We are in a time of change.

Whether it is politically, socially or economically we are continually hearing the word “change”. Change is good. Change is actually really good when it is proactive. Its much tougher when it is reactive, however. Typically reactive change becomes hasty, unplanned and lacks direction. The path of reactive change is similar to the children’s game of follow the leader. Proactive change is calculated, discussed and usually blazes new trails for the competition. Proactive change, in many scenarios is also defined as innovation.

Many in the mortgage market are being reactive, which in many cases is good because it means you are changing, period. Your evolving to the demands of the market and your business. It doesn’t matter which side of the table you are on. If you are a lead generator or a lead buyer, more then likely you are changing or your business model is evolving.

One example out of many, is Low.com whom recently dissolved it mortgage arm to allocate resource to other verticals. It has been a few weeks since the announcement and they have already moved quickly to reface the low.com site to an insurance, more specifically an Auto Insurance quotes portal. They are not the only ones to announce a change or make the shift to insurance. According Paul Knag Doug Labda of Tree.com mentioned that they too were going to turn their focus to Education, Auto and other insurance verticals. I predicted that Tree would begin to focus on education and credit card debt about a month ago and think it was a no brainer, really.

Never the less, we come to the question of why the insurance verticals? I think there are a number of answer ranging from the trivial to the very complex. Actually, there may not even be answers with any level of complexity. First, there is a major hurdle that many new companies diving into insurance have yet to deal with and that is the “captive group”. This is where lead buyers do not want to compete against their company counterparts. Meaning a Farmers insurance agent does not want to receive a lead that is going to do to another farmers agent. For this reason the level complexity and diversity that needs to be implemented in a lead companies sales strategy is not something that is familiar and often leads to failure. Insurance is not an easy vertical to enter, however the market is refreshingly different then mortgage. First, the demand rarely fluctuates based on rates and programs.

Lets take a look at the search volume comparison of the terms “mortgage refinance”, “Car Insurance”, “Life Insurance” and “Health Insurance”.

The search volume for the insurance verticals are drastically higher then the term mortgage refinance. Based on these trends you could say that their is a ton of traffic to capture. Now these are very general terms, but we can at least take it at face value.

The insurance verticals have pricing issues too. Mortgage is not the only vertical that is facing very thin margins. Competitive auto keywords are very expensive and the actual retail cost of a lead sold is many times in the single digits. This is why larger insurance lead generators sell their leads up to 8 times.

According to Google trends again, we see that search volume for insurance leads have stayed fairly steady as searches for mortgage leads have declined and fallen below the amount of searches for insurance leads. However, Google trends does not even show a blip on the radar screen for more targeted searches like Auto Insurance Leads or Life Insurance Leads.

It becomes very difficult based to make changes when they are reactive, because you may find yourself walking into situations that are not much better then where you currently are. I must say, it is so very, very easy for me to say “diversify when times are good” then it is to actually do it, although it is good to take note and keep the innovation wheel turning even when times are golden.

Will Tree and Low succeed in their new verticals? I think so, however not with a few bumps and bruises. And I don’t think anyone on either team thinks they have a golden ticket to success based on the current changes, but they did realize that they had to make a change and sometimes reactive change is better then no change at all.

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