Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549

FORM 10-K

(Mark One)

or

Commission File Number 0-26083

INSWEB CORPORATION
(Exact name of registrant as specified in its charter)

11290 Pyrites Way, Gold River, California 95670
(Address of principal executive offices)

(916) 853-3300
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value
(Title of Class)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý    NO o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

        Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act). YES o    NO ý

        The aggregate market value of registrant's voting and non-voting common equity held by non-affiliates of registrant, based upon the closing sale price of the common stock as of the last business day of the Registrant's most recently completed second fiscal quarter (June 30, 2002), as reported on the Nasdaq National Market, was approximately $5,630,000. Shares of common stock held by each officer, director and holder of 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

        Outstanding shares of registrant's common stock, $0.001 par value, as of March 20, 2003: 4,701,104

        DOCUMENTS INCORPORATED BY REFERENCE

        Parts of the definitive Proxy Statement for registrant's 2003 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Report are incorporated by reference into Part III of this Form 10-K Report.

PART I

        This report includes a number of forward-looking statements. Such statements reflect our current views with respect to future events and our potential financial performance and are subject to risks and uncertainties that could cause our actual results and financial position to differ materially from what we say in this report. These factors include, but are not limited to, our ability to generate significant revenues from our core business; our ability to achieve or maintain profitability; our reliance on automobile insurance; our ability to expand our operations; our reliance on a limited number of insurance companies for our current revenues; and our success in developing and maintaining cost efficient online relationships to attract consumers to our website. We more fully discuss these and other risk factors in "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Our Future Performance" and elsewhere in this report and in our other filings with the Securities and Exchange Commission. InsWeb undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Item 1. Business

The InsWeb Online Insurance Marketplace

        InsWeb Corporation operates an online insurance marketplace that enables consumers to comparison shop online and obtain insurance company-sponsored quotes for a variety of insurance products, including automobile, term life and homeowners. InsWeb's marketplace electronically matches consumers and insurance companies. InsWeb has combined extensive knowledge of the insurance industry, technological expertise and close relationships with a significant number of insurance companies to develop an integrated online marketplace. InsWeb's marketplace enables consumers to research insurance-related topics, search for, analyze and compare insurance products, apply for and receive insurance company-sponsored quotes for actual coverage and to purchase automobile insurance coverage through InsWeb's insurance agency. Management believes that InsWeb provides insurance companies with pre-qualified consumers at attractive acquisition costs, as well as the scalable, cost-efficient distribution capabilities of InsWeb's Internet-based model.

        InsWeb was originally incorporated in California in February 1995 and re-incorporated in Delaware in October 1996, and is headquartered outside Sacramento, California. InsWeb's headquarters mailing address is 11290 Pyrites Way, Gold River CA., 95670, and the telephone number at that location is (916) 853-3300. The InsWeb website is www.InsWeb.com. All periodic and current reports that have been filed with, or furnished to, the SEC are available on our website within 24 hours of the electronic filing.

The Quote Generation and Purchase Process

        The quote generation and purchase process involves the following steps:

•

data entry by the consumer;



•

electronic underwriting;



•

electronic rating and generation of price quotes;



•

presentation of quotes to the consumer;



•

delivery of leads to a participating insurance company and/or InsWeb's insurance agency;



•

purchase of the insurance policy.

        Quotes obtained through the online marketplace are free to consumers, while participating insurance companies pay a transaction fee to InsWeb. These fees are earned either from the delivery of a lead to a participating insurance company, from a fee paid by an insurance company for each closed policy, or from a commission earned by InsWeb's insurance agency, InsWeb Insurance Services, Inc.

        Data Entry.    To initiate a shopping session, a consumer completes an online form that requests information such as the consumer's age, address and coverage requirements, a process that InsWeb estimates takes approximately 10 to 20 minutes, depending on the type of insurance sought and the complexity of the consumer's profile. The quote form captures a comprehensive set of information designed to address each of the participating insurance companies' underwriting and rating criteria. To assist consumers in evaluating and fulfilling their insurance needs, InsWeb provides consumers a variety of interactive website features and insurance-related information. In addition, InsWeb provides online help and customer service throughout the data entry process. The consumer is required to complete only one form to obtain quotes for a particular type of insurance from those participating companies offering that type of insurance in the consumer's state who have qualified that consumer. Throughout the data entry process, consumers are presented with the option of saving their data into their personal insurance profile. Consumers who are returning to the online marketplace can simply enter their user name and password to retrieve information they entered during previous visits. This information can be used to automatically complete portions of the quote form for other insurance products. Because the information insurance companies use to underwrite, rate and provide quotes to a consumer is entered directly by the consumer, the insurance companies can reduce or eliminate the expense associated with collecting consumer data. Moreover, information entered directly by consumers typically contains fewer errors than information provided orally to an agent or insurance company representative, who must then enter that information manually into the insurance company's system.

        Underwriting.    InsWeb's software uses criteria set by each participating insurance company to analyze a consumer's data and determine whether it fits within the insurance company's targeted risk profile. InsWeb's system can provide rapid feedback to an insurance company regarding the impact that particular criteria are having on the number of leads being directed to that company, and also permits individual criteria to be easily added or removed. Electronic underwriting eliminates the expense of screening and quoting risks that an insurance company ultimately may not want to accept. Electronic underwriting also ensures that consumers are only presented with quotes from companies who are interested in doing business with them.

        Rating.    InsWeb integrates each of its participating insurance companies' rating criteria into its online marketplace through one of several rating solutions, depending on the insurance company's preference. These solutions include:

•

a customized interface between InsWeb's site and the insurance company's own rating engine;



•

an interface between InsWeb's site and a third-party rating engine; or



•

an integration of the insurance company's rating criteria into an InsWeb's maintained rating engines.

        In each case, the rating process is developed in conjunction with the participating insurance company.

        Presentation of Quotes.    After a consumer has completed the form for a particular product and has requested quotes, the consumer is presented with a "quote pad." The quote pad contains the logos of insurance companies interested in providing quotes, along with prices for the insurance companies offering instant quotes. The quote pad also informs the consumer which insurance companies will provide quotes on a delayed basis, either via e-mail, mail or telephone. The response method varies among insurance products and companies. Currently, all term life and the majority of automobile quotes are provided through instant quotes. InsWeb is working with its participating insurance companies to increase implementation of instant quoting capability.

2

        Delivery of Leads.    InsWeb earns revenues from participating insurance companies based on the delivery of qualified leads. With certain insurance companies, InsWeb is paid a fee only when the consumer purchases an insurance policy, and with others, InsWeb is paid a transaction fee based on the delivery of a lead, regardless of whether or not the consumer actually purchases a policy. Qualified leads are produced in two ways: for insurance companies providing instant online quotes, a qualified lead is produced when a consumer clicks to request insurance coverage based on a specific quote; for insurance companies providing e-mail or other offline quotes, a qualified lead is produced when a consumer clicks to request the quote itself. Once a lead is generated by the consumer's request for an application or offline quote, InsWeb transmits the lead either to InsWeb Insurance Services, or to the selected insurance company or other entity by e-mail, file transfer or direct connection to the insurance company's information system. InsWeb provides each participating insurance company with custom-formatted lead information based on the insurance companies individual requirements.

        Purchase of Policy.    After InsWeb generates and delivers a qualified lead, insurance companies, or InsWeb Insurance Services, may respond directly to the interested consumer by e-mail, mail or telephone to close the purchase of the policy or direct the lead to an agent for follow-up. The delivery of a qualified lead to the insurance company does not require further involvement by InsWeb, although InsWeb monitors insurance company responses and works with companies and agents to ensure that they are responding to leads generated from the online insurance marketplace in a timely fashion. In addition, InsWeb performs closing services, through InsWeb Insurance Services, as a traditional agency, for some participating insurance companies. These closing services include advising consumers about coverage options, confirming consumer information, selling the policy and taking a premium deposit. In either case, the insurance company generally performs the ongoing servicing of the insurance policy, after it has been sold. As of December 31, 2002, InsWeb Insurance Services is selling policies on behalf of ten auto insurance companies in nine states. In addition, for one insurance company in the InsWeb term life marketplace, InsWeb Insurance Services contracts with a third-party organization to perform these closing services on its behalf.

        Customer Care.    InsWeb provides assistance to consumers throughout the data entry, quote-generation and delivery process through embedded help icons, which link to explanations of the various steps in the process and through e-mail support. InsWeb's Customer Care Center provides additional help to consumers working through the process of shopping for insurance online through email and live telephone support.

Products and Services

        Insurance companies participating in InsWeb's online insurance marketplace currently offer automobile, term life, homeowners, renters, condominium, home warranty and motorcycle insurance. In addition, InsWeb has contractual relationships with third-party providers for critical illness and health insurance.

        Automobile Insurance.    Automobile insurance comprises the largest segment of the consumer insurance market, and, to date, has accounted for most of the consumer traffic on InsWeb's online marketplace, and a substantial majority of its revenues. At December 31, 2002, InsWeb's online marketplace offered quotes to qualified consumers in 47 states plus the District of Columbia, from 24 participating insurance companies.

        At December 31, 2002, the national average for actionable insurance quotes received by consumers participating in InsWeb's online marketplace was 2.5, of which 2.1 were instant quotes.

        Term Life Insurance.    At December 31, 2002, the InsWeb online marketplace offered comparative quotes for term life insurance from 11 companies in 48 states plus the District of Columbia.

3

        Homeowners/Renters/Condominium Insurance.    As of December 31, 2002, the InsWeb online marketplace offered quotes for homeowners, renters and condominium insurance from at least one insurance company in 14 states.

        Individual Health Insurance.    Commencing in 1998, individual health insurance was offered in the form of preferred provider organization plans, health maintenance organization plans and traditional indemnity plans. In April 2000, InsWeb entered into a two-year linking agreement with eHealthInsurance.com under which InsWeb originated consumers had access to a co-branded version of eHealthInsurance's individual health, small group health, and Medicare supplement insurance product offerings. In February 2001, InsWeb temporarily suspended its online health insurance quoting due to the decision by eHealthInsurance to unilaterally terminate the marketing agreement. eHealthInsurance filed suit in U.S. District Court against InsWeb alleging InsWeb's failure to perform its obligations under the agreement. In March 2001, InsWeb filed a counterclaim alleging that eHealthInsurance wrongfully terminated the agreement and pursued a course of conduct aimed at damaging InsWeb's business. The lawsuits were settled on March 24, 2003 and all claims between the parties were dismissed. In addition, eHealthInsurance agreed to pay InsWeb $800,000 for services performed by InsWeb prior to the termination of the agreement. See "Item 3—Legal Proceedings". In June 2001, InsWeb entered into a two-year agreement with QuickQuote Financial, Inc. pursuant to which QuickQuote Financial became the exclusive provider of online health insurance services to InsWeb consumers.

        Other Products and Services.    InsWeb's online marketplace also allows consumers to shop for home warranty and motorcycle insurance and critical illness insurance in some states. At present, the InsWeb online marketplace does not offer multiple quotes with respect to these types of insurance, which are offered by a single insurance company for each product in the states in which it is available. InsWeb's long-term strategy is to expand the range of insurance products and services offered through its online insurance marketplace. From time to time, InsWeb licenses its insurance quoting functionality to insurance companies and financial institutions on a selected basis.

        Non-U.S. Markets.    In 1998, InsWeb entered into a joint venture agreement with SOFTBANK Corp. to develop, implement and market an online insurance marketplace in Japan and the Republic of Korea. The joint venture is carried out exclusively through InsWeb Japan K.K., a Japanese corporation, in which InsWeb owned a 25% interest until a reorganization in March 2001 under which a holding company, was created which controls InsWeb Japan K.K. and other companies in which InsWeb did not have a financial interest. In this reorganization, InsWeb's shares in InsWeb Japan K.K. were exchanged for shares in the holding company, Finance All K.K. In conjunction with the original joint venture agreement, InsWeb also entered into an agreement in August 1999 to provide consulting and hosting services to assist InsWeb Japan K.K. in developing its Internet strategy. Although this agreement has not been terminated, InsWeb does not expect to provide future consulting and hosting services to InsWeb Japan K.K. At December 31, 2002, InsWeb's ownership interest in Finance All K.K. was approximately 9%.

Insurance Company Relationships

        InsWeb believes that establishing long-term relationships with reputable insurance companies is essential to its ability to offer a desirable insurance marketplace on its website. InsWeb's focus is to maintain and expand the product offerings available on the online marketplace by selling InsWeb's services to new companies and expanding InsWeb's relationship with participating insurance companies.

        Once an insurance company decides to participate in InsWeb's online insurance marketplace, InsWeb's implementation team works with the insurance company to integrate its insurance product information, which entails a process of specification development, education, planning and activation. Because of the complexity of interfacing with an insurance company's legacy computer systems, the

4

implementation team conducts a thorough assessment of the insurance company's business processes, technical capabilities and desired interface to develop a comprehensive integration plan. Although the implementation process can be costly and time-consuming for both InsWeb and the insurance company, InsWeb believes that it represents a significant commitment by the insurance company, and that the insurance company typically views this expenditure of time and resources as an investment in a long-term relationship with InsWeb. Once an insurance company's initial implementation is complete, InsWeb works with the insurance company to expand its geographic coverage and add insurance products.

        At December 31, 2002, InsWeb had relationships with 37 insurance companies, including many large companies with established brand names that InsWeb believes are attractive to consumers. These companies are:

        To date, InsWeb has been dependent on a limited number of insurance companies for a significant portion of its revenues. Revenues from the top three insurance companies that participate in InsWeb's marketplace represented 38%, 32% and 34% of total revenues for the years ended December 31, 2002, 2001 and 2000, respectively. See "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations."

Interactive Website Features and Information

        To assist consumers in evaluating and fulfilling their insurance needs, InsWeb provides consumers with a variety of interactive website features and insurance-related information, including:

•

tools to help consumers estimate their coverage requirements for auto and term life insurance;



•

research capabilities to help consumers review the financial strength of insurance companies nationwide;



•

answers to frequently asked questions on insurance;

5

•

articles on a wide variety of insurance and personal finance topics;



•

glossaries of insurance-related terms; and



•

email and 800 phone service.

Marketing and Sales

        InsWeb's marketing program consists of a two-pronged effort, with substantial resources directed both at attracting increased consumer traffic to the InsWeb website, and building and expanding relationships with participating insurance companies. InsWeb believes that increased traffic will encourage insurance companies to develop and expand their relationship with InsWeb, and that enhancing the comparative shopping opportunities available through increased insurance company participation will drive further increases in consumer traffic.

Consumer Marketing

        InsWeb's consumer marketing program seeks to increase consumer traffic and brand awareness through the establishment of relationships with online companies as well as through direct offline and online consumer marketing.

        Online Relationships.    InsWeb believes that relationships with high-profile online companies can drive significant traffic to its site. InsWeb seeks out relationships with companies whose websites feature a high volume of traffic or a substantive focus that is related to the purchase of insurance coverage, such as sites related to automobiles, homes or personal finances. Agreements with these online companies typically provide that InsWeb pay the online company a portion of the resulting transaction fees and in some cases a fixed fee. Online companies integrate links into their websites connecting to InsWeb's marketplace. InsWeb provides functionality to further integrate with online companies and, in some cases, provides co-branding functionality whereby the online company's logo is presented on the InsWeb marketplace to those consumers directed to InsWeb's marketplace from a company's site. For some of InsWeb's more significant online relationships InsWeb has further integrated its functionality with these companies' sites by customizing the look and feel of InsWeb's insurance-related content and marketplace to replicate the design characteristics of the online company's site. Additionally, some of these companies have developed customized interfaces on their own site to link to the InsWeb marketplace. InsWeb's agreements with online companies typically have a 12-month term, with either party having a right to terminate the agreement on 30 to 90 days' notice.

        Traditional Consumer Marketing.    As part of its branding effort, InsWeb developed a consumer marketing campaign, which began in 1998 with radio advertising in selected metropolitan markets, and which was expanded in 1999 to include national television and syndicated radio advertising. In the first half of 2000, InsWeb changed its marketing focus to emphasize more online marketing efforts and discontinued its radio and television marketing campaigns. In the future, InsWeb may engage in limited traditional advertising, including radio and print advertising.

        Online Direct-Response Advertising.    InsWeb's online direct-response advertising is intended to create a presence for InsWeb on a wide range of websites whose audiences closely match its target audience. InsWeb's key advertisements are delivered through content sponsorships, banners and keywords on financial, news, real estate, classifieds, automobile, directory and general interest sites. InsWeb and some of its third-party marketing providers also conduct advertising campaigns promoting InsWeb through emails and electronic newsletters. InsWeb's advertisements are targeted primarily at consumers who are actively seeking insurance.

6

Technology

Architecture and Interfaces

        Since its inception, InsWeb has invested significant resources to develop and deploy its proprietary technology platform that InsWeb believes constitutes a significant competitive advantage.

        InsWeb's software architecture facilitates interoperability among software components to maximize responsiveness, flexibility and reliability. This architecture enables InsWeb to efficiently develop and deploy new insurance company-specific modules for underwriting, rating and data delivery. It also simplifies the process of providing InsWeb's core marketplace functionality for use on insurance company sites. In order to speed implementation for each participating insurance company, InsWeb has developed transmission software components which allow consumer data to be custom-formatted for delivery to each insurance company based on the requirements of the insurance company's computer system. InsWeb has developed custom communication software to provide multiple types of real-time telecommunication links to its participating insurance companies. These components provide a variety of solutions to the insurance companies to best meet their needs and interface with their legacy systems. InsWeb has devoted significant time and resources to maximize the efficiency of integrating new insurance companies into its online marketplace and to create a flexible, customizable Web interface. InsWeb's front-end user interface is accessible to consumers via standard Web browsers and is designed without unnecessary graphics that would increase download time.

        InsWeb's server software operates on servers running the Microsoft Windows 2000 operating system. The software is designed for a high-volume transaction-processing environment, with a focus on reliability, redundancy and around-the-clock availability. It is designed to enable the system to respond rapidly and to simultaneously underwrite and rate a consumer's profile against all participating insurance companies' criteria. The software is also designed for scalability, enabling InsWeb to expand processing capacity through the addition of more processors and servers as transaction volumes increase.

        InsWeb has also integrated and plans to further develop systems to facilitate incoming consumers though InsWeb's Customer Care Center and the processing of leads and sale of insurance policies through its agency operations. InsWeb's agency technology systems use a combination of our own proprietary technologies and commercially available, licensed technologies. These technologies include an array of proprietary advanced telephony and network tools to manage leads delivered from InsWeb's marketplace and email and telephone calls received in the customer service center. InsWeb's proprietary automated customer management system has been developed to communicate and process data with the InsWeb marketplace, outside rating services, credit bureaus, third-party data providers, and an online credit card processing company to facilitate the sale of insurance policies to consumers. Once a policy is sold, data is entered into an agency management system, where upload and download interfaces between its agency management system and various insurance company back office systems have been developed to streamline the proper fulfillment and servicing of sold policies.

Security

        InsWeb employs third-party firewall technology to protect its corporate network from intrusion and uses proprietary designs to isolate confidential data on its network so that only selected information is publicly available on its website. Consumer information is transmitted to InsWeb's site using Secure Socket Layer encryption technology, a widely used technology for transmitting encoded data via a Web browser. InsWeb employs a number of other encryption methods for delivery of consumer information to insurance companies. InsWeb protects its system management functions using security models integrated with the operating system. Additionally, some sensitive software applications incorporate proprietary authentication schemes.

7

Site Operations

        InsWeb's hardware servers, storage systems, Internet connections, back-up strategies and network are designed to allow its online marketplace to operate continuously. InsWeb's main Web servers are located at its headquarters facility in Gold River, California. InsWeb uses multiple service providers to access the Internet over multiple dedicated communication lines. InsWeb uses a separate server to operate the software for each primary insurance product, as well as at least one redundant server for each core product. InsWeb uses a number of internally-developed and third-party software products to monitor the performance and availability of its website and core products. InsWeb continuously monitors consumer traffic, response times and capacity to ensure a high quality of service for consumers and insurance companies. InsWeb maintains a back-up facility in Rancho Cordova, California through a third-party service provider to ensure the continuous operation of its online marketplace in case of a failure at its main facility.

Product Development

        InsWeb devotes significant resources to improving the structure of its products and delivering additional tools that allow insurance companies to effectively reach consumers. InsWeb generally follows a semi-quarterly release schedule for new versions of its online user interface, which may incorporate technology advances, new product features and improvements in consumer interactivity. InsWeb also devotes resources to refining its online consumer tools and research materials, as well as developing new support products. InsWeb is also researching new methods of designing more useful insurance-related material and presenting it to the consumer in a more meaningful context.

        InsWeb's technology expenses were approximately $10.3 million in 2002, $14.0 million in 2001, and $22.9 million in 2000. In addition, InsWeb capitalized costs of $0.8 million in 2001 and $1.2 million in 2000 relating to the development and enhancement of its website.

Privacy Policy

        InsWeb believes that the privacy of personally identifiable information of Internet users is becoming increasingly important as the use of the Internet for electronic commerce continues to grow. InsWeb has adopted a privacy policy for information of users of its online marketplace. InsWeb does not disclose any personally identifiable information of a user to InsWeb's participating insurance companies until the user specifically requests insurance coverage based on an instant online quote, or requests an offline quote. InsWeb does not sell or otherwise make available to any other party any personally identifiable information concerning its users. However, InsWeb does compile user information in its databases. This aggregated statistical information is analyzed internally by InsWeb for marketing purposes and to improve the content and site layout of its website. This information is made available in aggregate form only, without individual identification of consumers, to InsWeb's participating insurance companies for their use in adjusting, refining and expanding their product offerings. Aggregate statistical information also may be made available to online companies with which InsWeb has established a marketing relationship. InsWeb is a licensee of the TRUSTe Privacy Program and adheres to their standards regarding the protection of the personally identifiable information of Internet users.

Competition

        The online insurance distribution market is a new industry and, like the broader electronic commerce market, is rapidly evolving and is highly competitive. InsWeb competes with other companies that provide quotes and sell insurance policies online, as well as with:

•

single insurance company websites that offer quotes for their own insurance products online or by telephone;

8

•

Web-based information delivery services that use generic filings with state regulators to deliver estimated price quotes from various insurance companies;



•

Web-assisted agency distribution services, that provide an Internet-based distribution channel for traditional insurance agencies;



•

online workplace marketers that sell insurance to employees over their employer's intranet; and



•

providers of software technology to insurance companies and other competitors that may target electronic commerce solutions for the insurance industry.

        InsWeb believes the principal bases for competition in the online insurance distribution market include:

•

brand awareness;



•

variety and quality of insurance company selection;



•

strength of relationships and depth of technology integration with insurance companies;



•

accuracy of insurance quotes;



•

breadth and pricing of insurance product selection;



•

speed, accessibility and convenience;



•

quality and quantity of website content; and



•

relationships with other online companies.

Government Regulation

        The insurance industry is subject to extensive regulation under state laws. Insurance laws and regulations cover all aspects of the insurance process, including sales techniques, underwriting for eligibility, rates, compensation, claim payments and record keeping by licensed insurance companies and insurance agents. InsWeb performs functions for licensed insurance companies and is, therefore, required to comply with a complex set of rules and regulations that often vary from state to state. If InsWeb fails to comply with these rules and regulations, InsWeb, an insurance company doing business with InsWeb, our officers, or agents with whom we contract could be subject to various sanctions, including censure, fines, a cease-and-desist order or other penalties. This risk, as well as changes in the regulatory climate or the enforcement or interpretation of existing law, could require changes to InsWeb's business or otherwise harm InsWeb's business. Furthermore, because the application of online commerce to the insurance market is relatively new, the impact of current or future regulations on InsWeb's business is difficult to anticipate.

        A company that does business as an insurance agent is generally required to be licensed in any state in which it conducts that business. Although InsWeb does not believe that the operation of its online insurance marketplace constitutes doing business as an insurance agent under existing laws and regulations, InsWeb has received direct and indirect inquiries from insurance regulatory authorities in several states suggesting that these activities may be considered to fall under their licensing jurisdiction. Should these or other regulatory authorities pursue inquiries and ultimately determine that InsWeb's activities required licensure, InsWeb's business could be harmed.

        In order to provide the types of services that require a license, InsWeb established a wholly-owned subsidiary, InsWeb Insurance Services, Inc., to operate as a licensed insurance agent. This subsidiary currently maintains property and casualty licenses in 45 jurisdictions (including the District of Columbia) and life and health licenses in 44 jurisdictions (including the District of Columbia). In the states where our subsidiary does not maintain a license, InsWeb is licensed through its officers or

9

through resident agents that contract with InsWeb. InsWeb's policy is to post prominently on its website the jurisdictions in which the subsidiary is licensed. Links to agents that contract with InsWeb afford consumers access to licensed agencies. In addition, employees of InsWeb who are engaged in the sale of insurance are licensed as insurance agents. InsWeb's operations depend on the validity of and continued good standing under the licenses and approvals pursuant to which InsWeb's subsidiary, licensed officers and agents operate. Licensing laws and regulations vary depending on the jurisdiction. The applicable licensing laws and regulations are subject to amendment or interpretation by regulatory authorities. Such authorities generally are vested with broad discretion concerning the allowance, renewal and revocation of licenses and approvals. The inability to obtain the requisite agent licenses or other necessary licenses, permits, or authorizations could harm InsWeb's business.

        InsWeb transferred responsibility for the ongoing operation of InsWeb's website in April 1999 to its licensed subsidiary, and intends to conduct business activities that require a license through this subsidiary and InsWeb's licensed officers and agents. Offering services through this licensed subsidiary or through licensed officers and agents could create conflicts with insurance companies that have policies prohibiting them from employing insurance agents or from selling insurance through agents that compete with their own exclusive agents. These conflicts could result in a loss of business from these insurance companies and could harm InsWeb's business.

        InsWeb developed its Customer Care Center to provide assistance to consumers who visit InsWeb's website through email and live telephone support. InsWeb believes that the defined responsibilities of the service representatives staffing the Customer Care Center do not require licensure; however, InsWeb intends to comply with any licensing requirement of the jurisdictions served by the Customer Care Center.

        InsWeb faces additional regulatory risk because most of the laws and regulations governing the transaction of insurance, including laws and regulations relating to marketing and underwriting, do not currently address the delivery of services through electronic communications. Until these laws and regulations are revised to clarify their applicability to electronic commerce, any company offering insurance products and services through the Internet or other means of electronic commerce will face uncertainty as to compliance with these laws and regulations. InsWeb's policies and procedures may not be deemed acceptable by any regulatory body examining its activities in light of these potentially different laws and regulations. Any adverse regulatory actions could seriously harm InsWeb's business.

        In addition, many state insurance codes limit the collection and use of personal information by insurance companies, agents, or insurance service organizations and, under certain circumstances, the payment of insurance-related compensation to unlicensed persons. If InsWeb does not comply with these state laws, InsWeb could be subject to fines or other enforcement proceedings that could harm its business. To date, InsWeb has not been notified by any regulatory authority that its information practices or compensation methodologies do not comply with these state laws.

Intellectual Property

        InsWeb regards its intellectual property as critical to its success, and relies upon trademark, copyright and trade secrets laws in the United States and other jurisdictions to protect its proprietary rights. The INSWEB mark has been registered in the United States, France, Germany, South Korea, Japan and the United Kingdom, among others, and applications are pending in several other countries. Other U.S. and worldwide trademark applications include, but are not limited to, eAgent, InsWeb.com, Powered by InsWeb, Where You and Your Insurance Really Click, and Lower Your Insurance Costs, Not Your Expectations. InsWeb has applied for patents on its core technology and related patentable subject matter; however no patent has been issued, and thus InsWeb cannot currently prevent a competitor from independently using similar functionality. In connection with its acquisition of assets from Intuit in January 2001, InsWeb obtained the rights to patent applications filed by Intuit relating to

10

Intuit's online insurance shopping and purchasing service. InsWeb intends to continue to pursue these patents. InsWeb's pending trademark registrations and patent applications may not be approved or granted, or, if granted, may be successfully challenged by others or invalidated through administrative process or litigation. In addition, effective patent, copyright, trademark, and trade secret protection may be unavailable or limited in some foreign countries. InsWeb also seeks to protect its proprietary rights through physical and technological security measures, and through the use of confidentiality or license agreements with its business partners, employees, consultants, advisors and others, and generally to control access to, and distribution and use of, its software, documentation, business and other proprietary information. Despite InsWeb's efforts to protect its proprietary rights from unauthorized use or disclosure, employees, consultants, advisors or others may not maintain the confidentiality of InsWeb's proprietary information, and this proprietary information may otherwise become known, or be independently developed, by competitors. The steps InsWeb has taken may not prevent misappropriation of its proprietary rights, particularly in foreign countries where laws or law enforcement practices may not protect its proprietary rights as fully as in the United States.

        InsWeb licenses its trademarks and similar proprietary rights to third parties. While InsWeb attempts to ensure that the quality of its brand is maintained by these companies, they may take actions that could harm the value of InsWeb's proprietary rights or the reputation of InsWeb or its services.

        InsWeb may receive notice of claims of infringement of other parties' proprietary rights or claims that its own patents or other intellectual property rights are invalid. From time to time InsWeb has been subject to infringement claims in the ordinary course of its business, including claims of alleged infringement of the trademark rights of third parties by InsWeb and the companies with which it does business. Any of these claims, with or without merit, could be time consuming to defend, result in costly litigation, divert management attention and resources or require InsWeb to enter into royalty or licensing agreements. Licenses may not be available on reasonable terms, if at all, and the assertion or prosecution of any infringement claims could significantly harm InsWeb's business.

Employees

        As of December 31, 2002, InsWeb had 166 full-time employees. InsWeb has never had a work stoppage, and none of its employees are currently represented under collective bargaining agreements. InsWeb considers its relations with its employees to be good. InsWeb believes that its future success will depend in part on the continued service of its senior management and key technical personnel and its ability to attract, integrate, retain and motivate highly qualified technical and managerial personnel. Competition for qualified personnel in InsWeb's industry and geographical location is intense. InsWeb may not continue to be successful in attracting and retaining a sufficient number of qualified personnel to conduct its business in the future.

Executive Officers of the Registrant

        As of March 20, 2003, InsWeb's executive officers were as follows:

11

        Hussein A. Enan co-founded InsWeb in February 1995 and has served as its Chairman of the Board since its inception. Mr. Enan served as InsWeb's Chief Executive Officer from February 1995 to June 2002. Mr. Enan also served as InsWeb's President from May 1999 to June 2000. From March 1992 to November 1994, Mr. Enan was a general partner at E.W. Blanch, a reinsurance intermediary that merged with his own wholly-owned company, Enan & Company, a reinsurance intermediary, in March 1992. Mr. Enan founded Enan & Company in February 1979.

        Mark P. Guthrie joined InsWeb in September 1997 as Senior Vice President of Strategic Partnerships and served as its Executive Vice President of Operations from July 1998 to June 2000. Mr. Guthrie served as InsWeb's Chief Operating Officer since January 2000, its President since June 2000 and Chief Executive Officer since July 2002. Mr. Guthrie became a director of InsWeb in July 2002. From July 1995 to August 1997, Mr. Guthrie held various positions with Industrial Indemnity, a nationwide property and casualty insurance company, most recently as senior operating officer of national programs.

        William D. Griffin joined InsWeb in May 2001 as Chief Financial Officer. From August 1999 to February 2001, Mr. Griffin was Chief Financial Officer of ZipSend, Inc., an Internet services company, of which he was a co-founder. From October 1998 through August 1999, Mr. Griffin provided consulting services to various early stage Internet and technology companies. Prior to that, from May 1990 through September 1998, Mr. Griffin was Senior Vice President and Chief Financial Officer of Inference Corporation, a customer services software company.

        L. Eric Loewe joined InsWeb in October 1998 as Corporate Counsel, Legal and Regulatory, responsible for all regulatory compliance issues, and has served as Senior Vice President and General Counsel since September 2000 and as Secretary since July 2001. Mr. Loewe held various positions with the National Association of Independent Insurers from January 1980 to September 1998. As Senior Counsel for the NAII, Mr. Loewe was responsible for legislation and regulations affecting the association's 570 member companies. Mr. Loewe is a member of the Illinois and California bars.

Item 2. Properties.

        InsWeb's corporate headquarters and its principal administrative, product development, sales and marketing operations are located in a 55,000 square foot facility in the Sacramento, California area, which InsWeb occupies under a lease expiring in 2011. InsWeb also leases approximately 75,000 square feet of office space in Redwood City, California under leases expiring through September 2008, and 12,474 square feet of office space in Westlake Village, California under a lease expiring in July 2004. These facilities were formerly occupied by InsWeb as its headquarters and agency facilities, respectively, and were vacated by InsWeb in December 2000 when it consolidated its operations at its present facility.

        One of the vacated office leases is for a 65,000 square foot building in Redwood City, California. Under the terms of this lease, InsWeb is responsible for taxes, insurance and maintenance expenses. InsWeb had previously subleased a portion of the Redwood City facility under a four-year sublease agreement. In July 2002, InsWeb and its sub-lessee agreed to amend the sublease, whereby, the sub-lessee agreed to rent the entire facility for the duration of the InsWeb lease (through September 2008). All rent and operating expenses otherwise payable by InsWeb to the landlord will be paid directly by the sub-lessee. However, the sub-lessee is a start-up company with limited operating history and, therefore, there are inherent risks and uncertainties associated with its future operations and its ability to discharge its obligations through the term of the sublease. In the event that the sub-lessee defaults on its obligations under the amended sublease, InsWeb would be responsible for making the required lease payments to the landlord through the remaining term of the lease. In connection with this lease and other lease obligations for formerly occupied facilities, InsWeb must make assumptions regarding the estimated future sublease income relative to these facilities. These

12

estimates and assumptions are affected by area-specific conditions such as new commercial development, market occupancy rates and future market prices. If these estimates or their related assumptions change in the future, InsWeb may be required to record a charge to increase its existing accrual.

        InsWeb believes that its existing facilities are adequate to meet its needs for future growth, and there should be no need to lease additional or alternative space in the near term.

Item 3. Legal Proceedings.

eHealth Insurance Litigation

        In February 2001, InsWeb temporarily suspended its online health insurance quoting services due to the decision by eHealthInsurance, Inc., formerly InsWeb's exclusive provider of online health insurance quotes, to unilaterally terminate their marketing agreement. In February 2001, eHealthInsurance filed suit in the U.S. District Court for the Northern District of California alleging InsWeb's failure to perform its obligations under the agreement. In March 2001, InsWeb filed a counterclaim alleging that eHealthInsurance wrongfully terminated the agreement and pursued a course of conduct aimed at damaging InsWeb's business. On March 24, 2003, the parties agreed to settle the lawsuit and dismiss all of the claims asserted against each other. In addition, eHealthInsurance agreed to pay InsWeb $800,000 for the services performed by InsWeb prior to the termination of the agreement.

Securities Class Action Lawsuit

        A class action lawsuit was filed on December 5, 2001 in the U.S. District Court for the Southern District of New York on behalf of purchasers of InsWeb common stock alleging violations of federal securities laws. The case is brought purportedly on behalf of all persons who purchased InsWeb common stock from July 22, 1999 through December 6, 2000. The complaint names as defendants InsWeb, certain current and former officers and directors, and three underwriters for InsWeb's initial public offering in July 1999. The complaint alleges violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, on the grounds that the prospectus incorporated in the registration statement for the offering failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors substantial blocks of the stock sold in the initial public offering, and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares of the stock sold in the initial public offering to those customers in exchange for which the customers agreed to purchase additional shares of InsWeb stock in the aftermarket at pre-determined prices that were above the initial public offering price. No specific damages are claimed. In February 2003, the court dismissed the claims alleging violations of the Securities Exchange Act of 1934 but allowed the plaintiffs to proceed with the remaining claims. InsWeb believes that the remaining allegations against InsWeb and its current and former officers and directors are without merit and intends to contest them vigorously. The litigation is in the preliminary stage, and InsWeb cannot predict its outcome. The litigation process is inherently uncertain. An unfavorable outcome could have a material adverse effect on InsWeb's financial condition, results of operations and cash flows.

Item 4. Submission of Matters to a Vote of Security Holders.

        None.

13

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.

        InsWeb's common stock is quoted on the Nasdaq National Market under the symbol "INSW." As of December 31, 2002, there were approximately 2,643 stockholders of record. Certain shares are held by brokers and other institutions on behalf of stockholders, and we are unable to determine the total number of stockholders represented by these record holders. The following table sets forth, for the quarters indicated, the high and low sales price per share of InsWeb's common stock as reported on the Nasdaq National Market:

        InsWeb has not paid any cash dividends on its capital stock. InsWeb currently intends to retain future earnings, if any, for use in the operation and expansion of our business and, therefore, does not anticipate paying any cash dividends in the foreseeable future.

14

Item 6. Selected Financial Data.

        The following selected consolidated financial data should be read in conjunction with "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

(in thousands, except per share amounts)

15

(1)

Represents the write-down of long-lived assets related to the acquisition of certain assets of Quicken Insurance in 2002 and 2001 and the write-off of assets related to the Benelytics acquisition in 2000. See Note 8 of Notes to the Consolidated Financial Statements for additional information.

(2)

Represents charges recorded pursuant to InsWeb's restructuring plan and related vacated facilities. See also Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

(3)

Reflects the impact of the adoption of SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"), effective January 1, 2000. Pro forma amounts of net loss and related diluted per share amounts, assuming retroactive application of the change in accounting principle for the years ended December 31, 1998 through 1999 are as follows:

(4)

Represents the gain recognized from the renegotiation and amendment of the obligations under the license and distribution agreement in March 2002, which was originally entered into in connection with the purchase of certain assets of Intuit Insurance Services, Inc. in 2001. A portion of the fixed payments previously payable to Intuit were eliminated. The net result of this amended contract was a $10.6 million extraordinary gain. See Note 10 of Notes to Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEET DATA:

(in thousands)

16

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.

        This Annual Report on Form 10-K and in particular Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements with respect to InsWeb's future financial performance. These forward-looking statements are subject to various risks and uncertainties, including the factors described below under the caption "Factors That May Affect Our Future Performance," and other documents filed with the Securities and Exchange Commission, that could cause InsWeb's actual results to differ materially from historical results or those currently anticipated.

Overview

        InsWeb operates an online insurance marketplace that enables consumers to shop online for a variety of insurance products, including automobile, term life, homeowners, renters and health insurance, and obtain insurance company-sponsored quotes for actual coverage. In order to create this marketplace, InsWeb has established close relationships with a significant number of insurance companies throughout the United States.

        InsWeb's principal source of revenues is transaction fees from participating insurance companies. While quotes obtained through InsWeb's online insurance marketplace are provided to consumers free of charge, InsWeb earns revenues from participating insurance companies based on the delivery of qualified leads. With certain insurance companies, InsWeb is paid a fee only when the consumer purchases an insurance policy, and with others, InsWeb is paid a transaction fee based on the delivery of a lead, regardless of whether or not the consumer actually purchases a policy. Qualified leads are produced in two ways: for insurance companies providing instant online quotes, a qualified lead is produced when a consumer clicks to request insurance coverage based on a specific quote; for insurance companies providing e-mail or other offline quotes, a qualified lead is produced when a consumer clicks to request the quote itself. Once a lead is generated by the consumer's request for an application or offline quote, InsWeb transmits the lead either to InsWeb Insurance Services, or to the selected insurance company or other entity by e-mail, file transfer or direct connection to the insurance company's information system. InsWeb provides each participating insurance company with custom-formatted lead information based on the insurance companies individual requirements.

        In October 1999, InsWeb began generating commission revenue as an insurance agent based on activities it performs related to the sale of certain automobile insurance policies in California. Since that date, InsWeb has expanded its insurance agency operations. As of December 31, 2002, InsWeb's subsidiary, InsWeb Insurance Services, Inc., has been appointed as an authorized automobile insurance agent by 10 participating insurance companies and is acting as an agent in nine states. InsWeb receives a commission based on a percentage of the initial insurance policy premium related to each insurance policy sale where InsWeb has acted as the agent. InsWeb recognizes the revenue from these activities on the effective date of the policy, less an estimate for early cancellations of the underlying insurance policies. InsWeb also recognizes revenue when an applicable policy is renewed. Commission revenue is included in transaction fees. InsWeb intends to expand its online insurance agency operations by adding additional participating insurance companies and by expanding into additional states.

        A less significant, but on-going source of revenues for InsWeb are development and maintenance fees that are paid by insurance companies that participate on the InsWeb insurance marketplace. Development fees are generated from the design and development of customized interfaces between an insurance company's information system and the InsWeb site. InsWeb charges maintenance fees for maintaining and servicing the programs of the individual insurance companies and for maintaining any hardware at InsWeb's facility that is dedicated to specific insurance companies.

17

        InsWeb initially focused its efforts on developing insurance company coverage for automobile insurance in order to be able to offer true comparative online shopping for this important segment of the insurance market. Automobile insurance accounted for approximately 83% of transaction revenues in 2002, 67% in 2001 and 69% in 2000. We anticipate that automobile insurance will continue to account for a significant portion of InsWeb's revenues for the foreseeable future. However, InsWeb intends to continue to expand its online insurance marketplace by adding new products and additional insurance companies.

        InsWeb has been dependent on a limited number of insurance companies for a majority of its revenues. Revenues from Amica, GE Financial Assurance and Kemper Direct accounted for approximately 14%, 14% and 10%, respectively, of InsWeb's revenues for the year ended December 31, 2002. Revenues from Amica, GE Financial Assurance and AIG accounted for approximately 11%, 11% and 10%, respectively, of InsWeb's revenues for the year ended December 31, 2001. Revenues from State Farm, AIG and GE Financial Assurance accounted for approximately 14%, 11% and 9%, respectively, of InsWeb's revenues for the year ended December 31, 2000. InsWeb expects its revenues to become less concentrated as new insurance companies are added to its online insurance marketplace. However, because of the broad market presence of some of InsWeb's participating insurance companies, InsWeb expects to continue to generate a substantial portion of its revenues from a limited number of insurance companies for the foreseeable future.

        Since its inception, InsWeb has incurred significant losses, and as of December 31, 2002, InsWeb had an accumulated deficit of $174.8 million. These losses, and this accumulated deficit, have resulted from the significant costs incurred in the development of InsWeb's technology platform, the establishment of relationships with insurance companies, their integration with the InsWeb site, and InsWeb's marketing and sales activities. InsWeb intends to continue to invest in product development and maintenance, sales and marketing and in its administrative infrastructure. As a result, InsWeb believes that it will continue to incur operating losses at least through 2003. Although InsWeb has experienced revenue growth in recent periods, its operating results for future periods are subject to numerous uncertainties, and there can be no assurance that InsWeb's revenue growth will continue or that it will be able to achieve and sustain profitability. In view of the rapidly evolving nature of InsWeb's business and its limited operating history, InsWeb believes that period-to-period comparisons of its operating results are not necessarily meaningful and should not be relied upon as an indication of future performance.

Recent Developments

License and Distribution Agreement with Intuit

        In January 2001, InsWeb acquired from Intuit certain assets and related liabilities associated with an online insurance shopping and purchasing service operated by Intuit Insurance Services, Inc., a wholly-owned subsidiary of Intuit. In connection with the acquisition, InsWeb and Intuit entered into a license and distribution agreement under which Intuit and InsWeb granted one another licenses to create links between their respective websites in order to create and operate a co-branded insurance center. Under this agreement, InsWeb is the exclusive aggregator of online consumer insurance services for Quicken.com, an Intuit website. The original agreement required InsWeb to pay Intuit fixed fees totaling $20.5 million plus additional amounts associated with consumers linking from the Quicken.com website to the InsWeb co-branded insurance center.

        In March 2002, the parties amended the license and distribution agreement. Under the amended agreement, InsWeb will make the originally agreed upon fixed payments (long-term marketing commitments) only through July 31, 2003. Fixed payments previously payable to Intuit after July 31, 2003 were eliminated. Effective August 1, 2003 and through the remainder of the agreement (January 2006), InsWeb will pay Intuit a portion of the transaction fees received by InsWeb from the Intuit Internet traffic, payable on a quarterly basis. The net result of this amended contract was a $10.6 million extraordinary gain.

18

        In December 2002, as a result of continuously lower than anticipated traffic levels, InsWeb reassessed the recoverability of the prepaid marketing costs asset recorded in connection with the acquisition, by comparing the estimated future undiscounted cash flows expected to be generated relating to this asset to its carrying amount. Based on this evaluation, InsWeb determined that the acquired asset was impaired and recorded an impairment charge, as the carrying value of this asset was in excess of its fair value. The fair value was based on estimated future cash flows to be generated from the license and distribution agreement, discounted using a rate commensurate with the risk involved.

        In assessing the recoverability of InsWeb's prepaid marketing costs asset, InsWeb must make assumptions regarding estimated future cash flows and other factors to determine fair value. Specifically, the variability in anticipated traffic levels, number of completed shopping sessions, and revenue per completed shopping session affect these estimates and assumptions.

Negotiated Common Stock Repurchases

        In December 2002, the Board of Directors authorized management to repurchase 107,445 shares of InsWeb's common stock held by SOFTBANK Ventures, Inc. for $0.2 million or $1.49 per share. Additionally, in February 2003, the Board of Directors authorized management to repurchase 2,241,440 shares of InsWeb's common stock, consisting of 1,169,898 shares held by Intuit Insurance Services, Inc. and 1,071,542 shares held by SOFTBANK America, Inc. These shares were purchased for $3.8 million, or $1.70 per share. With the closing of these transactions, total SOFTBANK Corporation's holdings of InsWeb common stock have been reduced to 353,032 shares, while Intuit Insurance Services, Inc. holds no shares.

Litigation Settlement

        In March 2003, InsWeb and eHealthInsurance.com agreed to settle ongoing litigation in the U.S. District Court for Northern California. The litigation stemmed from eHealthInsurance's decision in February 2001 to terminate an agreement concerning the marketing of health insurance to consumers originating at InsWeb. Although specific terms of the settlement agreement are confidential, eHealthInsurance has agreed to pay InsWeb $0.8 million for the services performed by InsWeb prior to the termination of the marketing agreement. In addition, the parties have released all claims against each other relating to the marketing agreement.

19

Results of Operations

        The following table sets forth statement of operations data as a percentage of total revenues for the periods indicated:

Years Ended December 31, 2002 and 2001

Revenues

        Transaction Fees.    Transaction fees accounted for $24.1 million, or 94.3%, of total revenues in 2002, compared to $23.0 million, or 92.5%, in 2001. The increase was primarily the result of the increased number of leads generated by an increased number of completed shopping sessions. The increase in shopping sessions resulted from increased consumer traffic due to InsWeb's consumer marketing activities, and the addition of a substantial number of online relationships.

        During the year ended December 31, 2002, more than 3.4 million shopping sessions were completed on InsWeb's online marketplace, a 21% increase over the 2.8 million shopping sessions completed in 2001. InsWeb recorded more than 14.6 million consumer quotes presented during the year ended December 31, 2002, compared to 12.9 million in 2001.

        Development and Maintenance Fees.    Development and maintenance fees accounted for $1.4 million, or 5.7%, of total revenues in 2002, compared to $1.9 million, or 7.5%, in 2001. Development and maintenance fees are expected to continue to decline as set-up programs have become a less significant component in an insurance company's initial participation.

        Technology.    Technology expenses consist primarily of payroll and related expenses for development and technology personnel. Technology expenses decreased to $10.3 million in 2002 from $14.0 million in 2001. The decrease was primarily attributable to a reduction in headcount and decreased amortization of capitalized website costs. Technology expenses in 2003 are expected to be comparable to 2002 expenses.

20

        Sales and Marketing.    Sales and marketing expenses consist primarily of consumer marketing expenditures for advertising, promotions and fees paid to Internet companies, as well as payroll and related expenses for InsWeb's sales and marketing personnel, customer care center personnel and insurance agency operations. Sales and marketing expenses decreased to $18.3 million in 2002 from $28.8 million in 2001. The decrease was primarily attributable to significant reductions in traditional consumer marketing relationships combined with a reduction in headcount. Direct marketing costs will fluctuate based on the amount of consumer traffic driven to the InsWeb marketplace, while all other sales and marketing expenditures in 2003 are expected to be comparable to 2002 expenses.

        General and Administrative.    General and administrative expenses consist primarily of payroll and related expenses for InsWeb's management, administrative and accounting personnel, expenses relating to site operations, occupancy costs, professional fees and other general corporate expenses. General and administrative expenses decreased to $6.9 million in 2002, compared to $7.3 million in 2001. The decrease was primarily due to decreased personnel and related costs, and decreased office and occupancy costs, partially offset by an increase in legal expenses incurred during the period in connection with the ongoing litigation with eHealthInsurance. General and administrative expenses in 2003 are expected to be comparable to 2002 expenses.

        Amortization of Stock-based Compensation.    Amortization of stock-based compensation decreased to $0 in 2002 compared to $0.3 million in 2001. Deferred stock-based compensation amounts were fully amortized in 2001.

        Impairment of Long-Lived Assets.    In January 2001, InsWeb acquired from Intuit, Inc. certain assets and related liabilities associated with an online insurance shopping and purchasing service operated by Intuit Insurance Services, Inc., a wholly-owned subsidiary of Intuit. In connection with the acquisition, InsWeb and Intuit entered into a license and distribution agreement under which Intuit and InsWeb granted one another licenses to create links between their respective websites in order to create and operate a co-branded insurance center. InsWeb recorded a long-lived asset of $17.0 million for prepaid marketing costs and an intangible asset of $13.1 million relating to the beneficial terms of the license and distribution agreement. The fair value of the intangible asset was estimated based on the expected Internet traffic to be received from Intuit by InsWeb.

        In 2002 and 2001, as a result of significantly lower than anticipated traffic levels, InsWeb reassessed the recoverability of the assets recorded in connection with this transaction by comparing the estimated future undiscounted cash flows expected to be generated relating to this asset to its carrying amount. Based on these evaluations, InsWeb determined that the acquired assets were impaired and recorded impairment charges of $3.7 million and $18.5 million, respectively, as the carrying value of these assets was in excess of fair value. The fair value of the acquired assets was based on estimated future cash flows to be generated from the license and distribution agreement, discounted using a rate commensurate with the risk involved.

        Restructuring and Other Charges.    InsWeb recorded a charge of $1.8 million in 2002 to increase the accrual for lease obligations relating to formerly occupied facilities. In evaluating these lease obligations, InsWeb must make assumptions regarding the estimated future sublease income relative to these facilities. These estimates and assumptions are affected by area-specific conditions such as new commercial development, market occupancy rates and future market prices. As a result of the continued decline in the real estate markets where the InsWeb properties are located and the inherent risk associated with its sub-lessee, due to recent actions by the sub-lessee in attempting to renegotiate and/or terminate the amended sublease agreement, the Company recorded the additional charge of $1.8 million in 2002. If these estimates or their related assumptions change in the future, InsWeb may be required to record a charge to increase its existing accrual.

21

        In 2001, InsWeb recorded a charge of $1.8 million to write-down certain leasehold improvements to their net realizable value and to establish the accrual for lease obligations relating to formerly occupied facilities.

Interest Expense

        Interest expense was $0.5 million in 2002, compared to $1.0 million in 2001. The decrease in interest expense was primarily attributable to imputed interest associated with the long-term marketing commitments (fixed payments) recorded in conjunction with the purchase of assets from Intuit, Inc.

Interest Income and Other, Net

        Interest income and other, net decreased to $0.7 million in 2002 from $2.1 million in 2001. Interest income and other, net includes income earned on InsWeb's investments and the gain (loss) on foreign currency exchange rate fluctuations associated with a note payable due to a strategic partner and stockholder incurred in connection with InsWeb's original investment in InsWeb Japan K.K. and with InsWeb's investment in Finance All K.K. The decrease in interest income and other, net was primarily a result of decreased interest income due to lower average cash and short-term investment balances during 2002 and to a lesser extent, lower interest rates.

Extraordinary Gain

        As more fully discussed above in "Recent Developments," InsWeb amended, in 2002, its license and distribution agreement that was entered into in connection with the purchase of certain assets of Intuit Insurance Services, Inc. in 2001. A portion of the fixed payments previously payable to Intuit were eliminated. The net result of this amended contract was a $10.6 million extraordinary gain.

Years Ended December 31, 2001 and 2000

Revenues

        Transaction Fees.    Transaction fees accounted for $23.0 million, or 92.5%, of total revenues in 2001, compared to $19.6 million, or 84.2%, in 2000. The increase was primarily the result of the increased number of leads generated by an increased number of completed shopping sessions. The increase in shopping sessions resulted from increased consumer traffic due to InsWeb's consumer marketing activities and the addition of a substantial number of online relationships.

        During the year ended December 31, 2001, more than 2.8 million shopping sessions were completed on InsWeb's online marketplace, a 27% increase over the 2.2 million shopping sessions completed in 2000. InsWeb recorded more than 13.3 million consumer quotes presented during the year ended December 31, 2001, compared to 8.0 million in 2000.

        Development and Maintenance Fees.    Development and maintenance fees accounted for $1.9 million, or 7.5%, of total revenues in 2001, compared to $3.6 million, or 15.8% in 2000. The decrease primarily resulted from a reduction in revenue under a development agreement with InsWeb Japan K.K. in 2000.

Operating Expenses

        Technology.    Technology expenses decreased to $14.0 million in 2001 from $22.9 million in 2000. The decrease was primarily due to the reduction in headcount resulting from InsWeb's restructuring efforts in 2000.

22

        Sales and Marketing.    Sales and marketing expenses decreased to $28.8 million in 2001 from $34.0 million in 2000. The decrease was primarily attributable to significant reductions in traditional consumer marketing relationships combined with a reduction in headcount resulting from InsWeb's restructuring efforts in 2000.

        General and Administrative.    General and administrative expenses decreased to $7.3 million in 2001 from $11.2 million in 2000. The decrease was primarily due to decreased personnel and related costs, and decreased office and occupancy costs.

        Amortization of Intangible Assets.    Amortization of intangible assets decreased to $0 in 2001 from $1.2 million in 2000. The decrease was attributable to the write-down of intangible assets recorded in connection with the acquisition of Benelytics.

        Amortization of Stock-based Compensation.    Amortization of stock-based compensation was $256,000 in 2001 compared to $912,000 in 2000. The decrease was attributable to the reduction in employees in conjunction with InsWeb's restructuring plan.

        Impairment of Long-Lived Assets.    In January 2001, InsWeb acquired from Intuit, Inc. certain assets and related liabilities associated with an online insurance shopping and purchasing service operated by Intuit Insurance Services, Inc., a wholly-owned subsidiary of Intuit. In connection with the acquisition, InsWeb and Intuit entered into a license and distribution agreement. InsWeb recorded a long-lived asset of $17.0 million for prepaid marketing costs and an intangible asset of $13.1 million relating to the beneficial terms of the license and distribution agreement. The fair value of the intangible asset was estimated based on the expected Internet traffic to be received from Intuit by InsWeb.

        In December 2001, as a result of significantly lower than anticipated traffic levels, InsWeb reassessed the recoverability of the assets recorded in connection with this transaction by comparing the estimated future undiscounted cash flows expected to be generated relating to this asset to its carrying amount. Based on these evaluations, InsWeb determined that the acquired assets were impaired and recorded an impairment charge of $18.5 million, as the carrying value of these assets were in excess of fair value. The fair value of the acquired assets was based on estimated future cash flows to be generated from the license and distribution agreement, discounted using a rate commensurate with the risk involved.

        In 2000, InsWeb evaluated the recoverability of the assets recorded in connection with its acquisition of Benelytics and determined, as a result of its partnership with eHealthInsurance announced in April 2000, that it would be unlikely to recover the carrying amount. Accordingly, InsWeb recorded a write-down of $4.4 million of goodwill and other intangible assets, including the assembled workforce and contractual relationships.

        Restructuring and Other Charges.    Restructuring and other charges expense decreased to $1.8 million in 2001 from $2.2 million in 2000. In 2001, InsWeb recorded a charge of $1.8 million to write-down certain leasehold improvements to their net realizable value and to establish the accrual for lease obligations relating to formerly occupied facilities, as InsWeb's ability to sublease these facilities was uncertain. In 2000, InsWeb recorded a restructuring charge of $2.2 million for the closure of certain exited facilities in connection with the relocation of InsWeb's entire operation to the Sacramento, California area. The charge consisted of employee separation costs of $1.0 million, asset impairment charges related to closure of its San Carlos facility of $1.3 million, and other exit costs of $0.9 million, offset by a lease termination fee of $1.0 million received as a result of the termination of a lease on InsWeb's San Carlos facility. The restructuring plan was completed in 2001.

        Separately, InsWeb recorded charges of approximately $4.8 million in 2000 for retention agreements with key employees, relocation expenses, and other transition costs. These charges were recorded in technology, sales and marketing, and general and administrative expenses, respectively.

23

Interest Expense

        Interest expense in 2001 was $1.0 million, compared to $87,000 in 2000. The increase in interest expense was primarily attributable to imputed interest associated with the long-term marketing commitments (fixed payments) recorded in conjunction with the purchase of assets from Intuit, Inc. Interest expense in 2000 consisted solely of interest payments associated with a note payable due to a strategic partner and stockholder incurred in connection with InsWeb's original investment in InsWeb Japan K.K.

Interest Income and Other, Net

        Interest income and other, net was $2.1 million in 2001 compared to $4.4 million in 2000. The decrease in interest income and other, net was primarily a result of decreased interest income due to lower average cash and short-term investment balances during 2001 and to a lesser extent, lower interest rates.

Critical Accounting Policies

        InsWeb's discussion and analysis of its financial condition and results of operations are based on InsWeb's consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires InsWeb to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. InsWeb bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. InsWeb believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

        Impairment of Long-Lived Assets.    In assessing the recoverability of InsWeb's long-lived assets, principally prepaid marketing costs, InsWeb must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. Specifically, the variability in anticipated traffic levels, number of completed shopping sessions, and revenue per completed shopping session affect these estimates and assumptions. If the number of completed shopping sessions, and/or revenue per completed shopping session is below currently anticipated amounts, InsWeb may be required to record additional impairment charges.

        Cost-Method Investments.    InsWeb holds a minority ownership interest in Finance All K.K., a privately-held corporation. As of December 31, 2002, the carrying value of this investment was $1.7 million. InsWeb would record an investment impairment charge if and when it believes an investment has experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of Finance All K.K. could result in an inability to recover the carrying value of the investment, thereby possibly requiring an impairment charge in the future.

        Accrual for Lease Obligations.    InsWeb is contractually obligated to make future lease payments on certain formerly occupied facilities through September 2008. As of December 31, 2002, total future obligations for these facilities amounted to $13.9 million; these obligations are contractually offset by total future sublease income of approximately $11.0 million. However, the sub-lessee is a start-up company with limited operating history and, therefore, there are inherent risks and uncertainties associated with its future operations and its ability to discharge its obligations through the term of the sublease. In the event that the sub-lessee defaults on its obligations under the amended sublease, InsWeb would be responsible for making the required lease payments to the landlord through the

24

remaining term of the lease. In connection with this lease and other lease obligations for formerly occupied facilities, InsWeb must make assumptions regarding the estimated future sublease income relative to these facilities. These estimates and assumptions are affected by area-specific conditions such as new commercial development, market occupancy rates and future market prices. As a result of the continued decline in the real estate markets where the InsWeb properties are located and the inherent risk associated with its sub-lessee, due to recent actions by the sub-lessee in attempting to renegotiate and/or terminate the amended sublease agreement, the Company recorded an additional charge of $1.8 million in 2002 to increase its accrual for formerly occupied facilities. If these estimates or their related assumptions change in the future, InsWeb may be required to record a charge to increase its accrual.

        Contingencies.    As discussed in "Item 3—Legal Proceedings," eHealthInsurance filed suit in the U.S. District Court for Northern California alleging InsWeb's failure to perform its obligations under their marketing agreement. On March 24, 2003, the parties agreed to settle this lawsuit and to dismiss all claims against each other. Also as discussed in Item 3, a class action lawsuit has been filed that alleges InsWeb violated certain federal securities laws at the time of its initial public offering. Although some claims against InsWeb have been dismissed, InsWeb cannot accurately predict the ultimate outcome of this matter at this time and therefore, cannot estimate the range of probable loss, if any, due to the inherent uncertainties of litigation. InsWeb believes it has meritorious defenses with respect to the class action lawsuit, however InsWeb cannot assure that it will prevail in this action. An unfavorable outcome could have a material adverse effect on InsWeb's financial condition, results of operations and cash flows.

Liquidity And Capital Resources

        At December 31, 2002, InsWeb's principal source of liquidity was $28.9 million in cash, cash equivalents and short-term investments. Since inception, InsWeb has financed its operations primarily through the sale of preferred and common stock.

        Net cash used in operating activities was $4.1 million in 2002 compared to $11.8 million in 2001 and $38.3 million in 2000. In 2002, the use of cash primarily consisted of InsWeb's operating loss, excluding non-cash items of: extraordinary gain of $10.6 million; charge for the impairment of long-lived asset of $3.7 million; depreciation and amortization of fixed assets of $1.8 million; restructuring and other charges of $1.8 million; and amortization of prepaid marketing costs of $1.5 million. Decreases in deposits and other assets partially offset by the decrease in other liabilities affected cash used in operations in 2002. In 2001, the non-cash items included a charge for the impairment of long-lived assets and prepaid marketing costs of $20.4 million, depreciation and amortization of fixed assets of $5.3 million and amortization of intangible assets of $5.6 million. Decreases in deferred revenue offset by decreases in prepaid expenses and other current assets affected cash used in operations in 2001. In 2000, the non-cash items included a charge for the impairment of long-lived assets of $4.4 million, depreciation and amortization of fixed assets of $3.6 million, write-down of fixed assets relating to restructuring efforts of $1.3 million, amortization of intangible assets of $1.2 million and amortization of deferred compensation of $0.9 million. Increases in deposits and other assets, accounts payable and accrued expenses, offset by decreases in accounts receivable, deferred revenue and other liabilities affected cash used in operations in 2000.

        Net cash provided by investing activities was $4.6 million in 2002 compared to $3.2 million in 2001 and $34.6 million in 2000. Net cash provided by investing activities in 2002 consisted of net maturities of short-term investments of $4.4 million, sales of property and equipment of $0.9 million partially offset by capital expenditures of $0.7 million. Net cash provided by investing activities in 2001 primarily consisted of net maturities of short-term investments of $5.4 million offset by capital expenditures of $1.6 million. Net cash provided by investing activities in 2000 primarily consisted of net maturities of short-term investments of $42.7 million offset by capital expenditures of $7.5 million.

25

        Net cash used in financing activities was $2.7 million in 2002 compared to $1.6 million in 2001, and net cash provided by financing activities was $2.8 million in 2000. Net cash used in financing activities in 2002 primarily represented repayments of debt of $2.6 million. Net cash used in financing activities in 2001 primarily represented repayments of debt of $1.5 million. Net cash provided by financing activities in 2000 primarily represented proceeds of $2.8 million received from the issuance of common stock pursuant to InsWeb's stock plans.

        As of December 31, 2002, InsWeb had the following contractual commitments (in thousands):

        In addition to the fixed payments for long-term marketing commitments due to Intuit through July 2003, effective August 1, 2003 and through the remainder of the agreement (January 2006), InsWeb will pay Intuit a portion of the transaction fees received by InsWeb from Intuit Internet traffic, payable on a quarterly basis.

        In July 2002, InsWeb and one of its sub-lessees agreed to amend the sublease covering portions of the property InsWeb formerly occupied as its headquarters in Redwood City. Under the terms of the amendment, the sub-lessee agreed to rent the entire facility for the duration of InsWeb's lease (through September 2008). All rent and operating expenses otherwise payable by InsWeb to the landlord will be paid directly by the sub-lessee. Therefore, the amended sublease agreement results in a reduction in InsWeb's operating lease commitments by $10.7 million, through the remainder of the lease. However, the sub-lessee is a start-up company with limited operating history and, therefore, there are inherent risks and uncertainties associated with its future operations and its ability to discharge its obligations through the term of the sublease. In the event that the sub-lessee defaults on its obligations under the amended sublease, InsWeb would be responsible for making the required lease payments to the landlord through the remaining term of the lease. In connection with this lease and other lease obligations for formerly occupied facilities, InsWeb must make assumptions regarding the estimated future sublease income relative to these facilities. These estimates and assumptions are affected by area-specific conditions such as new commercial development, market occupancy rates and future market prices. If these estimates or their related assumptions change in the future, InsWeb may be required to record a charge to increase its existing reserves.

        InsWeb currently anticipates that its cash, cash equivalents and short-term investments will be sufficient to meet its anticipated cash needs for working capital and capital expenditures for at least the next 12 months. Although InsWeb does not anticipate the need for additional financing, InsWeb nevertheless may require additional funds to meet operating needs, or to expand its business internally or through acquisition. InsWeb cannot be certain that additional financing will be available when required, on favorable terms or at all. If InsWeb is not successful in raising additional capital as required, its business could be materially harmed. If additional funds were raised through the issuance of equity securities, the percentage ownership of InsWeb's then-current stockholders would be reduced.

26

Recent Accounting Pronouncements

        In April 2002, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 145 ("SFAS 145"), the "Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS 145 will require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items. SFAS 145 is effective for InsWeb's fiscal year beginning January 1, 2003. Upon the effective date of SFAS 145, the extraordinary gain of $10.6 million, recorded in 2002 in connection with the amendment of the license and distribution agreement with Intuit (see Note 10 of Notes to Consolidated Financial Statements), will be reclassified to other income. Except for this reclassification, the adoption of SFAS 145 is not expected to affect InsWeb's financial condition, results of operations or cash flows.

        In November 2002, the Emerging Issues Task Force reached a consensus on Issue 00-21 ("EITF 00-21"), which addresses how to account for arrangements that may involve the delivery or performance of multiple products, services, and/or rights to use assets. This issue addresses how to account for these multiple-element revenue arrangements and focuses on when a revenue arrangement should be separated into components or deliverables, or alternatively, when smaller deliverables or elements should be combined for purposes of recognizing revenue. EITF 00-21 will be applicable to agreements entered into in fiscal periods beginning after June 15, 2003, with early adoption permitted. The Company is currently evaluating the effect that EITF 00-21 may have, if any, on its results of operations, financial condition and cash flows.

        In December 2002, the FASB issued Statement of Financial Accounting Standards Statement No. ("SFAS 148") "Accounting for Stock-Based Compensation—Transition and Disclosure." SFAS 148 amends SFAS 123 to provide alternative methods of transition to SFAS 123's fair value method of accounting for stock-based compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 and APB Opinion No. 28, "Interim Financial Reporting," to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net loss and loss per share in annual and interim financial statements. SFAS 148 is effective for fiscal years ending after December 15, 2002. While InsWeb does not plan to change its method of accounting for stock options from the intrinsic method to the fair value method (and therefore, there is no effect to InsWeb's results of operations, financial condition or cash flows), InsWeb has adopted the disclosure requirements in its annual report for the year ended December 31, 2002.

        In January 2003, in an effort to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity, the FASB has issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." The objective of FIN 46 is not to restrict the use of variable interest entities but to improve financial reporting by companies involved with variable interest entities. Until now, one company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The Company is currently evaluating the effect that FIN 46 may have, if any, on its results of operations, financial condition and cash flows.

27

Factors That May Affect Our Future Performance

        Our future business, operating results and financial condition are subject to various risks and uncertainties, including those described below.

Our business is difficult to evaluate because we did not begin to generate significant revenues from our core business until 1998

        We were incorporated in February 1995, but we did not begin to generate significant transaction fees from our online marketplace until 1998. Our limited operating history makes an evaluation of our future prospects very difficult. An investor in our common stock must consider the uncertainties frequently encountered by early stage companies in new and rapidly evolving markets. These uncertainties include:

•

an evolving and unpredictable business model, which makes prediction of future results uncertain and an investment in our common stock highly speculative;



•

the development of comparable services by competitors, which may reduce our market share;



•

the uncertainty of the extent to which the consumer market will adopt the Internet as the preferred medium for comparison shopping for and purchase of insurance products, which may limit our ability to generate revenue from consumers that visit our online marketplace or our insurance agency;



•

our potential inability to successfully manage growth, which could lead to management distractions and increased operating expenses;



•

our ability to retain key employees; and



•

our reliance on key customers and ability to retain customers.

        To address these uncertainties, we must, among other things:

•

refine our business model;



•

work to expand the efficiencies and geographic coverage of our agency activities;



•

enhance the brand identity of our online insurance marketplace;



•

maintain and increase our strategic alliances with other online businesses to increase traffic to our website;



•

maintain, increase and geographically diversify our base of participating insurance companies;



•

continue to ensure that our participating insurance companies offer competitive insurance products;



•

satisfy legal and regulatory requirements applicable to the insurance industry; and



•

continue to address consumer privacy concerns.

        Our business strategy may not be successful and we may not be able to successfully address these uncertainties. Moreover, our ability to take the foregoing steps may be hampered by our limited financial resources should we fail to rapidly increase revenues or should increased revenues be more than offset by increased operating expenses.

28

We have a history of losses, we expect future losses, and we may not achieve or maintain profitability

        Given planned investment levels, our ability to achieve profitability will depend upon our ability to generate and sustain substantially increased revenues. As a result, we believe that we will incur operating losses at least through the year ending 2003. We incurred operating losses of $15.5 million for the year ended December 31, 2002, $46.0 million for the year ended December 31, 2001, and $53.6 million for the year ended December 31, 2000. As of December 31, 2002, our accumulated deficit was $174.8 million. Our operating results for future periods are subject to numerous uncertainties, and we may not achieve sufficient revenues to become profitable. Even if we achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future. If we are unable to achieve profitability, or if our profitability is delayed we may need to seek additional financing to continue our business operations. Such financing could be on terms that are dilutive to our existing stockholders or could involve the issuance of securities that have rights and preferences that are senior to those associated with our common stock. Moreover, if such financing were not available or were available only upon terms that were unacceptable to us, we could be required to significantly curtail our operations.

Our future revenues are unpredictable, our operating results are likely to fluctuate from quarter to quarter, and if we fail to meet the expectations of securities analysts or investors, our stock price could decline significantly

        Due to our limited operating history, the emerging nature of the market in which we compete and the high proportion of our revenues that are derived from consumer traffic on our website, our future revenues are inherently difficult to forecast. We believe that period-to-period comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of our future performance. Moreover, our expense levels are based largely on our investment plans and estimates of future revenues. We may be unable to adjust our spending to compensate for an unexpected shortfall in revenues. Accordingly, any significant shortfall in revenues relative to our planned expenditures would harm our results of operations and could cause our stock price to fall sharply, particularly following quarters in which our operating results fail to meet the expectations of securities analysts or investors.

        Factors that may cause fluctuations in our operating results include the following, many of which are outside our control:

•

We may experience consumer dissatisfaction with our online marketplace as we add or change features, or as the insurance coverage offered by participating insurance companies varies;



•

Consumer traffic on our online marketplace may decline as a result of the announcement or introduction of a competing online insurance marketplace or other new websites, products or services offered by our competitors;



•

Such consumer traffic may also fluctuate as a result of changes in consumer acceptance of Internet commerce, particularly in connection with shopping for insurance;



•

Our revenues may be harmed if we lose one or more significant insurance company relationships or if any of our participating insurance companies merge with one another;



•

Use of the Internet by consumers may fluctuate due to seasonal factors or other uncontrollable factors affecting consumer behavior and may be affected by slow Internet performance due to technical problems or traffic bottlenecks on the network;



•

Our ability to convert site visits into transaction fees and/or revenue from insurance agency activities may fluctuate due to changes in our user interface or other features on our site or

29

changes in the underwriting criteria used by our participating insurance companies to determine which consumers will be offered quotes; and

•

Our ability to generate transaction fees and/or revenue from insurance agency activities may also be harmed due to technical difficulties on our website that hamper a consumer's ability to start or complete a shopping session.

Seasonality affecting insurance shopping and Internet usage may cause fluctuations in our operating results

        We have experienced seasonality in our business associated with general slowness in the insurance industry during the year-end holiday period. We expect to continue to experience seasonality as our business matures. Because of this seasonality, investors may not be able to predict our annual operating results based on a quarter-to-quarter comparison of our operating results. We believe seasonality will have an ongoing impact on our business.

Because a significant portion of our revenue is attributable to automobile insurance shopping on our online marketplace, we are especially vulnerable to risks related to the online market for automobile insurance or the automobile insurance industry generally

        Automobile insurance accounted for approximately 83% of our transaction revenues in 2002, approximately 67% in 2001 and approximately 69% in 2000. We anticipate that automobile insurance will continue to account for a substantial portion of our revenues for the foreseeable future. As a result, if we fail to attract a broad base of consumers to shop for automobile insurance on our site, or if changes in the automobile insurance industry make electronic commerce a less attractive means to shop for this type of insurance, our ability to generate revenue will be reduced and our business will be harmed. In addition, property and casualty insurance, including automobile insurance, is subject to operating cycles. During a cycle in which loss ratios rise, insurance companies may choose to restrict the amount of business they write while they await approval of rate increases from the various state insurance departments. Our business could be harmed if our participating insurance companies reduce their participation in our online marketplace.

If we are unable to promote our brand and expand our brand recognition, our ability to draw consumers to our website will be limited

        A growing number of websites offer services that are similar to and competitive with the services offered on our online insurance marketplace. Therefore, a positive recognition of our brand is critical to attracting additional consumers to our website, strengthening our relationships with participating insurance companies and attracting new insurance companies. In order to attract and retain consumers and insurance companies and to promote and maintain our brand, we are continuing our financial commitment to create and maintain brand awareness. Our current marketing program consists of the maintenance of certain network online relationships and other selective cost effective marketing campaigns, designed to maintain consumer awareness of InsWeb and our online insurance marketplace. If our marketing efforts do not generate a corresponding increase in revenues or we otherwise fail to successfully promote our brand, or if these efforts require excessive expenditures, our business will be harmed. Moreover, if visitors to our website do not perceive our existing services or the products and services of our participating insurance companies to be of high quality, or if we alter or modify our brand image, introduce new services or enter into new business ventures that are not favorably received, the value of our brand could be harmed.

30

Our plans to offer additional services could result in significant expenditures, and we may not generate sufficient revenue to offset these expenditures

        We intend to offer additional services including, among other things:

•

performing activities on behalf of an increased number of insurance companies as an authorized agent;



•

adding new insurance companies and helping our existing insurance companies to expand the number of states in which they are offering coverage in our online marketplace;



•

increasing the level of technology integration between our platform and the systems of our participating insurance companies; and



•

continuing our market presence through relationships with Internet portals, financial institutions, websites oriented to activities that involve the purchase of insurance, such as automobile shopping sites, and other online companies.

        We may not be able to offer these additional services in a cost-effective or timely manner, or these efforts may not increase the overall market acceptance of our products and services. Expansion of our operations in this manner could also require significant additional expenditures and strain our management, financial and operational resources. The lack of market acceptance of these efforts, regulatory issues, or our inability to generate enough revenue from these expanded services or products to offset their cost could harm our business.

Competition in the market for online distribution of insurance is intense, and if we are unable to compete effectively with current competitors or new competitors that enter the market, the fees paid to us by participating insurance companies may fall, the fees charged by online companies with which we have strategic relationships may rise, and our market share may suffer

        The online insurance distribution market is a new industry and, like the broader electronic commerce market, is both rapidly evolving and highly competitive. Increased competition, particularly by companies offering online insurance distribution, could reduce the fees we are able to charge our participating insurance companies or increase the fees we are required to pay to online companies with which we have strategic relationships, resulting in reduced margins or loss of market share, any of which could harm our business. In addition, our current and future competitors may be able to:

•

undertake more extensive marketing campaigns for their brands and services;



•

devote more resources to website and systems development;



•

adopt more aggressive pricing policies; and



•

make more attractive offers to potential employees, online companies and third-party service providers.

        Accordingly, we may not be able to maintain or grow consumer traffic to our website and our base of participating insurance companies, our competitors may grow faster than we do, or companies with whom we have strategic relationships may discontinue their relationships with us, any of which would harm our business.

31

If our participating insurance companies or our insurance agency do not continue to provide high quality products and service to consumers, our brand will be harmed and our ability to attract consumers to our website will be limited

        Our ability to maintain a positive recognition of our brand depends in part on the quality of the products and services consumers receive from our participating insurance companies or our insurance agency, including timely response to requests for quotes or coverage. If we are unable to provide consumers with high-quality products and services, the value of our brand may be harmed and the number of consumers using our services may decline. We have from time to time received complaints from consumers who have not received a timely response to a request for an insurance quote. Although we have taken steps to increase responsiveness to consumer requests, these steps and future efforts we may make may not be successful. In addition, if any of our major participating insurance companies were to discontinue their business, be downgraded by insurance company rating services or be financially harmed by trends in the insurance industry, our brand may be harmed.

Our plan to expand our online insurance agency operations will require significant resources and we may not be able to generate sufficient revenues to recover our expenses

        Since October 1999, InsWeb has been operating an online insurance agency business. Our online agency receives a commission on the sale and renewal of the automobile insurance polices sold though its offices. Our plan to expand our online agency operations requires that we attract and retain highly skilled sales agents and customer care personnel. We face competition from other agencies and insurance companies for these agents. In addition, we will need additional insurance companies to appoint us as an agent and pay us commissions. Although the agency infrastructure is already in place, integration of additional insurance companies into our online agency operations may take more time and be more expensive than we project. If we are unable to implement our expansion in a timely and cost-effective manner, we may not be able to recover our costs and our business will be harmed.

Because a limited number of insurance companies account for a majority of our revenues, the loss of a single insurance company relationship could result in a substantial drop in our revenues

        Revenues from Amica, GE Financial Assurance and Kemper Direct accounted for approximately 14%, 14%, and 10%, respectively, of our revenues in 2002. Revenues from Amica, GE Financial Assurance and AIG accounted for approximately 11%, 11%, and 10%, respectively, of our revenues in 2001, and revenues from State Farm, AIG, and GE Financial Assurance accounted for approximately 14%, 11% and 9%, respectively, of our revenues in 2000. In May 2000, State Farm discontinued participating in InsWeb's marketplaces for automobile, term life, homeowners, condominium and renters insurance. Should one or more of our other key insurance company partners cease to participate in our online marketplace, change its underwriting criteria or geographic coverage in a way that reduces the proportion of consumers that are offered quotes from that insurance company, or suffer a significant decline in its ratings, our operating results could be materially harmed. Because of the broad market presence of some of our participating insurance companies, we expect to continue to generate a substantial portion of our revenues from a limited number of insurance companies for the foreseeable future. Although InsWeb continually seeks new insurance companies to participate in the online marketplace, we may be unable to add any new insurance companies.

32

In most jurisdictions, we rely on the participation of a limited number of insurance companies on our online marketplace, and the loss of any of these insurance companies could make our online marketplace less attractive to consumers

        Consumer demand for the services offered on our website in any jurisdiction is substantially dependent upon the participation of competing brand-name insurance companies offering competitive quotes for a given insurance product in that jurisdiction. Accordingly, the success of our business depends on our ability to attract and retain well-known insurance companies to participate in our marketplace. Although we currently have relationships with a significant number of insurance companies overall, in individual jurisdictions where competing quotes for comparable products are available on our online marketplace, the number of companies offering quotes ranges from one to 14. If we are unable to increase the number of insurance companies that participate in our online marketplace, particularly in the jurisdictions where we currently offer comparable insurance products from only three or fewer insurance companies, we may not be able to attract additional consumers or may lose our existing consumers to other online competitors offering a wider variety of insurance companies. At December 31 2002, there were 17 jurisdictions in which three or fewer insurance companies were offering automobile insurance quotes on our online marketplace. No automobile insurance quotes are available in New Jersey, North Carolina and Massachusetts as of December 31, 2002. If any insurance company participating in a number of jurisdictions discontinued or significantly reduced its participation in our online marketplace, the attractiveness of the marketplace to consumers in these jurisdictions would be greatly diminished.

        In addition, we believe that there is a general trend toward consolidation in the insurance industry. In the jurisdictions where we currently offer comparable insurance products from three or fewer insurance companies, the loss of one or more of these companies, whether due to industry consolidation or otherwise, could materially reduce the selection of insurance companies available to consumers on our website, thereby substantially reducing the attraction of our online marketplace to consumers.

We may have difficulty integrating new insurance companies into our online marketplace or agency operations, which could harm our ability to offer improved comparison-shopping opportunities and thus limit the attractiveness of our service to consumers

        Integration of an insurance company into our online marketplace requires a significant commitment of time and resources on our part and on the part of the insurance company, and is a technologically difficult process. This integration process typically takes from three to six months to complete and typically requires us to expend between 160 and 2,000 man-hours. To develop company-sponsored quotes for consumers, the integration requires either the development of a customized interface with the insurance company's own rating system, accessing a third-party rating engine of the insurance company's choice, or adding the insurance company's rating information into InsWeb's proprietary rating engines. Though integration into our agency operations may require fewer resources to implement than integration of an insurance company into our online marketplace, potential participating insurance companies may not be willing to invest the time and resources necessary to achieve this integration, or we may not be able to overcome the technological difficulties associated with, or devote the time and resources necessary to, successfully integrate the insurance company into our online marketplace or our agency operations.

33

We do not have exclusive relationships or long-term contracts with insurance companies, which may limit our ability to retain these insurance companies as participants in our marketplace and maintain the attractiveness of our services to consumers

        We do not have an exclusive relationship with any of the insurance companies whose insurance products are offered on our online marketplace, and thus, consumers may obtain quotes and coverage from these insurance companies without using our website. Our participating insurance companies offer their products directly to consumers through insurance agents, mass marketing campaigns or through other traditional methods of insurance distribution. These insurance companies can also offer their products and services over the Internet, either directly to consumers or through one or more of our online competitors, or both. In addition, most of our agreements with our participating insurance companies are cancelable at the option of either party upon 90 days' notice or less. We have experienced, and expect to continue to experience, reductions in the level of participation in our marketplace or complete termination by participating insurance companies. These reductions in participation, terminations, or an inability to attract additional insurance companies to our marketplace could materially affect our revenues and harm our business.

The outcome and impact of the securities class action lawsuit involving InsWeb is uncertain

        A class action lawsuit was filed on December 5, 2001 in the U.S. District Court for the Southern District of New York on behalf of purchasers of InsWeb common stock alleging violations of federal securities laws. The case is brought purportedly on behalf of all persons who purchased InsWeb common stock from July 22, 1999 through December 6, 2000. The complaint names as defendants InsWeb, certain officers and directors, and three underwriters for InsWeb's initial public offering in July 1999. The complaint alleges violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, on the grounds that the prospectus incorporated in the registration statements for the offering failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors substantial blocks of the stock sold in the initial public offering, and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate shares of the stock sold in the initial public offering to those customers in exchange for which the customers agreed to purchase additional shares of InsWeb stock in the aftermarket at pre-determined prices that were above the initial public offering price. No specific damages are claimed. In February 2003, the court dismissed the claims alleging violations of the Securities Exchange Act of 1934 but allowed the plaintiffs to proceed with the remaining claims. However, InsWeb believes that the remaining allegations against InsWeb and its current and former officers and directors are without merit and intends to contest them vigorously. The litigation is in the preliminary stage, and InsWeb cannot predict its outcome. The litigation process is inherently uncertain. An unfavorable outcome could have a material adverse effect on InsWeb's financial condition, results of operations and cash flows.

Traffic on our website is heavily dependent on our online relationships. These relationships may not generate sufficient revenues to justify the fees we pay to online companies. Further, our consumer traffic may decline in the event an online relationship is unsuccessful

        We rely on relationships with a variety of Internet portals, financial institutions, and other online companies to attract consumers to our website. In a typical arrangement, the online company includes a "link" on its website on which a user can click to jump to our website or to a site that we operate under the online company's name; as part of the arrangement, we typically pay the online company a portion of the resulting transaction fees and in some cases a fixed fee. These relationships may not continue to generate a substantial amount of new traffic on our website, or the revenues generated by these relationships may be insufficient to justify our payment obligations. We have experienced occasional fluctuations in the traffic from our online partners as a result of redesigns of their websites or being outbid for promotions by other online insurance providers. Furthermore, the value of these relationships is based on the continued positive market presence, reputation and growth of these online companies' websites and services. Any decline in the market presence, business or reputation of these online companies' websites and services will reduce the value of these relationships to us and could harm our business.

34

        For the years ended December 31, 2002, 2001 and 2000, we received approximately 11%, 32% and 25%, respectively, of our website traffic from the major Internet portals Yahoo! Inc., MSN and AOL. We did not renew our agreement with MSN for fiscal 2002, and our status as exclusive provider to Yahoo! and AOL was converted to non-exclusive, effective November 1, 2001 and January 1, 2002, respectively. Additionally, during 2002 we significantly expanded our on-line marketing relationship with LowerMyBills.com, Inc., whereby they delivered approximately 34% of our website traffic for the year ended December 31, 2002. Our ability to increase our revenues will depend, in part, on our ability to generate increased traffic to our website through these significant online relationships.

        Most of our relationships with online companies are terminable by either party on 30 to 90 days' notice. We may not be able to negotiate or renew marketing agreements with online companies on terms that are acceptable to us. The termination, non-renewal or renewal on unfavorable terms of a relationship from which we generate significant traffic to our website would harm our business. If the recent trend of failing online companies continues, the traffic currently being received as well as the ability to attract new consumer traffic to our site could be harmed. Additionally, an online company's failure to maintain efficient and uninterrupted operation of its computer and communications hardware systems would likely reduce the amount of traffic we receive at our site, harming our business.

Laws and regulations that govern the insurance industry could expose us, or our participating insurance companies, our officers, or agents with whom we contract, to legal penalties if we fail to comply, and could require changes to our business

        We perform functions for licensed insurance companies and are, therefore, required to comply with a complex set of rules and regulations that often vary from state to state. If we fail to comply with these rules and regulations, we, an insurance company doing business with us, our officers, or agents with whom we contract, could be subject to various sanctions, including censure, fines, a cease-and-desist order or other penalties. This risk, as well as changes in the regulatory climate or the enforcement or interpretation of existing law, could expose us to additional costs, including indemnification of participating insurance companies for their costs, and could require changes to our business or otherwise harm our business. Furthermore, because the application of online commerce to the consumer insurance market is relatively new, the impact of current or future regulations on InsWeb's business is difficult to anticipate.

Our intended expansion of our business, including, in particular, our agency activities, will subject us to additional regulations which may delay or prevent our expansion and harm our business

        Over time, we intend to expand our operations to include new products and services and to offer existing and new products in new jurisdictions, which may require us to comply with additional laws and regulations. If we fail to adequately comply with these laws and regulations, our ability to offer some of our products or services in a particular jurisdiction could be delayed or prevented and our business could be harmed. Compliance with these laws and regulations and those of other jurisdictions into which we expand may require us to obtain appropriate business licenses, make necessary filings and obtain necessary bonds, appoint foreign agents and make periodic business reports.

35

If we are unable to safeguard the security and privacy of consumers' and participating insurance companies' confidential data, consumers and insurance companies may not use our services and our business may be harmed

        A significant barrier to electronic commerce and communications is the secure transmission of personally identifiable information of Internet users as well as other confidential information over public networks. If any compromise or breach of security were to occur, it could harm our reputation and expose us to possible liability. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to make significant expenditures to protect against security breaches or to alleviate problems caused by any breaches. To date, we have experienced no breaches in our network security. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission of confidential information, such as names, addresses, Social Security and credit card numbers, user names and passwords and insurance company rate information. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments could result in a compromise or breach of the algorithms we use to protect consumers' and insurance companies' confidential information.

Uncertainty in the marketplace regarding the use of Internet users' personal information, or proposed legislation limiting such use, could reduce demand for our services and result in increased expenses

        Concern among consumers and legislators regarding the use of personal information gathered from Internet users could create uncertainty in the marketplace. This could reduce demand for our services, increase the cost of doing business as a result of litigation costs or increased service delivery costs, or otherwise harms our business. Laws have been enacted at both the federal and state levels that limit the uses of personally identifiable information of Internet users gathered online or require online services to establish privacy policies. In addition, the Federal Trade Commission has adopted regulations affecting the information gathering practices of online companies, and it has brought suit against several high profile companies for failing to adhere to the privacy policies posted on their websites. Many state insurance codes limit the collection and use of personal information by insurance companies, agents, or insurance service organizations. Failure to adhere to the growing body of privacy regulations could result in administrative actions or private litigation and harm our business.

System failures could reduce or limit traffic on our website and harm our ability to generate revenue

        Since launching our online marketplace, we have experienced occasional minor system failures or outages that have resulted in the online marketplace being out of service for a period ranging from several minutes to three hours while our technicians brought backup systems online. We may experience further system failures or outages in the future that could disrupt the operation of our website and could harm our business. Our revenues depend in large part on the volume of traffic on our website and, more particularly, on the number of insurance quotes generated by our website in response to consumer inquiries. Accordingly, the performance, reliability and availability of our website, quote-generating systems and network infrastructure are critical to our reputation and our ability to attract a high volume of traffic to our website and to attract and retain participating insurance companies. Moreover, we believe that consumers who have a negative experience with an electronic commerce website may be reluctant to return to that site. Thus, a significant failure or outage affecting our systems could result in severe long-term damage to our business.

36

Our website may not perform at levels that are satisfactory to consumers

        We are continually enhancing and expanding our technology, quote generating systems, network infrastructure and other technologies to accommodate the volume of traffic on our website. We may be unsuccessful in these efforts or we may be unable to accurately project the rate or timing in the volume of traffic on our website. In addition, we cannot predict whether additional network capacity will be available from third party suppliers, as we need it. Also, our network or our suppliers' networks might be unable to timely achieve or maintain a sufficiently high capacity of data transmission to timely process orders or effectively download data, especially if our website traffic increases. Our failure to achieve or maintain high capacity data transmission could significantly reduce consumer demand for our services.

Our facilities and systems are vulnerable to natural disasters and other unexpected losses, and we may not have adequate insurance to cover such losses

        Our computer hardware operations are located in leased facilities in Gold River, California. A third-party service provider located in Rancho Cordova, California maintains a full backup system. If both of these locations experienced a system failure, the performance of our website would be harmed. These systems are also vulnerable to damage from fire, power loss, telecommunications failures, break-ins, natural disasters and similar events. If we seek to replicate our systems at other locations, we will face a number of technical challenges, particularly with respect to database replications, which we may not be able to address successfully. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.

We may experience technological problems or service interruptions with individual insurance companies, which could harm the quality of service on our website

        Several of our participating insurance companies have chosen a technical solution that requires that our website servers communicate with these insurance companies' computer systems in order to perform the underwriting and risk analysis and rating functions required to generate quotes. Thus, the availability of quotes from a given insurance company may depend in large part upon the reliability of that insurance company's own computer systems, over which we have no control. A malfunction in an insurance company's computer system or in the Internet connection between our website servers and the insurance company's system, or an excess of data traffic on that system, could result in a delay in the delivery of e-mail quotes or could cause an insurance company that provides instant quotes to go offline until the problem can be remedied. Moreover, the malfunction could cause the insurance company to dispute the number of leads it received from InsWeb. Further, a computer malfunction could cause an insurance company to quote erroneous rates, in which case the insurance company would be required to take itself offline until the malfunction can be corrected. Any technological problems with or interruption of communications with an insurance company's computer systems could materially reduce the number of competing insurance companies available to provide quotes, and therefore the level of service perceived by consumers, on our online marketplace.

37

We rely on the services of our executive officers and other key personnel, whose knowledge of our business and the insurance industry and technical expertise would be extremely difficult to replace

        Our future success is substantially dependent on the continued services and continuing contributions of our senior management and other key personnel, particularly Hussein A. Enan, Chairman of our Board, and Mark P. Guthrie, our President and Chief Executive Officer, and the loss of the services of any of our executive officers or other key employees could harm our business.

        We have no long-term employment agreements with any of our key personnel, although Mr. Guthrie is entitled to certain severance benefits should his employment be involuntarily terminated. We maintain a $2 million life insurance policy on each of Mr. Enan and Mr. Guthrie that names us as the beneficiary, but maintain no similar insurance on any of our other key employees. Additionally, InsWeb has granted stock options as incentives to executive officers and new employees, including Mr. Guthrie, and certain other key personnel. As the value of these incentives are highly dependent on an increase in the market price of our common stock, we may be unable to retain such key employees, nor retain or recruit other officers and key employees in the future.

Because of intense competition for personnel, we may not be able to recruit or retain necessary personnel, which could slow the process of adding new insurance companies to our website or otherwise harm our business

        Our future success depends on our continuing ability to attract, retain and motivate highly skilled employees, particularly with respect to technology development and implementation, including integration of insurance companies into our online marketplace. If we are not able to attract and retain new personnel, particularly within our technology development and implementation team, our business will be harmed. The implementation of new insurance companies on our site is a technologically complex and labor-intensive process. Accordingly, any difficulty we face in attracting and retaining talented development and implementation personnel could slow the process of adding new insurance companies to our online marketplace and therefore limit our ability to increase the attractiveness of our services to consumers. As competition for personnel is intense, we may be unable to retain our key employees or attract, assimilate or retain other highly qualified employees in the future. We have from time to time experienced, and we may experience in the future, difficulty in hiring and retaining employees with appropriate qualifications.

If the Internet does not continue to develop and reliably support the demands placed on it by electronic commerce and other high volume applications, our business will suffer

        The Internet may not become a viable medium for commerce or comparison insurance shopping for a number of reasons, including potentially inadequate development of the necessary network infrastructure or delayed development of enabling technologies and performance improvements. If the Internet continues to experience significant growth in the number of users, levels of traffic or networks' capacities for transmitting large amounts of data, the Internet's infrastructure may not be able to support the demands placed upon it. The Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure, and it could face additional outages and delays in the future. These outages and delays could reduce the level of traffic and therefore the number of consumer insurance inquiries on our website. In addition, the Internet could lose its viability due to delays in the development or adoption of new standards and protocols required to handle increased levels of Internet activity, or due to increased governmental regulation. Changes in or insufficient availability of telecommunications services to support the Internet could also result in slower response times and reduced use of the Internet.

38

Regulation of the Internet is unsettled, and future regulations could inhibit the growth of the Internet and otherwise harm our business

        The laws governing the Internet remain largely unsettled, even in areas where there has been some legislative action. Furthermore, the growth and development of the market for electronic commerce may prompt the enactment of more stringent consumer protection laws that may impose additional burdens on companies conducting business online. For example, many states have adopted laws or regulations relating to unsolicited commercial email or "spam". These laws typically prohibit the sending of a commercial email to a recipient unless the recipient has consented in some manner. However, there are inconsistencies in these state laws that make it difficult to implement national email-based marketing campaigns. These laws may inhibit the growth of the Internet as a medium for commerce and comparison insurance shopping, which could, in turn, decrease demand for our services, increase our cost of doing business, or otherwise harm our business. In addition, applicability to the Internet of existing laws governing issues including property ownership, copyrights and other intellectual property issues, taxation, libel and personal privacy is uncertain. The vast majority of these laws was adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies.

Any acquisitions that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value and harm our operating results

        We may acquire or make investments in complementary businesses, technologies, services or products if appropriate opportunities arise. The process of integrating any acquired business, technology, service or product into our business and operations may result in unforeseen operating difficulties and expenditures. Integration of an acquired company also may consume much of our management's time and attention that would otherwise be available for ongoing development of our business. Moreover, the anticipated benefits of any acquisition may not be realized. We may be unable to identify, negotiate or finance future acquisitions successfully, or to integrate successfully any acquisitions with our current business. Future acquisitions could result in potentially dilutive issuances of equity securities or the incurrence of debt, contingent liabilities or amortization expenses related to goodwill and other intangible assets, any of which could harm our business.

We may be unable to protect our intellectual property rights

        We regard our intellectual property as critical to our success. We rely on trademark, copyright and trade secret laws to protect our proprietary rights. We have registered the INSWEB mark in the United States, Japan, France, Germany, South Korea, Japan and the United Kingdom and applications are pending in several other countries. Other United States and worldwide trademark applications include, but are not limited to, eAgent, InsWeb.com, Powered by InsWeb, and Where You and Your Insurance Really Click. We have patent applications on file in the United States. Our trademark registration and patent applications may not be approved or granted, or, if granted, may be successfully challenged by others or invalidated through administrative process or litigation. Notwithstanding these laws, we may be unsuccessful in protecting our intellectual property rights or in obtaining patents or registered trademarks for which we apply.

39

We may be subject to claims for infringement of intellectual property, with or without merit, which could be costly to defend or settle

        We may from time to time be subject to claims of infringement of other parties' proprietary rights or claims that our own trademarks, patents or other intellectual property rights are invalid. We have been subject to infringement claims in the ordinary course of business, including claims of alleged infringement of the patent and trademark rights of third parties by companies and us with which we have business relationships. Any claims of this type, with or without merit, could be time-consuming to defend, result in costly litigation, divert management attention and resources or require us to enter into royalty or license agreements. License agreements may not be available on reasonable terms, if at all, and the assertion or prosecution of any infringement claims could significantly harm our business.

We incorporate third-party technologies and services into our online marketplace, and if the providers of these technologies and services fail in a timely manner to develop, license or support technology necessary to our services, market acceptance of our online marketplace could be harmed

        We have incorporated technology developed by third parties into our online marketplace, and we will continue to incorporate third-party technology in our future products and services. We have limited control over whether or when these third-party technologies will be developed or enhanced. If a third-party fails to timely develop, license or support technology necessary to our services, market acceptance of our online marketplace could be harmed.

Our stock price has fluctuated widely, and Internet stocks in general have been extremely volatile

        The trading price of our common stock has been highly volatile and may be significantly affected by factors including actual or anticipated fluctuations in our operating results, new products or new contracts by us or our competitors, loss of key customers, conditions and trends in the electronic commerce and insurance industries, changes in financial estimates by securities analysts, general market conditions and other factors. The trading prices of many Internet stocks have experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These fluctuations may continue and could harm our stock price. Any negative change in the public's perception of the prospects of Internet or electronic commerce companies could also depress our stock price regardless of our results.

Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover, even if such a transaction would be beneficial to our stockholders

        Provisions of Delaware law and our certificate of incorporation and bylaws could make more difficult the acquisition of us by means of a tender offer, a proxy contest, or otherwise, and the removal of incumbent officers and directors.

40

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

        InsWeb is exposed to financial market risks including changes in interest rates and, to a lesser degree, foreign currency exchange rates. The fair value of InsWeb's investment portfolio or related income would not be significantly impacted by either a 10% increase or decrease in interest rates due mainly to the short term nature of the major portion of InsWeb's investment portfolio. InsWeb's interest income is sensitive to changes in the general level of U.S. interest rates, particularly since all of our funds are invested in instruments with maturities currently less than one year. InsWeb's policy is to limit the risk of principal loss and ensure the safety of invested funds by limiting market and credit risk. Funds in excess of current operating requirements are invested in obligations of the U.S. government and its agencies and investment grade obligations of state and local governments and large corporations.

        The table below represents carrying amounts and related weighted-average interest rates of InsWeb's investment portfolio at December 31, 2002 (in thousands, except interest rates):

        InsWeb's revenue and capital spending is transacted in U.S. dollars. InsWeb's investment in Finance All K.K. and the note payable to a strategic partner and stockholder is denominated in Japanese Yen. InsWeb has not engaged in hedging transactions to reduce its exposure to fluctuations that may arise from changes in foreign exchange rates. Based on InsWeb's overall currency rate exposure at December 31, 2002, a near-term 10% appreciation or depreciation would have an immaterial affect on InsWeb's financial condition, operating results or cash flows.

Item 8. Financial Statements and Supplementary Data.

        The Reports of Ernst & Young LLP, Independent Auditors and PricewaterhouseCoopers LLP, Independent Accountants, Consolidated Financial Statements and Notes to Consolidated Financial Statements follow below on pages F-1 to F-28.

41

INSWEB CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

Report of Ernst & Young LLP, Independent Auditors

Board of Directors and Stockholders of
InsWeb Corporation

        We have audited the accompanying consolidated balance sheets of InsWeb Corporation as of December 31, 2002 and 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. Our audits also included the financial statement schedule listed in the Index at Item 15(a) for the years ended December 31, 2002 and 2001. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. The financial statements of InsWeb Corporation for the year ended December 31, 2000 were audited by other auditors whose report dated January 31, 2001, expressed an unqualified opinion on those statements and included an explanatory paragraph that describes a change in the Company's revenue recognition policies to apply the accounting and disclosure provisions of the Securities and Exchange Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," as discussed in Note 2 to these financial statements.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of InsWeb Corporation at December 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule for the years ended December 31, 2002 and 2001, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/  ERNST & YOUNG LLP      

Sacramento, California
January 24, 2003,
except for the first paragraph of Note 16,
as to which the date is February 20, 2003
and except for the second paragraph of Note 16,
as to which the date is March 24, 2003

F-2

Report of PricewaterhouseCoopers LLP, Independent Accountants

To the Board of Directors and Stockholders of
InsWeb Corporation

        In our opinion, the consolidated statements of operations, of stockholders' equity and cash flows for the year ended December 31, 2000, present fairly, in all material respects, the results of operations and cash flows of InsWeb Corporation and Subsidiaries (InsWeb) for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of InsWeb's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

        As discussed in Note 2 to the financial statements, effective January 1, 2000, InsWeb adopted the provisions of the Securities and Exchange Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements."

/s/  PRICEWATERHOUSECOOPERS LLP      

Sacramento, California
January 31, 2001

F-3

INSWEB CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share amounts)

See accompanying notes.

F-4

INSWEB CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

See accompanying notes.

F-5

INSWEB CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2002, 2001 and 2000
(Amounts in thousands, except per share amounts)

See accompanying notes.

F-6

INSWEB CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)