1. Analysis of SAFECO’s Internet Strategy
John Ray-Keil
Cheryl McRae
John Hoffman
Donjin Choi

2. AGENDA Insurance Industry Overview
Traditional Insurance Business Models
Impact of the Internet
SAFECO Background
SAFECO Internet Strategy
SWOT Analysis
Recommendations

3. Insurance Industry Overview
Property/Casualty market is $282 B (1998)
Private passenger auto
Homeowners and renters
Business owners
General liability
Life and Health market is $444 B (1998)
Life insurance
Annuities
Health insurance

4. Industry Overview (continued)
Fragmented market, but some big players
2,485 P&C insurance companies in US
Top 5 accounted for 30% of industry revenue
Very highly regulated
Regulated by states
Drives inefficiencies

5. Traditional Insurance Business Models Independent Agent Companies
Ins. Company
Independent
Agent
Customer
Ins. Company
Value Proposition:
Agent represents customer interests, does the shopping around. Personalized service-relationship.

6. Traditional Insurance Business Models (continued) Captive Agent / Direct Writer
Customer
Ins. Company
Employee
Agent
Value Proposition:
Relationship, local presence, understand customer needs. Lower cost structure than independent agency company.

7. Traditional Insurance Business Models (continued) Direct Response Carriers
Ins. Company
Customer
Value Proposition:
Convenience, Low Cost

8. Traditional Insurance Business Models (continued)
Personal lines consumers shifting buying behaviors from independent agency model to direct writer & direct response models.
1988 IA model = 43.9% of revenue
1998 IA model = 33.1% of revenue
Commercial lines consumers still want relationships and advice from agents.
1988 IA model = 75.4% of revenue
1998 IA model = 71.0% of revenue

9. Impact of the Internet New e-companies
e-banks, e-insurers, e-financial (Wingspan)
E-intermediaries
aggregators, e-brokers (Insweb)
ASP’s
claims, agency (ClaimsDesk.com)
Niche companies
communities, event mediators (autobytel.com)
Traditional insurers trying to catch up
Very few insurers selling anything

10. Impact of the Internet?
Harvard Business Review - March-April "Companies such as...InsWeb, which offer insurance, could become customer magnets for entire industries."

11. Impact of the Internet?

12. SAFECO Background Life & Health Insurance (7.2% of revenue)
Started in 1923 in Seattle as P&C Company
Always dedicated to independent agent system
Become a diversified financial services corp.
P&C insurance (88% of revenue)
Life & Health Insurance (7.2% of revenue)
Credit Company (2.3% of revenue)
Asset management / Mutual Funds (.9% of rev.)

13. SAFECO’s Internet Strategy
Focus on independent agents. Help with the servicing so agents can sell more (Many other companies are going to blended distribution - selling still through IA’s, but also selling direct. By 11/01/2000 consumers can buy auto and term life).
Safeco will sell policies online. If it comes through an agent's website, Safeco will issue the policy, assign the customer to that agent and pay the agent a commission. If the sale comes from someone on the web who doesn’t have an agent and came directly to safeco.com, the company will issue the policy, assign it to an agent located near the customer and pay the agent a commission.
Change the value proposition of the agent. Leverage independent agents and help them become financial services counselors. Target less price-sensitive consumers and deliver high service quality and breadth of product offerings.
Create strategic alliances to assist in customer acquisition. Concur Technology - An aggregator for small businesses allowing them to purchase in bulk discount. Safeco will be exclusive insurance provider. Sharebuilder - Safeco customers can purchase shares or partial shares of stock through regular payments.

14. SAFECO’s Plan
Provide assistance to all agents in creating a web site, acquiring minimum platform, etc.
Customers can access through agent web sites or Safeco.com
Will begin offering auto and term life on Web
Continue strategic alliances

15. SAFECO’s Plan (continued)
Safeco will provide service and answer questions from customers who buy via Web
All customers will be assigned an agent at time of purchase
Agents will receive reduced initial commission for customers attained on Web
-Full commission on renewal
-Full commission for other products sold to that customer

16. STRENGTHS Time & Resources -Corporate $
-Waiting for industry to shakeout
Helping agents create sites which ensure similar brand experience for consumers
Good strategic alliances with potential for more
Dedication to independent agency system should increase agents’ loyalty to Safeco

17. WEAKNESSES Doesn’t allow price comparisons with other companies
Relies on agents changing the way they do business and the value they bring
The process inserts an agent when some customers may prefer to only deal with Safeco.com

18. OPPORTUNITIES Personalized web pages and value-added services
-View accounts, pay bills, report claims, get other consumer information
Ability to sell other products to the consumer
-Recommend products that meet all of customers’ financial needs

19. THREATS Uncertainty of future of the agency system
-power shifts to agents
Banks or other financial services firms may offer the same value (financial consultants) to the same target customers as Safeco

20. RECOMMENDATIONS Narrow and clearly define target customer
Be aggressive on product innovation to fit target market
Develop marketing programs to help agents drive business to their sites
Integrate customer database to support relationship-building and cross-selling
Offer as many services as possible on the web
-report claims, pay bills, etc.
Concentrate efforts on a subset of agents who have the potential to successfully shift their value proposition.

21. QUESTIONS?