Google Could Add Distribution Source for Insurer, But Questions Remain, Experts Say
January 14, 2015 by Michael Buck, senior associate editor, BestWeek: Michael.Buck@ambest.com
OLDWICK, N.J. – A Google Inc. foray into the United States online insurance agency space could help insurers by providing another source of distribution, but there is potential for disruption as questions remain about the Internet search giant’s intentions, according to industry experts.
“Where and how far could they take this,” said Ellen Carney, an analyst for Forrester Research Inc., in an interview with Best’s News Service. “They could like insurance for the very same reason Warren Buffett likes insurance: you get a lot of cash in and you only have to pay it out if there are claims.”
An arm of Google has been setting itself up as a licensed insurance producer in several states and inking affiliations with various underwriting companies, according to information from state departments of insurance (Best’s News Service, Jan. 9, 2015). The company is being licensed as Google Compare Auto Insurance Services Inc. and was licensed in some states as recently as November. Carney wonders whether the company might eventually move into an underwriting role.
Vincent DeAugustino, an analyst with research firm Keefe, Bruyette & Woods, is skeptical that would happen. While Carney notes Google’s capital level dwarfs most insurance companies, DeAugustino thinks the issue is the return on capital, which “does not seem, to me, to be an attractive business for a company like Google.”
“What I could envision, is an MGA model where they are simply handling the distribution and the pricing of the product and there is essentially an underwriter and insurer behind them that ultimately writes that policy and handles the claims,” DeAugustino said.
Either way, Google has the potential to collect data with a move into the insurance space and use its technical prowess to leverage it. Acting as an agent, Carney said, Google would gain insight on how several different carriers price the same policy. That is “way more interesting than pulling state filings,” she said.
“From an underwriting perspective, they are going to get just fabulous information on how different carriers rate the same risk,” Carney said. “To me, what they are getting here is data.”
There has been a burgeoning wave in the United States in recent years of businesses marrying the adviser role of independent agents with digital platforms. Carney thinks online agencies could see a growing acceptance among consumers in the U.S. Price comparison models for automobile insurance are widely popular in the United Kingdom — Google launched its Google Compare service there in 2012. Attempts to reach Google for comment were unsuccessful.
Acceptance of online distribution and sales could be especially bolstered if a company with the brand recognition of Google enters the market, DeAugustino said. Consumers appear to have a comfort level with Google, reducing a privacy barrier and elevating the status of the online realm outside of the major direct writers, he said.
“This could be an interesting wake-up call for classic independent agents,” Carney said. “If we’re going to let a shopper get information really, really quickly about how much auto insurance costs, then what is the agent going to do?”
While Allstate Corp. distributes its namesake-branded products through an exclusive agency force, the company is attempting to shift its agents to a “trusted adviser” role, Chairman and Chief Executive Officer Thomas J. Wilson said last month. He said that agents acting like a “human modem” will “not be needed” in the future.