(Image credit: Dollar Photo Club.)
Earlier this month, the worst kept secret in insurance was finally confirmed when Google officially launched its auto insurance comparison shopping site, Google Compare. The long-anticipated announcement validated a viewpoint that many in the industry have long tried to avoid: If the insurance industry doesn’t evolve and utilize data-driven approaches to protect their business, new entrants will swoop in and disrupt how the industry interacts with its customers.
Companies like Esurance and Progressive have long found success by building their brands by consistently evolving and changing with growing consumer demands. But now that Google has arrived, what does the tech giant’s comparison site mean for the rest of the insurance companies that have not been able to meet growing consumer demand? How will Google’s decision affect an entire industry–from the way they interact with customers, to how they attract Millennial talent and price risk more accurately?
Ownership of the Customer is Up for Grabs
It’s highly unlikely that Google will become an insurance company and actually write their own business. But given how Google has disrupted other industries in the past, it’s not a stretch to assume how they could irrevocably change the industry landscape. Of primary concern is the disintermediation of the distribution ecosystem, making it more critical than ever for insurance companies and independent agents to remain relevant with customers.
The industry is in the envious position of having the infrastructure to facilitate personal connections with a deep knowledge base. If you can combine your status as a trusted advisor with a modern consumer experience, you’ll continue to own your customer relationships. According to a recent survey by Capgemini, North American consumer satisfaction has decreased 8.3% in 2014. Traditional carriers and agents need to know that relationship-building, transparency, and a stellar consumer experience online are key to keeping good business.
Don’t Fight Them–Join Them
Google entering the industry gives significant credibility and signals to the tech world that there is a market to take advantage of in insurance. Millennials know and overwhelmingly trust technology brands, and are estimated to surpass the baby boomers to become the largest consumer demographic at 75.3 Million in 2015. With the overwhelming number of Millennials who don’t like the insurance ‘experience’, it’s integral to work with tech, rather than fight it. Insurers have an opportunity to learn from the likes of Google and others to stay relevant with Millennials.
Multiple studies show that Millennials are dissatisfied with what the insurance industry offers today–both from a product and customer service perspective. One of Google’s partners, Compare.com, has built its innovative platform to make complex purchases like insurance approachable and more compelling to the everyday customer, allowing small and mid-sized carriers to remain competitive by offering a consumer experience and awareness that these companies cannot begin to offer.
For those who believe Google doesn’t apply outside of personal auto, it’s far too soon to make that claim. While the extent of Google’s partnership with CoverHound remains to be seen, they do provide offerings for renters and homeowners insurance. According to a recent J.D. Power study, the largest gap in satisfaction for Millennials is in both renters and homeowners insurance, more so than with any other generation. It wouldn’t be hard to see how Google could have a head start on tapping into these markets with fast, quick and cheap services. We believe small commercial insurance is next, assuming success on the personal lines side.
How to Remain Competitive
There’s a relentless mantra from tech companies to provide products and services better, faster and cheaper. For this reason, pricing sophistication is an important priority and a necessary first step in staying competitive. Third-party vendors provide an affordable way for small and mid-sized insurers to price risks with precision and not allow themselves to be pressured by market forces into taking on risks at rates that will cause them to be unprofitable. Insurers can now be on the offensive and consistent with their pricing in order to combat the cheap prices offered by new entrants. Maintaining underwriting profitability has become a top priority to make up for the lack of investment income, which has never fully recovered since the Great Recession in 2008.
Instead of accepting and maintaining the status quo, there are options and solutions to remaining competitive.
- The way to win against new entrants is to know what you insure. If you’re going to stay ahead of big trends and maintain profitable margins, you have to be better at selecting risks that fit your business and price them accordingly.
- Using data analytics to evaluate options allows you to test and learn, select the best approach, and deliver results that make the greatest strategic impact. Companies like Google thrive on the test-and-learn approach, and insurance companies must innovate to keep up.
- Finally, it’s time to accelerate the journey to becoming a data-driven decision organization. There are now a handful of insurers using predictive analytics in specific areas of their business, but insurers that aren’t overhauling organizational culture to think with a data-driven mindset are already behind.
The future is now the present, so it is no longer acceptable to continue doing “business as usual” simply because it’s the easy answer. These new entrants are data-driven and tech savvy, and they understand how to deliver a modern consumer experience. There is a silver lining, however. Google’s entrance has signaled that innovation and evolution is coming to insurance–these are exciting times, and the companies that will thrive are those that will embrace the opportunity to reinvent how to serve and engage their customers.