Filed Under:Carrier Innovations, Technology Solutions

What Amazon can teach auto insurance carriers

A sign for the Amazon.com fulfillment center in DuPont, Wash., is shown Monday, Nov. 30, 2015. (AP Photo/Ted S. Warren)
A sign for the Amazon.com fulfillment center in DuPont, Wash., is shown Monday, Nov. 30, 2015. (AP Photo/Ted S. Warren)

The insurance industry has been in a marketing arms race for several years, with carriers attempting to outspend, outsmart and outwit each other to increase market share.

Marketing budgets and competition have ballooned, with annual ad spending growing to $8 billion per year across the industry. This dramatic run up has created a ‘new normal’ in insurance marketing.

Along the way, consumer behavior and online shopping trends have been evolving as well. In particular, comparison shopping is now an everyday reality for most consumers. There's now a seemingly endless supply of comparison websites giving consumers easy access to purchase options across just about every industry.

Consumers have a powerful, consumer-friendly internet at their fingertips making them more informed than any generation before them. While many carriers are taking some steps to embrace the current marketplace dynamics, a large percentage are still not fully capitalizing on this shift in consumer experience and expectations.

There's one company, however, whose approach to the consumer experience offers an interesting and profitable path forward for insurance carriers — Amazon.

What Amazon learned


Amazon has been innovating all aspects of the retail model since their inception, with a strong emphasis on improving the consumer experience. In particular, Amazon definitely understands that comparison shopping is now a way of life and they have taken steps to accommodate consumers. The retailer knows that even if every visitor to their site is not interested in one of their products, they are still interested in making a purchase.

Shoppers are actively searching for something when they visit a site like Amazon, and that subtle distinction in the way they view their website visitors has helped Amazon learn an invaluable lesson about how to help the consumer and improve the overall bottom line in the process.

This forward-thinking perspective means that Amazon is focused on helping consumers find the right products — even if it isn’t from them. Though it might seem counterintuitive, the retail giant has been serving sponsored ad listings for other e-commerce sites alongside its own offerings.

In addition to helping consumers find what they want, the ad listings generate over $400 million per year in additional revenue. As a result, Amazon is recouping 10-20 percent of their marketing budget that can then be reinvested to increase marketing leverage and effectiveness. 

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How this lesson applies to carriers


Amazon has tapped into an important consumer behavior that more auto carriers should embrace in today’s choice-driven world. By giving consumers the option to compare, they can simultaneously attract more customers and improve their bottom line along the way. If carriers look to the success of Amazon, there is an opportunity for this new approach to drive home sales.

Online conversion rates for the insurance industry fall in the 5-10 percent range, meaning that close to 90 percent of visitors to a carrier’s website will not buy from them. In light of this challenging reality, they would benefit from re-thinking how to treat this 90 percent.

Forward-thinking carriers can better serve this segment of non-converting consumers by showing ad listings for competitors, similar to what Amazon is doing. And in the process — instead of losing all of the consumers and the marketing investments to attract them in the first place — they can create a new revenue stream for themselves that can be reinvested into higher performing customer acquisition activities.

Some of the larger carriers have followed suit, recognizing that active shoppers on their site can be monetized one way or another, and have started listing ads for competitors on their own sites. These companies are helping shoppers instantaneously see quotes across competition and substantially streamline the user experience, all while generating revenue when consumers click on the ad listings.

Changing how carriers view the consumer


The time has come for all carriers to embrace that comparison shopping is a way of life for today’s consumer. They must recognize that there is value and opportunity in consumers who do not convert into a policy and must therefore deliver a better overall experience by more effectively helping the consumer in their shopping journey.

Carriers would benefit by recognizing that consumers are no longer captive audiences and expect to comparison shop. Like Amazon, the companies who provide them with the freedom to do that will be the ones who create a stronger brand experience while also creating a new and significant revenue stream.

Several carriers have already embraced the value in this approach and are now showing listings on their websites. The data and technology exists to do this today, but the question now is how long it will take for more carriers to embrace this powerful trend.

It’s clear that today’s shoppers expect choice and ease of use. Giving consumers what they both want and expect does not mean “the end” for a carrier — in fact, it’s a smart business strategy that fosters goodwill and provides an alternate way to capitalize on those who have landed on your site.

Related: 4 digital strategies to reach auto insurance shoppers

Jeff Navach is vice president of Marketing at Redmond, Washington-based MediaAlpha, an advertising technology company. Contact him on Twitter @jnavach or on LinkedIn.

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