I recently chocked my girlfriend when I proclaimed that I was considering leaving my current employment to start an insurance company! She is still in chock so I do not know whether she is concerned about me turning down the monthly salary for a risky venture or the fact that I was considering the insurance industry. Do not worry. I can reassure you (and my girlfriend) that I will remain with Avanade as an “Innovation Peddler”. But I will use this blog post to “let out the steam” by giving you my view on what Google would do if they entered the insurance industry.
My itch was caused by the thought provoking survey that Accenture published recently on the digital transformation of the insurance industry. I referred to it in my previous blog post on the Disconnected Digital Insurer where I mentioned that 76% of the P&C insurers expect that they will face new entrants on their markets in the next three years. Google and Amazon where the most cited threats mentioned by the interviewed executives.
My brain has been on overdrive since I read the report with the question that Jeff Jarvis challenged us with in his block buster book “What would Google do“? Let us start by looking at the value chain for an insurance carrier to assess where and how they will leverage their strategic competencies to redefine the industry:
Here is my brain dump on what Google and possible other new entrants would do:
- They will focus on the motor insurance market that is ripe for change. The recent EU-legislation that ban companies from differentiating price based on gender is one of many forces that may play into the hands of Google. I have written about this legislation as a possible tipping point for Telematics in the insurance industry in a previous blog post. Just imagine, who is better positioned than Google to use big data on their customers’ driving habits to revolutionize the underwriting process with Pay-As-You-Drive (PAYD) products? This far, I have not seen any traction for PAYD in the Nordics, nor in Europe with UK and Italy as possible exceptions. It is interesting to note that the German Insurance Association (GDV) commissioned a report where they argued that the insurance industry need to opt-out from the ruling to protect careful drivers (women) from increased premiums when they are pooled with other careless drivers. They even foresaw a risk that careful but inactive drivers will experience ever increasing premiums when they are left in a “pool” with careless drivers when other careful drivers cancel their policies due to the price. But this so called “Adverse Selection” risk has not materialized due to the fact that there are no low-cost alternatives for careful drivers that want insurance coverage. The Swedish motor insurance market is dominated by four players that hold 90% of the market.
- Google will probably focus their distribution & channel management to the Internet. They will not engage any brokers nor affinity partners. They will leverage their supremacy on the web to build on changed customer behaviors where the consumers want to feel in control of the buying process. Using the web as the sales channel, Google will be able to leverage their insights into the keywords that we used when we early in the buying process browsed for alternatives and thereby indicated our intent and need.
- Though possible, I do not think that Google will use the telematics data on their customers to identify claims fraud. They are probably aware of the estimates that 10% of all claims are frauds and that only 10% of those frauds are detected. But Google would not strive for identifying the fraudulent 10% of the customers out of the risk of being perceived as evil (“Don’t be Evil” is one of Google’s mottos) by the 90% that are innocent victims. They know that the Claims process is the true Moment of Truth to the customer.
- Marketing in the insurance industry will be redefined by Google too. Naturally, they will use their own AdWords to make themselves relevant when potential customers are Googling on motor insurance related key words. And we can rest assured that their own insurance offering will be at the top of the result set when prospects search on motor insurance. In addition, I think that they will establish a loyalty program where customers get discounts based on how they market Google in their own networks. They will probably use an elaborate gamification plan where customers earn discount points based on the number, quality and exposure of testimonials on social media, e.g. likes, tweets, instagram, etc…
- Risk Management is a core skill at insurance companies with actuaries that excel in assessing risk exposure. Google will never amass the same expertize and will not see the same need to exploit that capability by branching out to other product areas. Instead, they will stick to motor insurance and focus their product development efforts on how they can leverage the telematics data that they have on their customers to provide entirely new products and services. They do not even have to be insurance related. Just imagine what services they can offer us through our cell phones when they not only know our location but can make predictions on our destination based on our previous trips.
Relax insurance executivesJ. I do not have any inside information on the whereabouts of Google but I have given you my answer to the question “What would Google do”. It is a question that all insurance executive ought to ask themselves to stay true to the old proverb “hope for the best and plan for the worst” that is the foundation for the insurance industry.