Google Takes the Wheel

When Google stepped into the insurance ring last month, the industry took note. Some said agents and the insurance industry should be concerned. Others said Google Compare, as the new service is named, is nothing new in the insurance game – just another online comparison tool.

Bill Wilson, director of the Virtual University of the Independent Insurance Agents & Brokers of America (IIABA), a well-known insurance industry expert and teacher for more than 30 years, says Google Compare is nothing more than another auto insurance comparison website that misleads consumers.

“What Google is doing has been done for at least 10 and maybe closer to 20 years now,” says Wilson. “There are all kinds of comparative rating websites. … from the usual Progressive Direct, GEICO, Esurance, Nerd Wallet, Quote Wizard, Bank Rate, carinsurancecomparison.com, and on and on.”

According to Wilson, Google isn’t any different from other comparative rating sites, except that it’s Google. The difference is in the Google name, expertise and financial prowess that come with it. “You have that Google name and their expertise and, needless to say, the potentially billions of dollars that they have available to pump into this.”

Because what they are offering now isn’t anything new, most independent agents aren’t overly concerned about Google’s entry into auto insurance, in Wilson’s view. Consumers are the most at-risk, he says.

“Most of the marketing for these kinds of websites is based allegedly on low-cost and convenience,” Wilson said. Many online comparison sites claim to offer an insurance quote in minutes. “How can you really help a consumer identify their exposures to loss and match it with the right customized product for those exposures” in minutes? he asks.

The big loser when it comes to online comparison tools like Google Compare is not going to be independent agents or even insurers; the real loser is consumers, he says. “Consumers are being duped into believing that all of these policies and the service providers are exactly the same. The only difference is price.”

Google Compare

Participation in Google Compare is based on a flexible cost-per-acquisition model, but payment isn’t a factor in ranking or eligibility, according to Google.

Google’s online comparison tool uses a simple portal. Users punch in a ZIP code, hit enter, and are brought to a form for basic information including name and date of birth. The site also offers visitors a choice to “speed things up” via an autofill feature. This may be a convenient option for those who are signed into Google’s Chrome browser.

Google Compare is currently only offered in California but will soon be available in more states. As Google Compare for car insurance rolls out in additional states the company says it will also introduce ratings and reviews, as well as local agent support for providers with agent networks.

As Wilson noted, Google Compare does indeed operate much like other comparison sites; it in fact turned to an existing one in order to launch its own site.

Online auto insurance comparison site compare.com, which has been selling online in the U.S. for a year and offers quotes from 41 carriers, teamed up with Google for this new consumer option. Andrew Rose, CEO of Virginia-based compare.com, said Google approached his company because it was having trouble attracting carrier partners to its search panel and wanted to offer more carriers.

Compare.com was established in 2013. It is the U.S. version of confused.com that started in 2002 in the U.K. and is owned by parent company Admiral, the former owners of esurance.com. Compare.com began writing business in the U.S. market in 2014 with auto insurance and recently changed its name from comparenow.com, which Rose said was unrelated to the partnership.

“They ultimately made the decision that we were a shortcut to building a panel themselves,” Rose said of the Google Compare partnership.

Google is offering its customers access to some of compare.com’s providers in addition to forming its own carrier panel, said Rose. Not all of compare.com’s carrier partners are available through the Google Compare site.

“Google Compare will collect user info and forward that information to us and we will forward it on to any of our participating carriers that want to have their rates shown on Google [Compare],” he said.

The partnership will work by showing Google Compare users multiple insurance quotes after they input their information – some quotes will come from compare.com’s carrier partners, and some from Google Compare’s partners. Quotes may also be provided by Google’s other partner, CoverHound.com. When users choose to purchase an auto policy on Google’s site from a compare.com carrier, they leave the Google site and go to that carrier’s webpage to finish the transaction, just as it works on compare.com’s site. Customers can also choose to call and purchase their policy over the phone.

Compare.com is compensated by the carrier just as it would be if they went straight to compare.com.

“From the carrier’s standpoint, the policy still came from compare.com and they will compensate us. Then we pay Google a share of what we were compensated by the carrier,” said Rose.

Compare.com doesn’t charge customers to use its site and the same is true of the Google Compare platform. Compare.com charges carriers a flat fee per sale based on the segment of business. A carrier is only charged if a customer actually buys its policy. Compare.com then uses that money to advertise on behalf of the carriers. Also like the compare.com site, the rate on Google Compare doesn’t change when the customer leaves the site or calls the listed phone number to purchase. Rose says this has been a critical part of his company’s success because consumers can finish their transaction without any other costs.

Carrier Concerns

Rose said not all of compare.com’s carrier partners want to participate in the new Google Compare venture as some have concerns. He wouldn’t name or give an exact number of compare.com’s carriers that agreed to participate, but did say it is “somewhere in between” its 41 partners.

“In some ways, this is quite scary for insurance companies. There is concern among them about what happens if Google controls one of the avenues where they get their business,” he said.

The relationship is also non-reciprocal, meaning Google Compare opted not to share its carrier partners with compare.com. Rose said that was Google’s decision.

Google Compare Auto Insurance Services Inc. has been licensed to sell insurance in 49 states and the District of Columbia and is working with several insurers including Dairyland, MetLife, Infinity, Mercury Insurance and several others.

Dominant Force

While IIABA’s Wilson may view Google as just another comparison site, others see potential industry disruption ahead due to Google’s technology for mapping the globe via satellite and its role in building autonomous vehicles.

One of them is W.R. Berkley Corp. CEO William R. Berkley, who believes Google has the capacity to change auto insurance. Berkley said Google’s competitive advantage can’t be denied “because they invested this enormous sum of money in actively building a rule-road map of America.”

Google also designs self-driving cars, which gives it another huge advantage in the auto insurance market, he said.

“It means Google knows the rules for driving on every road in the United States and they’re working on Europe. So they know that on this block you can go 25 and on the next block you can go 35. They know where you can take a right turn, a left turn or whatever,” Berkley said.

In that respect Google has the capacity to charge a different amount for every driver and every car – which Berkley says would be a game-changer.

“They can give you a plug-in device, not unlike Progressive’s, and they know exactly when you’re breaking the law and when you’re not. They can rate you exactly on how good a driver you are. Every day,” he said.

In addition, the better a person drives, the less this person will pay so Google’s platform will likely appeal to regulators. That’s because it’s a self-correcting model – drivers who notice their car insurance going up because of poor driving can change their driving habits.

“There’s something else – I no longer pay by the car, I pay by the driver. You plug it in and they know how many miles you drove. And they know what kind of car it was,” Berkley said.

And they charge in accordance with that, making it “a real risk-based system.” Plus, because Google has Gmail, they can charge direct and sell direct, he said.

These technology-driven changes are based on information and facts and will provide Google with better predictability.

“It’s exciting, it’s challenging. … It’s change,” he said.

And agents can either embrace it or lag behind.

Not Big ‘I’ Buyers

Still, IIABA’s Wilson doesn’t see Google Compare and other comparison shopping sites as having a huge impact on the independent agency market share. Auto insurance-only buyers – who might be more likely to buy from online sites like Google Compare – are not the bulk of Big “I” members’ business, he says.

“When you look at the [Big “I”] market share report that we produce annually and go back, say, over the last 20 years, back to the early days of the Internet when some of these websites really first got started, the people who have been affected the most by direct sales, both TV advertising, Internet, or whatever, are the captive agency channel,” Wilson said. “They’ve gone from almost 60 percent of the auto market space to just under 50 percent during that period of time.”

Independent agents have lost some auto market share, Wilson says, but some of that loss can be attributed to agents “letting go” of that customer base they are not interested in growing, he said.

Wilson also notes that over that same period of time there’s been a shift in the independent agency system from national to regional carriers.

“Something like 80 percent of all personal auto business written by independent agents is written by regional carriers and not by the national carriers; whereas when you look at many of these comparative websites, many, if not most, of the companies that are a part of that type of marketing are national carriers and not the carriers that are most commonly writing the business for independent agents,” Wilson said.

According to Wilson, the Big “I” is trying to “get the word out” to the industry, the media and consumers that auto insurance and homeowners are not commodities.

“There are huge, huge differences between the products that are being sold (by comparison shopping sites), particularly if you’re buying a product based on 15 minutes on a website with a few questions,” he adds.

“It is an educational process,” he said. “We’re not selling CDs where it doesn’t really matter whether you buy it from Amazon or Best Buy or whatever. … Insurance policies are complex legal contracts.”

While Wilson doesn’t see Big “I” members affected much by Google’s entry into insurance, others see it as more of a challenge.

Dax Craig, president and CEO of Valen Analytics, was in the audience at Valen’s summit for executives in Vail, Colo., when Compare.com CEO Andrew Rose announced his firm’s partnership with Google to bring direct sales of auto insurance to California, and possibly the rest of the nation.

Craig, whose Denver, Colo.-based firm partners with insurance carriers to improve underwriting performance with data, analytics and predictive modeling, said the news hit hard.

“The only thing that comes to mind is shock and awe,” Craig said. “I think everybody was floored. … Everybody went silent to think about how that impacted them and what it meant for their business.” he said.

Craig and others believe the ascending Google insurance force won’t stop at auto insurance.

“I think that auto is the first, best place to start,” Craig said. “Homeowners and renters insurance will follow, small commercial will be after that. As companies learn how to do this better, to overcome the technical hurdles, they will apply it to every type of insurance.”

Keith Moore, CEO of CoverHound, which also offers homeowners, and motorcycle and renters insurance, was limited in what he could say about future plans in the Google partnership, but didn’t deny the probability that Google Compare will expand beyond auto.

“Based on our partnership, I can’t speak on their behalf, but they will expand into other lines of insurance for sure,” he said.

San Francisco-based CoverHound is already beefing up for Google’s planned expansion into other states, and the company recently raised $14 million in Series B financing through existing and new investors, including the venture capital arm of American Family Insurance.

To date, CoverHound has raised more than $20 million in venture funding, and it has an impressive list of carrier partners including Progressive, Esurance, 21st Century, Safeco, Mercury, Travelers and The Hartford. The new funding will support CoverHound’s carrier growth and integrations with large marketing partnerships like this one, Moore said.

Nobody outside of Google knows for sure how Google Compare will do or where it will go next.

A Google spokesman said that aside from a press release it issued when the partnership was announced, the company would not comment.

“We rarely make forward-looking statements about our products,” said Google spokesman Joe Osborne in an email reply.

True to form, Google itself hasn’t offered much detail on how this partnership works; most of what is known comes from individual partners in Google Compare.

Google is known for keeping a low profile with the press on its new endeavors. The company rarely has replied to requests for interviews on its autonomous vehicle development program, and before that Google said little about its Google Glass product.

Valen’s Craig believes that Google may still be working out some of those details.

“They are very much test and learn,” Craig said of Google.

The insurance industry may need to test and learn as well, in his opinion.

“It remains to be seen how the insurance industry’s going to react to it,” Craig said. “The industry is ripe for disruption. The same old ways of doing business don’t work as well as they use to. The insurance industry, in my opinion, has opened itself up to vulnerability to tech-savvy companies like Google.”

Stephanie Jones and Andrea Wells contributed to this story.