The Google Property/Casualty Company
Insurance Experts' Forum, July 1, 2014
Google, the disruptor of worlds, is setting its sights on the insurance industry.
That's the word from Christoffer Hernaes, partner at Core Group, who, in a recent post at TechCrunch, cites a recently released report from BCG India and Google, which “concludes that insurance is among the top five product categories in which the web is the dominant purchasing channel in addition to travel, digital media, ticket purchases and books and magazines.” Three out of four insurance purchases will be made online by 2020, the report states.
Thus, the potential to disrupt an information-intensive industry such as insurance does not seem to be lost on Google, Hernaes writes. He connects the dots between a string of Google acquisitions and initiatives — including those that give it an advantage in monitoring data from home properties, such as its recent acquisition of Nest, which provides smart home thermostats, or its catbird seat in terms of publishing and monetizing insurance quote searches. For sure, the Google driverless car that is now hitting the roads represents a major source of disruption — or at least rethinking — of the automobile insurance industry.
At the same time, current insurance industry players will not remain static in the face of potential disruption from large digital players such as Google or, for that matter, Amazon, Facebook or even Twitter. Insurers, too, will adapt and re-align the value of their services to remain competitive. If anything, the threat of disruption may make some insurers stronger, and even more digitally savvy. Hernaes points out, for example, that “the industry already has a high degree of technology adaptation and has systematically developed digital channels, with GEICO and Progressive as good examples.”
The banking industry faced a similar prognosis of being overwhelmed by software companies back in the late 1990s, but effectively fought back with online banking initiatives of its own. Plus, banks had a value proposition the software companies could not match — trust. Insurance companies also have huge reservoirs of trust that may provide a leg up from the big web companies.
Banks also had another huge asset that software companies could not overcome — physical branch locations. In fact, some banks even started building more branches, proving that people still needed access to individuals they could call or visit to help with their financial needs. For insurance companies, networks of agents provide a similar level of guidance, comfort and convenience.
Digital companies such as Google, Amazon or Facebook, with their never-ending big data, mobile, social and cloud-based innovations, are already becoming major forces within the insurance marketplace. And, as mentioned above, it already is a major force in many ways. But Google and Amazon are also huge, far-flung entities, with many broad-based business initiatives, from web services to online advertising to wearable computers to mobile devices to online publishing. Rather than become full-fledged insurance providers in their own rights, they may instead turn to partnerships, affiliations, administrative agreements or similar arrangements with existing insurers to provide service and support to customers.
My alma mater, Temple University, offers a great alumni life insurance plan, which is actually a product serviced and underwritten by New York Life. I don't expect Temple University itself to go into the life insurance business any time soon. Likewise, the digital giants may be reaching out to established industry partners to provide underwriting, risk management and policy administration roles as part of their advance into the digital insurance business. But it will a partnership like no other based on data analytics, mobile, social and cloud savvy. The industry needs to be ready.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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