So  I had recentlly  read Losing My Virginity by Richard Branson and a smart friend, Chris Brogan, suggested Business Stripped Bare.  So glad I followed two “rules” of mine;

1. Read about smart people
2. 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.

Simple answer;

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;

1. Not currently enough agents to serve customers
2. 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.
3. 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?

**Heavy on industry thoughts

1. I think they can do so much of a better job driving business.  Yup, driving business to them.  Depending on where you look, several hundred million dollars are sent simply to get attention.  That’s really all it is.  Attention.  Because once they get there, where is the follow through?

2. Misunderstanding of branding versus spam.  There is a  big difference.  Continuing to tell me about you is not going to cut it.  It already isn’t so the sooner we can stop that behavior the better.  Advertising or talking about anything that requires fine print and is not standard with your product is no longer going to cut it.  tell me about the good stuff.  Tell me about why your product/service is what I want to buy.  Oh and if it is not worth talking about make it worth talking about.

3. Mistreating your core customers.  Big problem.  I don’t get it.  You take the profits from current customers to get yourself new customers.  Think about it, in theory that makes sense.  But at some point lets stop and look at what would happen if instead of churning business we churned up good feelings.  We held the line on rates for a year or so and gave them a reason to say.  Remember the point above, give them a reason to talk about you.  Good things.  Control the conversation.  Then, when this happens the customers will come to you instead of leaving.  Let the millions of customers you have positively advertise for you instead of leaving with bad feelings.

4. Rate increases are bad for everyone.  See the points above.  You raise the rate for a customer with no apparent cause which is terrible.  Or you raise them for simply using the policy that they pay for.  Then the customer wants to go.  So now you may have lost a profitable account and possibly hindered getting this profitable customer back in the future.  So now they leave and you discount points 2 and 3 above.  Now if you are a captive you have even less of a chance of getting them back. If you are working with brokers, the broker should be able to keep the client but likely at a lower rate.  More importantly they have to give time which as we know cust into profits.  So are rate increases worth it? Doubt it.

So lets get back to a partnership.  Let your agents drive the business to you.  Give me a better product to bring to people.  Give me a reason to keep the insured with you.  Take my time away from trying to save customers and instead I’ll be able to focus on bringing you more business.  Lets redefine the roles we play in the transaction.  We do that, we’ll all make more but all the while, the insured will have a lower rate.

Just some thoughts.