In 2012, Google launched a price comparison site in the UK and last month it launched a similar service in California - with more states to follow. This week Ellen Carney spoke to InsuranceLinked about what this might mean for the industry.
Ellen Carney is a principal analyst at Forrester Research with a focus on insurance and eBusiness. InsuranceLinked asked her about the significance of Google's aggregator website and whether it could prove to be a source of disruptive innovation for the insurance industry.
What is the scope of Google's plans for the US insurance industry?
The terms and conditions on Google Compare make it very clear how they are planning to use the data. The excuse that Google will not have the appetite to deal with the regulators couldn't be further from the truth. They are already courting them, they are understanding how the regulators work and how they make decisions - there are very few hurdles for Google here.
We like to think our industry is so complicated. But anyone can be an insurance carrier with enough capital, a distribution network and access to low cost debt, and there are an awful lot of companies besides insurance that meet that criteria. The excuses we've had in insurance - our compliance people won't let us do it our legal people won't let us do it - that stuff isn't going to hold water anymore.
This is what people want. They've got to get their car on the road, they've got to get home insurance - it couldn't be better. I've heard rumours in the US that they might not just be looking at car insurance, but also homeowners' insurance. And you could imagine life insurance might not be far behind, and something a little bit more complicated - but these guys are the masters of the algorithm - small business insurance too.
We know US consumers have an appetite to buy from a non traditional insurance channel. They will go to an online retailer like Amazon - that's another potential. It will not be long before we see Amazon acting as an aggregator for insurance coverage and then the gloves are really going to be off. We also suspect that, at some point in time, Facebook will sell insurance business.
In the UK, based on our survey data, 43% of people who have bought insurance over the last year have visited a comparison website. So that's a big number and 45% said they were looking for the best value and 23% said it was because it was easy to apply. This is something Google has mastered.
I played around with the US Google Compare site and it is so easy and so simple - they have completely hit on what people are looking for. I can get the best price for auto insurance in a way that isn't a burden for me. This is what is driving behaviour in the UK where we've completely shifted to a comparison model, so it should really be quite frightening for the US market.
Will we see more differentiated pricing in the future as data provides even more rating factors?
You could imagine that car insurance would be based on the trip, who else was on the road, the weather conditions and the roadway conditions. So we're going to see the price of car insurance change dramatically in the not too distant future. Especially when you think about what is happening with the self-driving vehicles that everyone is incredibly interested in.
There is a whole bunch of different factors that could be used in the future. They could look at more subtle kinds of behaviour - maybe you didn't get ticketed but you're a hard braker, you like to rev up the engine, and things like that.
They will be able to understand our driving behaviours that are below the radar and figure out potentially what kind of a risk we are. Also, marry that up with search histories and they are going to have a great deal of information about us as individuals. So instead of rating broadly across a whole population it will be based on the individual.
It's not the vehicle that causes accidents it's the person behind the wheel. And it's the same issue with homeowners. The house itself doesn't catch on fire, people leave a pan on a stove etc. So we will see interesting changes around that with internet door locks and connected light bulbs and things like that.
Google told me when I interviewed them on their intentions that they want to help consumers make the best financial decisions. But we're going to get a lot of data in the process about how consumers make decisions, how carriers decide to rate a risk and that there is an interesting residual insight. They can potentially use that data in the future in terms of how they need to insure that self-driving vehicle, because of course that becomes commercial product liability insurance coverage.
What other technologies might disrupt insurance?
We are seeing some interesting things happening already with telematics and messages from the insurer to the user about how their data is going to be used. The big problem at the moment is the data isn't portable.
There is an expectation that it will become portable at some point in time and we're already seeing that with willingness to trade your fitness data for discounts on life insurance and even discounts on auto insurance in South Africa. The pressure is going to come if the insurers want to collect more data and then the regulators will be very clear about who owns the data. You get to use it, but it is in effect the consumers'. Consumers in our UK survey said that this is a piece of information they would not like to share with their insurers.
Data is the new currency and information is power. That power has shifted into the hands of the consumer. An insurance carrier has the ability to know where you are with location-based services and lot of data is resident on mobile devices about where consumers have been and obviously how they are driving.
Ellen is a principal analyst serving insurance eBusiness & Channel Strategy Professionals. Her research focuses on the eBusiness strategies, technologies, adoption trends, and best practices of property and casualty, life, group, and health insurers globally. Ellen works with insurance clients to understand how market forces are changing how consumers, groups, and distributors engage with insurance carriers and the role that technology plays in maximizing new opportunities.
Posted: Monday, May 4th, 2015