This article doesn’t provide an opinion about the effectiveness of double serving ads or the unit economics of this approach. Rather, this article shows how InsureTechs face a challenge from suppliers, namely Search Engines, and how InsureTechs deploy a strategy to respond to a competitive market force.
I specifically want to dive deep into three topics:
- Defining what an InsureTech is and explaining one method these firms deploy to market their services.
- Explain how InsureTechs depend on Search Engines (and in particular digital advertising) to attract and retain customers.
- Show the ways in which one InsureTech, Lemonade, double serves ads to mitigate the force of industry suppliers.
What is an InsureTech? How do they market their services?
“Insurtech“ refers to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model.
At the foundation of the InsureTech business model is a direct, digital, customer-centric experience.
InsureTechs leverage technology in everything that they do. These firms see opportunities in older approaches to helping consumers evaluate and procure insurance policies.
For example, more than 93% of homeowners insurance policies in the United States are sold via agents, making a platform that finds, onboards, and digitally serves consumers end-to-end very much an outlier.
That is why InsureTechs like to build digital platforms.
These platforms enable InsureTechs to integrate marketing and onboarding with underwriting and claims processing, collecting and deploying data throughout, to constantly drive efficient customer acquisition and enhance the consumer experience.
As with any business, InsureTechs face risks, and have to work hard to mitigate these risks.
One risk for InsureTechs (and startups in particular) is their reliance on Search Engines, social media platforms, digital app stores, content-based online advertising and other online sources to attract consumers.
Third-party interference beyond the InsureTech’s control can greatly increase customer acquisition costs.
InsureTechs success depends on their ability to attract consumers to their websites and online apps and to convert these leads into customers in a cost effective manner.
How do InsureTechs reach users?
In short, they depend in large part on Google.
Why do InsureTechs depend on Search Engines (and in particular digital advertising) to attract and retain customers?
With respect to Search Engines, InsureTechs are included in search results as a result of both paid search listings, where these firms purchase specific search terms that result in the inclusion of their advertisement, and free search listings, which depend on algorithms used by search.
For paid search listings, if one or more of the Search Engines or other online sources on which InsureTechs rely for purchased listings modify or terminate their relationship with the InsureTech, user acquisition expenses can rise. Or worse, the InsureTech might lose consumers.
For free search listings, if Search Engines on which InsureTechs rely for algorithmic listings modify their algorithms, their websites may appear less prominently or not at all in search results, which could result in reduced traffic and product sign-ups.
In short, the ability to maintain and increase the number of consumers directed to a firm’s products from digital platforms is not within the InsureTech’s control.
I have started and built many websites and know firsthand the pain of being removed – even for a few days – from the Google Search Index.
This supplier power – held by Google (and other Search Engines) and felt by InsureTechs – is something these startups are constantly working to mitigate.
One answer: InsureTechs double serve ads.
The Double Serving of Ads: Mitigating Supplier Power
First, review this except from Lemonade’s 10k:
“Search Engines…often revise their algorithms and introduce new advertising products. If one or more of the Search Engines or other online sources on which we rely for traffic to our website and our online app were to modify its general methodology for how it displays our advertisements or keyword search results, resulting in fewer consumers clicking through to our website and our online app, our business and operating results are likely to suffer. In addition, if our online display advertisements are no longer effective or are not able to reach certain consumers due to consumers’ use of ad-blocking software, our business and operating results could suffer.”
With this context in mind, let’s review how Lemonade combats this threat to its user acquisition strategy in practice.
If you Google “lemonade review” this is the page you will see. To the untrained eye, the top four ad placements look unique.
Each has its own copy, call to action, and anchor text.
But let’s dive deeper into the actual search results.
Ad slot #2 and #4 direct users to the same sign-up flow.
Ad #4 is the sign-up flow for Lemonade directly.
Ad #2 takes users to a landing page in which the Lemonade sign-up is immediately prompted.
Consumer Voice, which asks one to check Lemonade’s pricing, starts this InsureTech’s sign-up flow.
Bringing It All Together
There are many interesting InsureTechs building products that help consumers and businesses protect against financial loss with new insurance offerings and services.
Insurance is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.
Given that InsureTechs know, evaluate, and price risk on a daily basis, I am not surprised to see InsureTechs seeking to hedge against risks to their user acquisition strategies.
By double serving ads, these InsureTechs are pushing back against industry supplier power.
How well this strategy works over the long run remains to be seen. In the short term, running 2x the ads per search query can balloon acquisition costs.
We can conclude that this risk is surely priced in.