Quotesmith.com Files IPO, Moves to E-Commerce

Though its bread and butter is online insurance quotes, Quotesmith.com is hoping stock quotes will help it complete its transition from an information site to an e-commerce site.

Quotesmith.com filed an initial public offering last week with the U.S. Securities and Exchange Commission to raise as much as $80 million (US$) on an unspecified number of shares. The company hopes to use the symbol QUOT on the Nasdaq exchange.

Quotesmith started in 1984 as an electronic service for insurance brokers and policy handlers, making the transition to a consumer quote service in 1994. Quotesmith.com’s online service enables consumers and businesses to get instant quotes from more than 300 insurance companies and thus bypass the need for an insurance agent to find the best deal.

Quotesmith.com guarantees the accuracy of every quote and says it will pay $500 to anyone who gets an invalid figure from the site. In addition, for term life insurance, Quotesmith.com also states it will pay $500 to anyone who finds a better deal elsewhere. The site also provides ratings on the term lift providers from five insurance review firms including Duff & Phelps and Moody’s.

Expect More Losses

The company steadily improved its balance sheet from 1997 to 1998, though first quarter 1999 results reflect some lost ground. While increasing revenues from $4.3 million in 1997 to $5.6 million last year, the company cut its net loss in half, from $467,000, or 4 cents per share, to $196,000, or 2 cents per share.

In the first quarter of 1999, revenues again increased to $1.5 million from $1.2 million in the prior year period. However, a first quarter 1998 net income of $88,000, or 1 cent per share, turned to a net loss this year of $1.4 million, or 11 cents per share.

The company is not likely to stem that bleeding soon, according to its SEC statement. “We plan to continue to significantly increase our operating expenses in an attempt to increase our consumer base,” the company said, warning potential investors not to look for profits in the near future.

Will E-Commerce Solve Insurance Problems?

More specifically, Quotes.com is looking to increase its paying customer base, not those coming to the site just for free quotes. Currently, Quotesmith.com offers very limited e-commerce capabilities, offering only term life insurance online. Apart from those policies, the company gets paid primarily by the insurance companies, who pay Quotesmith.com a fee for each policy a consumer buys after examining the options at Quotesmith.com.

The company plans to expand its insurance policy sales beyond term life, banking on the growing acceptance of the Internet for electronic commerce. “The fragmentation of the insurance industry and the significant price and product variation has led consumers and insurance companies to seek alternative means of purchase and distribution,” the company said in its SEC statement.

Quotesmith.com has allied with health information site DrKoop.com and Web portal Xoom.com to direct additional customers to its site.

How Much Handholding?

The company’s approach does raise some question, though, about how effective it will be in online insurance sales. Quotesmith.com boasts “a no salesperson approach that eliminates face-to-face commissioned agents from the insurance purchase process and puts consumers in control of their insurance purchase decisions.”

However, as evident by the development of several different technologies to allow customer service reps to communicate with online buyers during the course of a purchase, some in the insurance industry argue a hands-off approach will not work. Some insurance executives believe theirs is precisely the type of business that requires a salesperson’s handholding to complete the sale. Insurance policies, often with a variety of pricing and coverage options and numerous qualifying clauses, have a higher intimidation factor than most products sold online, they argue.

Quotesmith.com says it will not leave its customers hanging. The company offers support throughout the quote research and purchase process by answering questions and scheduling medical exam appointments, as customers request help. Customer service is provided by a non-commission staff, to avoid the intrusiveness of agents, the company says.