Why Overstock.com Opened an Insurance Agency

E-commerce site Overstock.com announced yesterday that it is now selling insurance. CEO Patrick Byrne explains in an interview with Insurance & Technology that given the site's biggest merchandise sellers — home appliances and furnishings — finding a way to offer the insurance that covers all those purchases was a logical next step for the company.

"A lot of our buyers are new home buyers," he says. "It's a natural constituency for insurance."

Overstock created a new company that holds an online insurance agency, which is accessible from a tab on its main site. Buyers can complete the buying process for auto, home, and renters insurance and then check out through their regular Overstock shopping cart.

The company currently offers policies from about a dozen companies, with plans to grow to about 20, Byrne says.

"We only want to be in businesses where we can save people money, and how do you save people money on insurance? You get the insurance companies to bid against each other on an exchange," he explains.

Why is Overstock so sure it can offer competitive prices through its agency? The company's data-driven DNA — common among online retailers — shows through in Byrne's assertion that "insurers have realized that people who come through online are better risks that they can offer special rates to."

[MetLife's Manish Bhatt explains the company's Walmart initiative]

Like any new entrant, Byrne says the company is learning how to navigate the rules around insurance sales. Most notably, it is figuring out just how much data it can auto-fill from its customer files. Even though the company has a wealth of data on its customers, it still has to collect some more for insurance purposes — and might have to re-collect some data.

"We are going to be using our data files as much as we can to make the experience of buying easier," he adds. "For us, it's both the cost savings and making it easier."

Overstock's announcement came on the same day that Walmart announced a marketing agreement with the online broker AutoInsurance.com. Clearly, retail giants see an opportunity to insert themselves in the insurance value chain. How should the industry react?

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio