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Background of Steve Aldrich
Steve Aldrich graduated from the Stanford Graduate School of Business in July 1995. One month after graduating, Steve and a partner decided to launch an online insurance "dot-com", as they saw a niche for online insurance products. One year after launching his company, Mr. Aldrich sold it to Intuit for $10 million. Steve then became the general manager of QuickenInsurance, which was owned by Intuit. In the summer of 2000, Mr. Aldrich was making a transition from general manager of QuikenInsurance to general manager of Quiken.com.
Insurance Industry Overview
By the late 1990's, the insurance industry was doing through significant transformation. The insurance industry of the 1990's was considered to be mature at $270 billion, and growth of the market had slowed considerably. The industry as a whole was large, inefficient and highly fragmented. The decision to purchase insurance was not straightforward. The process was time consuming and the information made it very difficult to make comparisons, as there were variations between companies and products in terms of costs, service, etc.
In 1998, there were over 1 million insurance agents selling insurance to U.
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Mr. Aldrich fully understood the industry and obstacles he was facing and had a plan for the future success of his company. He stated "When my partner and I first contemplated an online insurance business in 1994, the internet was un-chartered territory. When we launched the business in 1995, we had a hard time convincing insurance carriers to join our service. The decision to link our fledgling company with Intuit's well-known and well-respected brand dramatically increased our credibility with both suppliers and customers. Today, we have 50 of the largest, name-brand insurance carriers linked to our service." The decision to sell his company was a wise one. As 2000 approached, the Internet was becoming a popular and attractive distribution channel for simple consumer products, including auto and term life insurance. Auto insurance was projected to be the first and fastest growing online insurance product due to its simplicity and annual renewals. There was a tremendous amount of added value for QuikenInsurance joining Intuit. By summer 2000, Intuit's Quiken.com was receiving an average of 30 million visitors per month with over 20 million return visitors. The popularity of Intuit and Quicken.com instantly broadened the market for QuickenInsurance.
Although Mr. Aldrich is moving on to his new role, he still has responsibility in regards to working with QuikenInsurance and the new general manager. He remains indirectly responsible for the overall performance. Through his experience in the industry, he has been able to identify key issues that he feels will be vital for the future success of QuickenInsurance. He now has the responsibility to work with the new general manager and implement strategies for success.
There are a lot of positive things working for QuickenInsurance. It is known that the online insurance industry is rapidly growing, and there is business to capture. They have conducted surveys and know what prospective customers desire from an online insurance carrier. Mr. Aldrich has analyzed the industry and had the opportunity to watch companies such as InsWeb. All of these forces will help QuikenInsurance going forward.
QuickenInsurance Business Model
QuickenInsurance operated as an independent online insurance agent. In 2000, the company was licensed to sell life insurance in all 50 states and auto insurance in 37 states. The company had established relationships with 50 insurance carriers, 38 for auto and 12 for life. The Company had 13 carriers allowing them to sell policies online. Consumers were directed to QuikenInsurance through vertical portals such as Quicken.com and horizontal portals such as AOL.com.
Revenues were generated for the company through multiple avenues. The first is sales commission. QuickenInsurance charged sales commissions on each product sold. Next, companies that signed up to distribute insurance through QuickenInsurance were charged upfront development and implementation fees. Additionally, companies that had websites hosted by QuickenInsurance were charged an annual maintenance fee. Finally, QuikenInsurance charged referral fees to insurance agents they referred business to.
The costs and overhead for the company were minimal other than employee costs. There were significant costs associated with hiring, training, and retaining high quality technical employees. Due to the nature of the business, highly skilled technical employees were vital to the company's success. Other costs were associated with advertising and referral fees to partners such as AOL.com and Yahoo!.
Quicken.com and Quicken.com for small business
Prior to starting the company, Intuit founders Scott Cook and Tom Proulx saw a niche for personal and small business finance software. Ten years later Inuit dominated these markets. Quiken, Quickbooks and Turbo-Tax held at least 70% in the personal finance, small business accounting and tax software markets, respectively. Despite their success, Intuit continued to look for ways to improve the company, gain market share, and earn more profit. In 1996, the traditional software business was projected to be approximately $300 million by 2002, while the market for online businesses was projected to be approximately $202 billion by the same year. Intuit wasted no time and immediately launched Quicken.com.
The approach taken by Intuit in launching Quicken.com was very intelligent in hindsight. They knew that the market existed, and they knew that the reputation that they had developed with their traditional software packages would position them well for the launch. After the launch, the site simply provided useful financial information collected from various providers and compiled for easy use by consumers. The reputation was used to initially drive the site traffic. In an effort to grow the customer base, Intuit did not charge for use of the site, but charge companies to advertise on the site. This was a very valuable time for Intuit. The more visitors they received, the more they could charge for advertising, and more importantly, the better they could gauge exactly it was the visitors wanted.
Focusing on the information collected through Quicken.com, Intuit launched six focused distributors under the Quicken brand between 1996 and 1998. These were QuickenRetirement, QuickenInvestment, QuickenInsurance, QuickenLoan, QuickenBanking, and QuickenTurboTax. This was known as Quicken.com, a vertical portal.
In 1999, Intuit launched a second vertical portal call Quicken.com for small business. This allowed businesses to do accounting, payroll, bookkeeping, invoicing and purchasing. This was very successful as well, and by summer 2000 Quiken.com for small business had over $5 million worldwide.
Each Intuit online business leverages a common infrastructure to generate multiple revenue streams. This helped improve brand awareness for Inuit, Quicken and their customers and business partners. Due to the infrastructure in place, Intuit could add additional businesses for low cost and drastically increase revenue potential. This also diversified the company, and mitigated risk.