What Insurers Can Learn from Blockbuster's Demise

The video rental franchise Blockbuster rented its final movie this weekend: a copy of This is the End. Dish Network, the parent company of the video chain that once had more than 9,000 U.S. stores, was forced to close the remaining 300 due to mounting competition from Netflix and other video-on-demand services that stream content directly to viewers' TVs and computers. Even the DVD-by-mail service that Blockbuster ran is shutting down, with Dish hoping to carry on the brand with its own streaming service.

A casual observer might see the shuttering of Blockbuster's physical stores and yanking its DVDs from the mail as a sign that the physical-media model for video rental is dead. But there was a company that rented out nearly 200 million DVDs in the quarter right before Blockbuster shuttered: That company is Redbox.

Redbox stations its DVD-rental kiosks, which rent discs for as low as a dollar, in grocery stores and malls where families congregate and need a quick solution for evening entertainment. The company went over the top of Blockbuster by reducing overhead and prices while at the same time inserting itself upstream in the customer's routine. Parents don't have to make an extra trip, or page through on-screen menus at home. They see a movie poster for something that interests them or their children, swipe their card, and it's done.

The Redbox kiosk combines digital signage, instant delivery, and easy payment to attract customers at the time when they need their product the most. What can insurers learn from this?

Direct General Auto Insurance, a P&C insurer that operates in the southern United States, is using some of the same principles Redbox succeeded with in a new kiosk-based effort of its own. The company has partnered with Meridian, a provider of kiosk technology, to build its own insurance-selling boxes that can be stationed strategically.

"There is a confluence at kiosks of self-service, signage and point of sale, and customers are comfortable using them," says Marc DiGiacomo, VP of Product Management for Direct. "We're an insurance company, but we're also a multichannel retailer -- we have to be using the technology customers are."

Direct's kiosks incorporate technologies that have been gaining steam across the insurance industry: Document scanners pull applicants' information from their driver's licenses and existing insurance cards, allowing Direct to present them with a quote in 62 seconds, says Josh Jarrett, also VP of product management. The company has also explored user experience best practices so that the experience of applying for insurance on the kiosk is different from doing so online, with an agent, or over the phone, and is truly optimized to the channel. Finally, a 4G-equipped phone allows users to connect instantly with a Direct representative if they have questions or second thoughts before clicking "Buy." And when they do click, a policy and related documents print out right in front of the machine.

Direct has piloted 18 kiosks at some of its stores in Tennessee, mostly to use analytics to refine the on-device application experience. (The company uses employees at its retail stores, a website, and the phone in its "omnichannel" distribution strategy, executives told I&T.) But it is in negotiations with a number of different kinds of businesses -- grocery stores and auto dealerships, for example -- where prospects might be willing to take a moment to get a quote. DiGiacomo says there could be a mutual benefit to both companies if Direct is able to place a kiosk.

"In talking to the partners, there's an interest with them in understanding the data we pull out of the kiosk -- insurance companies get a lot of data, after all," he says. "There's privacy considerations to work out, of course, but it's something we're working on."

COO Jack Campbell says that the company also recognizes the synergy between the kiosk and some of its target customers' preferred channels. Direct is largely a nonstandard insurer, and those customers tend to be drawn to mobile technology, and often don't have a full PC-and-printer setup at home to get their insurance documents online.

"We have moved into some standard customers as the economy has taken its toll but our target customers are somewhat in the nonstandard arena -- they tend to be underbanked or unbanked," he explains. "They overindex into mobile phones to get a quote or pay -- and if they don't have a home printer or desktop computer, we can even accept cash as a payment through the kiosk."

DiGiacomo adds that kiosks expand Direct's local presence in a region without having to open more of its stores. With recent research indicating that insurance buyers want to complete most of the insurance buying process online, but be assured that there's a local presence from their chosen company in case they want it, that could be a winning strategy as well.

As for the backend, Direct is taking on this process even though it's still using an AS-400 based core system, Campbell says. While a refresh is on the horizon, service layers that have been added to the existing system are still able to power the kiosk experience.

Direct's experience — as well as Redbox's and Blockbuster's — show that even though it may seem obvious that home-based screen devices are the platform of choice for certain products, there is lots of room to still innovate in the offline world. The key is companies using modern technologies to their advantage within their offline implementations.

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