FRAMINGHAM (08/02/2000) - Name-your-own-price Web site operator Priceline.com Inc. today announced a deal with insurer W. R. Berkley Corp. under which the two companies will set up a new venture to sell auto insurance policies via the Internet.
As part of the agreement, W. R. Berkley -- a Greenwich, Conn., holding company that owns a variety of property casualty insurance businesses -- will underwrite policies and recruit other automobile insurers to participate in the online venture. The policies will be sold through Priceline's Web site, with Priceline receiving an annual licensing fee based on the revenue generated by the new company.
Priceline.com is hoping to provide a site that will enable users to fully purchase and sign agreements to buy auto insurance, eliminating the need to physically visit insurance agents, said Mike Darcy, a Priceline spokesman. But the full details of the plan haven't been finalized with W. R. Berkley yet, he added.
Ira Zuckerman, vice president of research at Nutmeg Securities Inc., said allowing customers to name a price for auto insurance could have its share of problems, including difficulties in determining whether the prices being asked for by users of the Priceline site are adequate.
Many people could ask for prices that are as much as 25% to 30% less than what their auto insurance would normally cost, Zuckerman said. He said there are many other companies starting to sell auto insurance policies online, but none that do it the same way that Priceline and W. R. Berkley are planning.
For example, Allstate Insurance Co. last month began a nationwide rollout of a program for selling insurance directly to customers via the Internet. Other insurers such as GEICO and American International Group Inc. offer quotes via the Web but don't actually sell policies online.
George Barto, an analyst at Gartner Group Inc. in Stamford, Conn., said the deal announced today will set up Priceline as an insurance aggregator similar to companies such as Quotesmith.com and InsWeb.com. But the participation of a company with wide name recognition, such as Priceline, is bound to help, he added.
"You have to be realistic: If a person bids $50 for insurance, no one will accept that bid," Barto said. "But they'll probably come back with an appropriate bid." And for consumers who need auto insurance, a name such as Priceline's will make them "think value," he said.