Mike Cote's Business Editor's Notebook: ValChoice takes on insurance, thanks to an accident
Ten years ago, Dan Karr was hit by a car while riding his bike to work in Silicon Valley, an episode that left him with a collapsed lung, broken ribs and other injuries as well as $84,000 in medical bills that insurance companies refused to pay, despite the driver being at fault.
"I didn't realize at the time that it was going to change the course of my life," said Karr, who spent Father's Day 2007 in intensive care. The youngest of his three children was 7 weeks old.
Karr chronicled his struggles with the insurers in a 2010 book, but that was just the beginning of his quest to bring transparency to the industry. After moving from California to Bedford in 2011, the tech-industry veteran spent two years gathering data and creating formulas to launch ValChoice, an online service that allows consumers to measure the value of auto insurance companies.
"I didn't realize it until years later after I went through the whole process of recovering the money," Karr said during a recent interview. "And then it was the final conclusion that this is crazy. This has got to change. That was when I started thinking about how to bring some change to the industry. And we're starting to get some traction."
Forbes magazine dubbed ValChoice "Carfax for insurance," a comparision Karr appreciates.
"Carfax really lets consumers know how good that used car is before they buy it. Our objective is to let them know how good their insurance is before they need it," Karr said. "The consumer's situation is really this still: Cross your fingers and hope you have insurance that's actually going to protect you. Nobody knows until it's too late."
Now Karr is expanding the business to include home insurance - grading companies on price, handling claims and service. Visitors to the ValChoice's New Hampshire page will find information on the average prices of car insurance ($751) and home insurance ($905), stats on the five biggest New Hampshire carriers in each category, a rate calculator, a comparison tool and other data, plus services for agents and carriers.
The site offers free reports and more detailed versions for $19.95, which are discounted $10 if consumers elect to promote ValChoice through social media. Karr also is working on a licensing plan for industry insiders that would add another revenue stream for the company.
"We've broken things down into these categories looking at how companies price or the value that they offer, how they do on the protection side and how they do on service," said Karr, who collects data from insurance commissioners and regulatory filings.
ValChoice is adding the home insurance feature at a time when rates continue to rise rapidly.
"Since 2000, the price of home insurance has gone up at four times the pace of the median family income," Karr said. "A lot of people haven't noticed it because during that same time interest rates have come way down, and they've been very low so a lot of people have been able to refinance if they owned a home. And the cost of rapidly escalating insurance hasn't been that big a deal to them."
As home affordability becomes more difficult, that's bound to change, he said.
Karr is building on the kudos ValChoice already has received from startup competitions and incubator programs that have provided $250,000 worth of cash and services. They include first-place showings in the University of New Hampshire's Social Venture Innovation Challenge and the Manchester Young Professional Network's New Hampshire Startup Challenge, and the Microsoft BizSpark Plus Award.
Karr is working with contract engineers, a web developer and a public relations agency, but he's doing much of the work on his own. He also has advisers who have an insurance background.
"It's been full time for four years now," said Karr, 57, who has three school-age children. "It takes a long time to get something like this off the ground. There's a lot of technical work. There's a lot of business development work. We're expanding as we need to."
ValChoice is aiming to upend the industry practice of relying on user surveys, which he says don't work well for insurance in particular because companies often have multiple brands under their umbrellas and policies that vary from state to state.
"The user surveys don't comprehend that either," Karr said. "They just ask, 'What do you think about State Farm?' It's kind of a fake information source to a large degree. And that's why we've seen so many other industries evolve toward data analysis, which is what we're doing for insurance. It's absolutely critical. It's the only way people can get a true picture of what's going on."
Ultimately, like any smart consumer choice, it comes down to making a decision based on information rather than marketing.
"We create a truer competitive environment with transparency," Karr said. "And now companies really have to compete on the quality of the product they are selling instead of the entertainment value of the advertisement."
Cute gecko, Geico, but what will you do for me if I get in an accident?
Contact Business Editor Mike Cote at 206-7724 or firstname.lastname@example.org.