they can’t find anywhere else. Let’s send these “knick knacks and insurance” clowns packin’.

<em>G. Hatfield says:</em> More cheapening of the insurance process for the consumer and the agents. I hope the agents that work with these “major insurance carriers” begin choosing other carriers for their business who are committed to their distribution channel and let Travelers, Safeco and the others work with Walmart and other retail establishments … I’ll bet Burger King has a bunch of folks they could send them … a Whopper my way and homeowners insurance please!