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Google Thinks the Insurance Industry May Be Ripe For Disruption
HughPickens.com writes: The insurance industry is a fat target — there's were about $481 billion in premiums in 2013, and agents' commissions of about $50 billion. Now Conor Dougherty writes in the NYT that the boring but lucrative trade has been attracting big names like Google, which has formed a partnership with Comparenow, an American auto insurance comparison site that will give Google access to insurers in Comparenow's network. "A lot of people are waking up to the fact that it's a massive industry, it's old-fashioned, they still use human agents and the commissions are pretty big," says Jennifer Fitzgerald. It may seem like an odd match for Google, whose projects include driverless cars, delivery drones and a pill to detect cancer, but the key to insurance is having lots of data about people's backgrounds and habits, which is perhaps the company's greatest strength. "They have a ton of data on where people drive, how people drive," says Jon McNeill. "It's the holy grail of being able to price auto insurance correctly."
People in the industry and Silicon Valley say it is only a matter of time before online agencies attack the armies of intermediaries that are the backbone of the trade, and Google could present formidable competition for other insurance sellers. As many as two-thirds of insurance customers say they would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon. Google Compare auto insurance site has already been operating in Britain for two years as a search engine for auto insurance prices.
People in the industry and Silicon Valley say it is only a matter of time before online agencies attack the armies of intermediaries that are the backbone of the trade, and Google could present formidable competition for other insurance sellers. As many as two-thirds of insurance customers say they would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon. Google Compare auto insurance site has already been operating in Britain for two years as a search engine for auto insurance prices.
Getting insurance isn't the problem.
Getting companies to honor it, is.
Given how difficult it is to track down support from Google for support on some of their current offerings, I'm not sure insurance will be much of an improvement in customer experience.
So commissions are $50/$481 = about 10%. In other words, a fairly minor factor; you can usually save that by switching companies. Sure, it would be nice to chop 10% off your bill; but that is hardly a "major disruption". Even a caveman can chop 15% off your bill; who needs technology?
Most major carriers are moving towards online services already. If Google enters the market, their efforts can quickly be matched, leaving no net advantage for Google.
The bigger savings will be by more accurately calculating the risk. Insurance rates (should be) based on the risk. The more accurately the risk can be calculated on an individual basis, the less tolerance needs to be added to account for an incorrect calculation. And with big data, more information = more accurate predictions in general. Insurance companies have access to a large amount of data, but Google probably has bigger datasets. I am also sure there are a great many insurance companies which are lazy and not calculating the risk as accurately as might be possible.
Even those who arrange and design shrubberies are under considerable economic stress at this period in history.