The online lending platform is a shining example of how a combination of technology, clever marketing and a simple to understand website can help a new kid become a formidable competitor to the incumbents in old industries.
After a successful push in the mortgage, consumer and student loan refinancing markets, SoFi is now looking to enter the insurance industry, where the carriers still operate on outmoded technology, in addition to relying heavily on agents to sell products.
Unlike its previous conquered dominions, however, the insurance industry is a different beast — and SoFi knows that.
By acting as an insurance broker, rather than underwriting its own policies, the platform will be able to steer clear of a tangle of regulatory issues, capital and licensing requirements — not to mention avoiding the constant burden of generating short-term returns for investors — while reaping some fat returns for itself.
Indeed, the paybacks for insurance brokers are pretty enticing. According to published reports, brokers can be compensated approximately 1.3 times the first year’s premiums on each policy sold.
With SoFi’s customer base of successful, career-driven millennials hopping from one SoFi debt product to another, and looking to get hitched with fellow HENRYs (Higher Earners, Not Rich Yet), SoFi’s insurance product push would just seem like an organic progression as its borrowers look to start families and buy insurance plans.
Having said that, SoFi’s position as a millennial darling would also be a boon for the insurance industry, which has struggled to entice the young segment of the population repulsed by mountains of paperwork, fine print and confusing language.
Given their preference for mobile or online services, millennials are less likely than their older peers to consult with financial brokers and agents, who have been the usual channel to sell insurance for decades. Hopefully, SoFi’s entry into the insurance industry will force incumbents to wake up to the idea that digital distribution must be seen as the way forward, or at the very least, used as a complement to these agent services.
Ultimately, there is no doubt that the insurance industry is in need of a technological disruption, and SoFi knows that the best way to get people — not just millennials — to buy insurance is to allow them to do so in the comfort of their own homes, rather than having to deal with hours of queuing to consult with a broker.
However, it remains to be seen if the fairy techmother will be able to make a permanent, positive change in the insurance industry as it did with the other consumer products — or will it all just turn back into one large rotten pumpkin after midnight