Item 1. Business
ITEM 1.
BUSINESS
Company Overview
EverQuote makes insurance shopping easy, efficient and personal, saving consumers and insurance providers time and money.
We operate a leading online marketplace for insurance shopping, connecting consumers with insurance providers. Our mission is to empower insurance shoppers to better protect life’s most important assets—their family, property, and future. Our vision is to become the largest online source of insurance policies by using data and technology to make insurance simpler, more affordable and personalized, ultimately reducing cost and
risk. Our results-driven marketplace, powered by our proprietary data and technology platform, is reshaping the insurance shopping experience for consumers and improving the way insurance providers attract and connect with consumers shopping for insurance.
Finding the right insurance product is often challenging for consumers, who face limited online options, complex, variable and opaque pricing, and myriad coverage configurations. We present consumers with a single starting point for a comprehensive and cost-effective insurance shopping experience. Our marketplace reduces the time consumers spend searching across multiple sites by delivering broader and more relevant results than consumers may find on their own. Our direct to consumer, or DTC, agents bind policies for consumers, further streamlining the consumer shopping experience. Our service is free for consumers, and we derive our revenue from sales of consumer referrals to insurance providers and directly from commissions on sales of policies.
Insurance providers, which we view as including carriers, our own DTC agents, and third-party agents, operate in a highly competitive and regulated industry and typically specialize on pre-determined
subsets of consumers. As a result, not every consumer is a good match for every provider, and some providers can struggle to reach the segments that are most desirable for their business models. Traditional offline and online advertising channels reach broad audiences but lack the fine-grained consumer acquisition capabilities needed for optimally matching consumers to specific insurance products. We connect providers to a large volume of high-intent, pre-validated
consumer referrals that match the insurers’ specific requirements. The transparency of our marketplace, as well as the campaign management tools we offer, make it easy for insurance carriers and third-party agents to evaluate the performance of their marketing spend on our platform and manage their own return on investment.
Industry Overview
Insurance is one of the largest segments of the United States economy and is highly fragmented with over 2,000 insurance carriers and 100,000 insurance agencies, which collectively issued policies representing approximately $2 trillion in premiums in 2020. To capture new policies and retain existing customers, U.S. insurance carriers spent $154 billion in 2020 on marketing and distribution consisting of $137 billion in commissions to agents and $16.7 billion in advertising, according to data from S&P Global Market Intelligence; SNL Insurance Data, a study we commissioned by Stax Inc. and our own estimates. Based on these same sources, online insurance advertising spend of North American insurance carriers and agents was $6.5 billion in 2020 and is estimated to grow more than 16% annually through 2024.
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Market Opportunity
The challenges faced in the $154 billion insurance sales, marketing and distribution market create a significant opportunity for companies that can efficiently align consumers and providers. These challenges include:
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Misalignment of providers and consumers creates an inefficient match between supply and demand
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A complex, fragmented and opaque market for consumers
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Inefficient advertising channels for insurance providers
Due to these challenges, insurance providers are seeking more efficient ways to connect with consumers, and as a result the internet has become increasingly influential in consumer insurance shopping. While carriers continue to shift advertising dollars online in order to capitalize on the superior marketing characteristics of digital channels, the shift of marketing budgets online continues to lag the shift in consumer behavior. The insurance industry is also beginning to make products easier to buy and sell through digital channels with the integration and digitalization of insurance products. We believe that the rise of digital insurance products and shopping experiences will enable more personal, end-to-end
shopping experiences, products and services.
Our Solution
Our results-driven marketplace, powered by our proprietary data and technology platform, matches and connects consumers seeking to purchase insurance with relevant options from our network of insurance providers, including our own DTC agents, saving consumers and providers time and money.
Proprietary, data-driven technology platform.
Our platform efficiently attracts consumers shopping for insurance to our websites and call center, which match them to relevant providers for streamlined quoting. This enables us to maintain high levels of quality control and provide real-time referrals to insurance providers at the moment of the consumer’s purchase intent.
Consumer engagement and benefits.
We engage with consumers through user-friendly and easy-to-navigate
websites that make shopping for insurance easy, cost-effective and more personal. We also connect with consumers who have completed a quote request with one of our verified partners. We aim to make the end-to-end
shopping experience seamless by enabling consumers to securely share their data with matched providers, accelerating quoting and reducing repetition in the shopping process. Additionally, we engage with consumers offline through non-company
branded television campaigns and consumer calls placed directly to a call center operated by us, by one of our verified partners, or by an insurance agent.
We offer consumers a streamlined and personalized insurance buying experience, providing the following key benefits:
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Saving time and money
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A single starting point for a comprehensive insurance shopping experience
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A results-driven insurance shopping destination efficiently matching consumers with relevant options
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Seamless online or offline handoff to quote or bind a policy
Insurance provider engagement and benefits.
Insurance carriers and agents connect with our marketplace through our web-based
provider portal. Our portal provides transparent, secure access to marketplace data regarding consumer type, volume and referral pricing, along with sophisticated campaign management tools for targeting consumers based on a wide array of attributes. Our tools are designed to integrate with insurance providers’ internal workflows to minimize administrative burden, and can incorporate quote, bind and lifetime value feedback, enabling providers to evaluate and optimize their acquisition and retention campaigns through a single interface.
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We offer insurance providers the following key benefits:
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Access to a high volume of in-market
online consumers
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Efficient acquisition of consumers that match providers’ specific criteria
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High bind rates for referrals through broad data integration with providers
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A flexible advertising channel
We derive our revenue from sales of consumer referrals to third-party insurance providers and directly from commissions on sales of policies by our DTC agents.
Our Strengths
We believe that our results driven marketplace provides us a competitive advantage based on the following key strengths:
Proprietary Data Assets and Algorithms.
Our marketplace is powered by a proprietary data and technology platform that efficiently attracts insurance shoppers from a diverse and large array of sources, increases the bind rate for consumers, and we believe will drive down the cost of acquisition for providers over time as well as improve our own monetization. Our proprietary data assets and machine learning algorithms efficiently attract consumers, match them with relevant insurance providers and drive our overall business model. We utilize our data assets and machine learning capabilities throughout our business, from advertising and consumer acquisition to the innovation of new consumer and provider experiences, as well as to guide our strategic direction. As our data assets grow, our algorithms become more powerful. We believe our data science capabilities, combining the use of proprietary data assets with scalable machine learning driven automation, give us a significant competitive advantage.
Powerful network effects.
Our insurance marketplace benefits from significant network effects. As we attract more consumers to our platform, we collect more data to improve user experience, which in turn improves conversion rates, which we believe will improve consumer satisfaction. Over time, the combination of these factors has increased consumer traffic, leading to more quote requests for our insurance providers. Increased quote requests, combined with quote and bind feedback, improve our third-party insurance providers’ advertising and marketing efficiency in our marketplace, resulting in more providers and provider spend. More providers and provider spend enable us to attract more consumers, generating more data.
Flexible business model.
Our cost structure provides us with the flexibility to react to changes in the business cycle. Our largest expense advertising is variable and can be quickly adjusted to market conditions. During periods of economic expansion, we can increase advertising spend to attract consumers to our platform and further enhance the strength of our marketplace. Conversely, during economic downturns, advertising expenses can be rapidly reduced. We are also able to quickly adjust our advertising expense if we believe the revenue associated with it does not result in incremental profit to the business.
Breadth and scale of our distribution.
Over the past decade, we have cultivated relationships with a broad range of insurance provider partners and currently have over 100 carriers participating in our marketplace either directly or via our network of over 8,500 agents as well as our own DTC agents. We believe that the breadth of our coverage provides a significant benefit to our consumers and is a key competitive advantage, particularly in our largest vertical of auto insurance where significantly all of the top carriers participate in our marketplace.
Agent workforce.
Through our acquisitions of Crosspointe Insurance & Financial Services, LLC, or Crosspointe, which we later renamed Eversurance, and Policy Fuel, LLC and its affiliated entities, or PolicyFuel, we significantly expanded the number of DTC agents on our platform. These agents allow us to directly offer insurance products to consumers, more efficiently serve insurance shoppers with a personalized experience and contribute to our data insight.
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Ability to expand with significant operating leverage.
We have leveraged our data assets, technology platform and engineering and data science capabilities, along with our growing audience of consumers and network of insurance providers, to expand our platform from the auto insurance market into other markets such as home, life and health insurance. We have the ability to enter new verticals with only a modest increase in headcount.
Diversified business model.
Our marketplace operates in several insurance markets including auto, home and renters, life and health, which provides an opportunity to diversify our revenue base and expand our potential growth opportunities. Additionally, by operating in several verticals we can lessen our exposure to negative impacts in any one of these markets. Recently, through the expansion of our DTC agency offerings, we are now able to generate revenue from carrier commissions, primarily from the sales of health and auto policies.
Our Growth Strategies
We aspire to be the largest online source of insurance policies by using data and technology to make insurance simpler, more affordable and personalized, ultimately reducing cost and risk. Data-driven innovation is at the core of our strategy, culture and operating focus. With our diverse team of analysts, engineers and business development employees, as well as our partnerships with leading third-party insurance providers, and our own DTC agents, we are working to build the largest and most trusted online insurance marketplace in the world. To achieve this goal, we intend to continue to grow our business by pursuing the following strategies:
Attract more consumers to our marketplace.
We plan to expand the number of consumers reaching our marketplace through existing channels by leveraging the superior features and growing data assets of our platform. In addition, we may launch new marketing channels to acquire consumers both online and offline. We believe that there is an opportunity to attract substantially more high-intent consumers to our existing insurance offerings and that there are further expansion opportunities in adjacent verticals.
Add more insurance providers and increase revenue per provider.
We plan to grow the number of insurance providers on our platform by demonstrating the value proposition of our marketplace as an efficient, scalable customer acquisition channel and adding new provider-facing features. While not a factor in our historical increases in revenue per quote request, we believe we have an opportunity to also increase the number of referrals per quote request while maintaining or increasing the bind rate per quote request, which would allow us to increase our revenue at limited marginal cost. In addition, we plan to expand revenue per provider by increasing consumer traffic and quote request volume, adding verticals and innovating advertiser products and services.
Despite the high costs, saturation and lower overall conversion rates associated with traditional advertising channels, such as television, radio and billboards, insurance carriers still allocate a significant portion of their advertising budgets towards these channels. We have achieved $418.5 million in annual revenue while capturing only a small fraction of insurance marketing spend in aggregate and at an individual provider level.
Expand and deepen consumer engagement.
We continuously leverage our data assets and growing consumer volume to conduct test-driven product development. We actively innovate with new consumer offerings and enhanced user experience to deepen consumer engagement. Our goal is to provide broader and more meaningful consumer experiences, leading to increased return visits, and higher frequency of interaction, which we believe will result in greater revenue per user. With our DTC agency offerings, we have expanded our opportunity to directly connect with insurance shoppers. We believe that our DTC agency experience will enable us to deepen consumer-provider engagement by creating a more personalized and streamlined end-to-end
consumer shopping journey, with enhanced product selection and less friction from arrival to policy sale.
Enhance our brand awareness.
We believe we have significant long-term opportunities to increase our brand awareness. Historically, our marketing efforts have been focused on algorithmic consumer acquisition rather than brand marketing. We plan to further expand our marketing channels to drive greater brand recognition and attract a broader consumer audience.
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Expand our platform.
We regularly evaluate new products and services that we believe will attract more consumers, and deepen our consumer and insurance provider engagement, which we believe will result in enhanced monetization. In 2020, we launched our DTC agency offerings in our life vertical and, in our health insurance vertical through our acquisition of Eversurance, a specialized health insurance agency. In 2021, we launched our DTC agency offering in our automotive vertical through our acquisition of PolicyFuel, a policy-sales-as-a-service
provider. PolicyFuel provides services to enable carriers to complement their own call center operations with access to dedicated advisor teams that focus exclusively on selling that provider’s offerings. By expanding the range of products we offer to carriers and expanding our DTC offerings into new markets, we have been able to generate additional revenue. We also plan to continue to invest in the growth of our non-auto
insurance verticals and expect to expand these areas by leveraging our customer acquisition capabilities, proprietary technology and data assets to attract consumers and build distribution. In addition, we may selectively look for opportunities to expand into additional non-auto
insurance verticals beyond those currently in our marketplace, through either organic development or acquisition.
We believe there are additional opportunities to grow our business, such as expanding internationally and launching non-insurance
financial service offerings.
Technology and Infrastructure
Our technology platform combines internally developed, third-party and open-source software. This combination allows for rapid development and release of high-performance technology solutions in a cost-effective and scalable manner. Our websites, mobile applications and supporting services, as well as our development and test environments, are hosted across industry-standard cloud providers such as Amazon Web Services and Google Cloud Platform. We use content delivery network solutions for fast, local access to our products. We use network, website, service and hardware-level monitoring, coupled with remote-content monitoring, to maintain a high level of uptime and availability for our systems with high-performance delivery.
Sales and Marketing
Our marketing efforts are designed to increase engagement by both consumers and insurance providers and enhance their awareness of our company. Our marketing spend across channels is fundamentally algorithmic and performance based. Over time, we believe we will increase our brand equity and recognition as we serve more ad impressions. Additionally, we have built an efficient, consultative sales and customer success organization, which sells our marketplace referrals to insurance carriers and agencies and engages directly with consumers to sell life and health insurance policies.
Consumer
marketing.
Our marketplace acquires consumers through both online and offline marketing efforts. Our online marketing efforts include search engines, display advertising, social media, email and content-based online advertising. Our online marketing also includes acquiring consumers that complete a quote request with one of our verified partners. Offline marketing efforts include non-company
branded television campaigns and consumer calls placed directly to a call center operated by us, by one of our verified partners, or by an insurance agent. Our consumer marketing strategies are algorithmic and performance-based, leveraging our team of analysts, data scientists and engineers, along with our data assets and technology. We have built technology to automate our algorithmic traffic acquisition across multiple online advertising platforms. Our technology serves millions of advertising impressions per day across hundreds of acquisition sources in a diversified strategy including search, display, social, email and video, with no single acquisition partner accounting for more than 12% of quote requests. We believe the combination of our talent, data and technology provides us with competitive advantages in acquiring more consumers as we continue to scale our business.
Direct-to-consumer
sales.
Our DTC agency is a data-driven, sales and decision support contact center that assists consumers in reviewing and purchasing health and life insurance in a customer centric environment. We also operate as a policy-sales-as-a-service
provider in our automotive vertical. This enables carriers to complement their own call center operations with access to our DTC agents that focus exclusively on selling that provider’s offerings.
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Carrier sales and marketing.
Our carrier marketing initiatives are designed to deliver high-value content on how carriers can increase efficiency in their customer acquisition efforts by capitalizing on the increasing targetability and personalization enabled by our marketplace. We focus on building deep relationships and establishing thought leadership among carriers through our presence at industry tradeshows, targeted delivery of whitepapers and other materials, and personal outreach to key decision makers and marketing teams. This team takes a data-driven approach to helping insurance carriers bind more policies with their target consumers at lower cost per sale than other channels. Our campaign management team develops a deep understanding of our carrier customers’ objectives to optimize their campaign performance and grow their budgets in our marketplace.
Agent sales and marketing.
Our agent marketing initiatives are designed to reach, educate and acquire insurance agents not yet participating in our marketplace. Our agent marketing focuses on educating agents on how consumer buying behavior is changing and increasingly moving online and how they can better acquire and serve consumers in the digital world through participation in our marketplace. We reach new agents online through email, search, telephone calls, social media, and content marketing and in person at tradeshows and conferences. For our current agent customers, we communicate the value of our platform and educate them on its use through our onboarding process, ongoing outreach and account performance reports. Our agency sales team focuses on onboarding new agents. Our customer success team analyzes account performance and consults with agents to optimize their participation in our marketplace, help them achieve growth and return-on-investment
objectives, expand volume and add products.
Our Customers
Our insurance provider customers include:
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Carriers:
Insurance carriers write auto, home and renters, life, and/or health insurance policies for consumers either directly and/or through agents. Our marketplace consists of an extensive network of national and regional carriers as well as technology enabled start-ups.
Our largest customer Progressive Casualty Insurance Company accounted for 16% of our revenue for the year ended December 31, 2021. We plan to continue to grow both the number of carriers participating in our marketplace and the level of participation from each carrier. We also receive commissions from our insurance carrier customers for policies sold by our own DTC agents.
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Third-party
Agents:
Insurance agents deliver auto, home and renters, life, and/or health insurance to consumers on behalf of one or more carriers. As of December 31, 2021, we had over 8,500 enrolled insurance agencies on our platform as well as our own DTC agents. We are focused on further penetrating the large base of more than 100,000 insurance agencies in the United States.
Competition
We face competition to attract consumers to our websites and mobile applications, as well as for insurance provider advertising and marketing spend.
Competition for consumers.
The competition for consumer traffic and advertising space online is broad and diverse. Our competitors offer various marketplaces, products and services that compete with us. Some of these competitors include internet search engines and social media platforms; brand advertisers and brand agencies across a spectrum of industries; sites operated by individual insurance providers; finance and credit savings sites; insurance lead-generation, affiliate and aggregator networks; and marketing services providers for insurers and general marketing services providers. We believe we compete favorably in attracting insurance shoppers due to our superior data assets, consumer acquisition technology, team and data sciences management infrastructure. We believe we also compete favorably in converting consumer traffic into referrals and, ultimately, purchased policies due to the depth of our provider network, our consumer matching algorithms and our intuitive and streamlined consumer interface. Furthermore, we believe the breadth of the insurance provider options in our marketplace gives us an inherent advantage over single-brand insurance providers with respect to conversion and bind rates for consumers.
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Competition for insurance provider advertising and marketing spend.
We compete for insurance providers’ advertising and marketing spend with other internet sites, performance marketers and online marketing service providers. We also compete with offline media, such as television, radio and direct mail. We believe we compete favorably on the basis of the scale and quality of our consumer referrals, our seamless handoff capability, our ability to align consumers with our providers’ preferences and business strategies and the targeting capabilities of our platform.
Employees and Human Capital Resources
Our company culture is data-driven, entrepreneurial, diverse and innovative. As of December 31, 2021, we had 674 employees, of which 671 were full-time.
Our human capital is integral to our future success. For that reason, our human capital resources objectives include attracting, retaining, developing and motivating a diverse team of highly skilled employees at all levels. We value our employees and provide them with competitive cash compensation as well as opportunities for equity ownership. The principal purposes of our equity incentive plans are to attract, retain and motivate employees, consultants and directors through the granting of stock-based compensation awards in ways that encourage long-term retention and are aligned with the interests of our stockholders. We value our employees and regularly benchmark total rewards we provide, such as short- and long-term compensation, 401(k) contributions, health, welfare and quality of life benefits, paid time off and personal leave, against our industry peers to ensure we remain competitive and attractive to potential new hires. In addition, we regularly conduct employee surveys to gauge employee engagement and solicit feedback and enhance our understanding of the views of our employees, work environment and culture. The results from engagement surveys are used to implement programs and processes designed to enhance employee engagement and improve the employee experience.
Regulation
Our business operates in a heavily regulated industry. Various aspects of our business are, may become, or may be viewed by regulators from time to time as subject, directly or indirectly, to U.S. federal, state and foreign laws and regulations. We are affected by laws and regulations that apply to businesses in general and the insurance industry, as well as to businesses operating on the internet and through mobile applications. This includes a continually expanding and evolving range of laws, regulations and standards that address financial services, information security, data protection, privacy and data collection, among other things. We are also subject to laws governing marketing and advertising activities conducted by telephone, email, mobile devices and the Internet, including the Telephone Consumer Protection Act, the Telemarketing Sales Rule, the Controlling the Assault of Non-Solicited
Pornography and Marketing Act of 2003, the Health Insurance Portability and Accountability Act, and similar state laws. In addition, we are a licensed insurance producer. Insurance is highly regulated by the states in which we do business, and we are required to comply with and maintain various licenses and approvals. Because the laws and regulations governing insurance, financial services, privacy, data security and marketing are constantly evolving and striving to keep pace with innovations in technology and media, it is possible that we may need to materially alter the way we conduct some parts of our business activities or be prohibited from conducting such activities altogether at some point in the future.
Intellectual Property
We seek to protect our intellectual property through a combination of copyrights, trademarks, service marks, domain names, trade secret laws, confidentiality procedures and contractual restrictions.
We have a number of registered and unregistered trademarks. We own federal registrations for trademarks including EVERQUOTE, as well as multiple pending applications. We will pursue additional trademark registrations to the extent we believe doing so would be beneficial to our competitive position.
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We are the registered holder of a variety of domestic and international domain names that include “EverQuote” and similar variations.
In addition to relying on the protection provided by these intellectual property rights, we enter into confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners. Our employees and contractors are also subject to invention assignment agreements. We further control the use of our proprietary technology and intellectual property through provisions in both our general and specific terms of use on our website.
Our Corporate Information
We were incorporated in Delaware on August 1, 2008, under the name AdHarmonics, Inc., and changed our name to EverQuote, Inc. on November 17, 2014. Our principal executive offices are located at 210 Broadway, Cambridge, Massachusetts 02139, and our telephone number at that address is (855) 522-3444. Our
website address is www.everquote.com. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K.
Available Information
Our Internet address is www.everquote.com. Our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K,
including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available through the “Investors” portion of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information on our website is not part of this Annual Report on Form 10-K
or any of our other securities filings unless specifically incorporated herein by reference. In addition, our filings with the SEC may be accessed through the SEC’s Electronic Data Gathering, Analysis and Retrieval system at http://www.sec.gov
. All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.