Sigo Seguros Introduces Accessible Auto Insurance to the Non-Standard MarketBy Annie Forhan
High premiums, added fees, and payment limitations are some of the many barriers non-standard customers often face when purchasing auto insurance. Sigo Seguros is a digital insurance provider addressing this challenge with a simple, fair, and transparent insurance brokerage platform that allows customers to shop for and purchase auto insurance online in their native language. I sat down with Sigo’s co-founder, Nestor Solari, to learn more about how Sigo is bringing accessible auto insurance to the industry’s non-standard and underserved customers.
Nestor Solari’s parents and relatives immigrated to the United States from Uruguay before he was born. He grew up in New Jersey and was working in finance after college when he began noticing a trend in the challenges several of his family members faced when trying to purchase auto insurance. When buying insurance for the first time, his cousin received quotes that exceeded her car’s worth from some traditional providers. When she shifted to working with a broker, she received more reasonable quotes but was surprised by the magnitude of additional hidden fees she was then responsible for if she wanted to maintain her coverage. Similarly, Nestor’s aunt was charged over $100 annually in “bill pay” fees.
As a Wharton student, Nestor teamed up with classmate and former Bain consultant, Julio Erdos, to dig deeper into the problems facing the auto-insurance industry. The two were shocked by how common these broken and unfair practices had become. The industry was exercising these sorts of “hidden taxes” in a variety of ways within the high-risk market segment, which included first-time insurance buyers, those without a driving history or credit score, and young people without access to their parents’ insurance plans. These customers were not only charged their premiums like the rest of the market, but were also forced to pay various additional fees. Furthermore, for customers whose native language was not English, insurance websites provided a limited amount of translated content, further limiting their ability to understand insurance quotes, payments, and policies. Frustrated by the trends they uncovered and eager to identify a solution that would challenge the way the industry was exploiting this customer base, the two classmates founded Sigo Seguros.
Bringing Accessible Auto-Insurance to High Risk Customers
Sigo Seguros, or “Sigo Insurance”, was founded as a low-cost, fair, and transparent tech-enabled insurance brokerage platform that allows customers to shop for and purchase auto insurance online. The company also gives customers the option to obtain quotes and manage the insurance purchase process in the language they prefer (currently English or Spanish). Sigo aims to serve the non-standard auto insurance market, and more specifically, Hispanic Americans – a segment that is disproportionally impacted by unfair insurance practices.
Using Sigo’s online platform, customers can navigate the end-to-end auto insurance process from requesting quotes to obtaining proof of insurance, without additional fees beyond the premium. Sigo has partnered with insurance companies that issue policies directly through the site. In this way, Sigo acts as a virtual broker, facilitating the relationship between customer and insurance provider all within a single platform. In the future, Sigo hopes begin issuing policies and rating, scoring, and pricing them in connection with insurance carrier partners who will assume the risk.
Advantages of Digital Brokerage
By delivering its services through a single online platform, Sigo has created value unmatched by its competitors:
- Lower Prices: Sigo’s model eliminates added auto insurance fees that have traditionally been passed to customers. 100% of its revenue currently comes from commissions on insurance premiums that it has negotiated with its partner insurance carriers.
- Reduced Operating Costs: Because Sigo’s services are entirely tech-driven, it has eliminated the cost of operating a brick and mortar storefront as well as the cost of human brokers, who often take large commissions on premium payments.
- End-to-End Purchase Experience: Customers can do everything from requesting a quote to purchasing a policy through the platform, eliminating the hassle of switching websites or traveling to brick and mortar locations.
“Our customer base is very tech-savvy. Hispanic Americans over-index in mobile usage, mobile internet access, mobile purchases, and online purchases, but currently have limited digital options for purchasing auto insurance.”
– Nestor Solari, Co-Founder and CEO
The Non-Standard Auto Insurance Landscape
While the demand for auto insurance within the non-standard market is high, pricing from insurance providers varies widely, with some providers completely unwilling to take these customers on. Despite underwriting some non-standard auto insurance, large players in the industry like Geico and Progressive often target standard, low-risk customers who have a high customer lifetime value. These companies are less interested in selling to high-risk customers and often outsource these transactions to brokers. Additionally, the prices these companies charge for insurance premiums is misaligned with the price sensitivity of high-risk customers.
Sigo’s closest competitors are specialized non-standard auto insurance brokers like Confie Seguros, but while these brokers target a similar customer base, they rely on brick and mortar store locations and charge additional fees to cover their costs.
Sigo has managed to identify a market segment that larger insurance companies are not interested in, and a business model that allows it to operate efficiently and keep value in the hands of the customer. However, unique characteristics of its target market present challenges that Sigo will need to manage carefully:
- Partner Selection: As Sigo looks to expand, it will need to find partner auto insurance providers that are willing to take on the risk of its customer base and offer prices that appeal to the non-standard market.
- Customer Acquisition: Customer churn is fairly common in this market. In the future, Sigo must keep customer acquisition costs low and find a model that effectively manages the frequent shifts in its customer base.
Sigo is approved to sell insurance in Pennsylvania and California, and has secured insurance carrier partnerships in both states. In 2018, Sigo successfully tested its online auto insurance quote generator with 2000 users. The test revealed high price sensitivity among applicants, and Sigo’s marketing approach yielded lower customer acquisition costs than expected. Using this data, Sigo negotiated competitive pricing with its partners and integrated instant quote functionality into its platform. It plans to launch the full platform in California in February, 2019.
Looking Beyond Auto Insurance
Sigo believes that the same bloated cost structure that exists in the auto insurance industry is being replicated within many other sectors. The team hopes to identify additional services like check cashing and tax services where it can apply a similar tech-enabled model focused on simplicity, low cost, and fairness to address these needs in the near future.