Local firm cashes in on growth of online insurance

Brad Cooper, a senior vice president with InsWeb, said, “The growth of insurance shopping on the Internet has been incredible, and we’ve grown along with it.” He said the company’s multiple sites have it well-positioned to compete.

Quick, name a locally based company that does business in all 50 states.

If InsWeb Corp. in Gold River did not immediately jump to mind, you probably haven’t gone online lately to shop for insurance.

That’s the 15-year-old local company’s niche, and more than 10 million consumers are using its services annually.

“The growth of insurance shopping on the Internet has been incredible, and we’ve grown along with it,” said Brad Cooper, a senior vice president with InsWeb. “What we realized is that it’s important to offer a wide range of services … (because) not all insurance shoppers are created equal.”

InsWeb started in 1995 in Burlingame with a basic concept: give consumers a Web portal to compare quotes and shop for insurance.

In quick order, the company moved to San Mateo and then Redwood City. It came to Gold River in 2000, doing business for a short time from trailers in the parking lot of the current headquarters building on Pyrites Way.

The company’s basic Web site enables consumers to request quotes from licensed insurance agents selling policies for auto, home, term life, health, motorcycle, renter, business, recreational vehicles and travel.

InsWeb makes money on the lead-generation model. Insurance agents pay a per-customer fee to the company for each client lead. Fees vary based on numerous factors.

In 2007, the company capped a record year with net income of $2.4 million on revenue of $33.2 million. Revenue continued growing in 2008 despite the down economy – to $37.5 million – but the firm lost $2.2 million as it spent money and hired technology staff to develop three new Web sites the company launched in 2009. The new sites are:

• InsuranceRates.com – Consumers fill out a form to immediately compare auto insurance rates from multiple providers. Shoppers have the option of not submitting their personal information during the process.

• BestInsurancematch.com – The site identifies auto insurance providers most likely to offer the most affordable rates based on specific factors entered by individual consumers. Variables include household finances and availability of local insurance agents.

• FreeInsuranceAdvice.com – It’s a consumer resource library with information on various types of insurance, plus a forum where consumers can ask questions and receive direct responses from licensed insurance agents.

“The (sites) give consumers the ability to shop and get the information they need, including e-mailing the agents if they want,” Cooper said.

Shortly after the introduction of InsuranceRates.com in September, InsWeb announced that it was slashing its work force from 87 to 61, the number of employees it had at the conclusion of 2007.

Most of the cuts were in its technology segment. The company anticipated an annual savings of $2.5 million.

With the new sites up and running, InsWeb Chairman and CEO Hussein Enan said the reductions were necessary to “bring us back to profitability.”

InsWeb returned to the black in the fourth quarter of 2009, turning a profit of $705,000 compared with a third-quarter loss of $870,000.

Cooper said the company’s multiple sites now have it well-positioned to compete against a growing field of online players, including similar services offered by major insurers such as Geico and Progressive.

“The plans continue to focus on choice,” Cooper said. “We push a model of price transparency with quotes in real time … and we have the sites for that.”

Cooper also noted that InsWeb’s current services in the health insurance field are comparatively small, a situation that could change with millions of baby boomers reaching retirement age and a growing group of online-savvy young people starting careers and families.

“Health insurance is a huge area of opportunity. We’re not doing as much there now, but there could be more up the road,” Cooper said.

Analysts said InsWeb’s niche is likely to grow over the next 10 years, as will the market for similar services offered by insurance shopping/information competitors and start-ups.

“The business model for selling insurance has changed over a generation,” said Peter Schaub, a New York-based marketing and branding expert. “The old model of shopping insurance agents takes time that most people don’t have to take with the Internet. Why go through all that when you can just pop online and get quotes and a list of agents in your area?

“What (InsWeb) is doing makes as much sense as what Amazon.com did for general merchandise or what other online niche sites are doing to sell their wares.”

Consumers also like the convenience.

Liz Johnson of Sacramento recently switched auto insurance providers with the help of the InsWeb site. She said: “It was so simple and it takes just a few minutes. I can’t believe how much time it used to take us to get quotes and get it all done.

“I’m online for good. I’ll never go back to the old way.”