- Read about smart people
- Read books that smart people recommend to you
Safe to say I thoroughly enjoyed the one and will finish the other one shortly. I coud not wait till I was done to lay out this thought. Recently Google has received some press in regards to them entering Insurance. I think it is awesome. I think the company they are buying has its flaws but overall is in a strong position. I also KNOW that the personal insurance market in the U.S.A. is massively flawed and has not kept up with consumer buying trends. Of course an operation like Google can apply a lot of money and a lot of brains and “fix” or improve just about anything they want. But are they in the best position? Maybe. But let’s talk about Sir Richard Branson and Virgin for a minute.
Let’s go beyond the awesome track record. Story book esque life. Amazing attitude and oh by the way Virgin has already built eight Billlion dollar companies. Let me show you how he can build a billion dollar insurance operation in the U.S.
By doing exactly what he has already done and applying it to this market. In both books he repeatedly writes about and shows evidence of how he and Virgin find opportunities and apply the Virgin mindset/way to them.
Same applies here.
Now some detail.
Mobile Virtual Network Operator; Fascinating. Had to look it up to get more details. Basically, assuming I have it right, You have an existing operation not using the full “bandwith” of their current operation. Now this was how Virgin Mobile was built. Same thing exists in insurance. You have dozens of large insurance companies who have dozens of call centers. The assumption here is with a little Virginizing they can perform better and actual perform up to their potential. There is plenty of room for new customers, or at least there should be, in all these operations. Insert the Virgin team and their existing customer base. No sense in creating your own call center, just yet, use what is there already. Get your capital and a healthy return back and then build your own and leverage ones you already have.
Marketing; Who needs a lizard, goofy paid endorsers, Cerrano(yes a Major League reference), or any other character when you can have the real thing; Richard Branson. Who would you rather believe; somebody who has actually improved the lives of tens of millions of people or a made up character pushing a slogan made up by marketers? Reality is Virgin was Zappos before there was a Zappos.
What about the Market Space? Pretty simple. There are massive openings since there are;
- Not currently enough agents to serve customers
- The industry has allowed itself to age out and it will only get worse. Big operations will buy large ones in a mass scale. Many will make redundant call centers.
- Overall, yes there are exceptions, the industry has not evolved and does not treat their customers very well.
So in steps Virgin. Let’s look at one small, Six Million person by this estimate, Virgin Mobile USA. So of those Six million, lets be very conservative. Let’s pretend it is really five million. Let’s then say that only four million actually have auto insurance. Since the audience is mostly younger lets say they pay about $1200 a year. So they spend, collectively,
4,000,000 * $1200= $4,800,000,000 on auto insurance each year. Now lets put them in my model with five carriers. They’ll be able to secure insurance for about 7 out of 10 people(conservatively) so 2,800,000 new customers.
2,800,000 * $1200= $3,360,000,000 in insurance premiums. Be VERY conservative and figure a 10% commisson and you are at revenue of $336,000,000 million. Not bad. Oh and we did not factor in home insurance or life insurance which they have some experiencce in already.
With several hundred companies already they also likely have the existing relationships that will allow them to scale up much faster than Google. Speaking of scaling, from what I can tell the exisitng “players” of Coverhound, Comparenow and The Zebra are still playing the “churn” game. In a pretty short amout of time a company like Virgin can accumulate a massive customer base. Now while they are doing that, another piece of their team, can be working through the regulatory mess that is the insurance market and be developing their own company. Not necessary but would be very interesting.
Yes, I know there are more details, etc. That is not the point. If you look at the facts of how the U.S. Market currently is and then do some research on Virgin, you’ll see they are as well positioned as ANY company is. If not better. Would be hard to believe that among the several hundred companies that they have, they do not have enough technology to quickly develop what is currently not available. Oh and by the way, I only brought up numbers based upon the perceived “younger” audience they have. They also have a seemingly wealthier and older client base with their airline. Combine those two, make live data points come to life. Show them the easy flaws to fix and I would bet, if you start today, you can be at a billion in revenue within three years.
So, Sir Richard, what do you think?