It’s a common thread in nearly every industry: Innovation occurs when consumers’ growing needs and expectations converge with intense competition. It’s no surprise, then, that insurance — not exactly known for being on the forefront of technology — is one of the last remaining industries to innovate and fully embrace data, analytics and customer communication technologies.
Insurance is a complex purchase business with a convoluted ecosystem and ever-changing regulatory requirements that has kept the industry in a well-protected bubble from external competition for decades. Now in 2015, the announcement of Google Compare for auto insurance pushes the industry to innovate from a technology standpoint, but most importantly from a structural standpoint, by changing the way insurance companies interact with their customers. The reasons below outline why Google has the greatest chance to succeed where others have not.
A Lesson From Other Industries
Google has previously disrupted numerous industries to great success — think health, travel, navigation and now insurance — and what the tech giant has accomplished can most easily be attributed to its dominance of the search space. Many of Google’s consumer-facing businesses have followed as logical next steps in the Google search process. For example, do you want to use Google to search for the best insurance company, or would you prefer to find the best insurance company with the cheapest policy through Google? Do you want to use Google to find the route for your road trip, or would you prefer to have Google find you the best route? Google’s constant innovation stems from a simple but effective idea — eliminate an unnecessary extra step (or steps) in the process, and give the consumer what they desire most — ease and simplicity.
There are some who believe that the tech giant may not be doing anything noticeably different from other aggregators in the auto insurance space. However, if past accomplishments in other industries like navigation, travel and email tell us anything, Google can (and will) find a way to engage the consumer better than incumbent insurers. Rather than writing its own business and determining individual risks, Google has teamed up with carriers of all sizes to reach customers efficiently, allowing them to quickly search, get rates and compare policies “pound for pound.” Already, this platform has helped shift the insurance industry’s emphasis on the customer by allowing peer-to-peer ratings and allowing consumers to openly disclose any negative or positive experiences with the insurer in question, which will breed overall superior customer service and experience.
Millennials Trust Google
It is highly unlikely that Google will ever become a full insurance company with its own agents and underwriters, but what it does bring as an aggregator is a brand name that elicits trust and familiarity with consumers. This is especially true of millennials, who are set to overtake baby boomers as the largest consumer demographic, at 75.3 million in 2015. When Strategy Meets Action reported in early 2014 that two-thirds of insurance customers would consider purchasing products from organizations other than an insurer — including 23 percent from online service providers like Google — it created an uneasy tension in the insurance industry. These findings are largely a reflection of consumer discontent with insurance companies and their seeming lack of transparency.
Additionally, it’s a widely-held belief that most millennials do not trust insurance companies. They do, however, trust Google with just about every engagement they have with the Internet, and perhaps even more so — consumers trust other consumers. Google Compare’s user feedback platform brings transparency to consumers, and requires the insurance industry to reevaluate how to effectively reach and engage customers in a tech-driven environment. Pushed by Google’s unique insight into millennials, traditional insurance companies must acquaint themselves with their new consumers, who are often considered impatient, demanding and social-media savvy.
Establishing a Preferred Consumer Platform
To highlight just how important ease of use is, a recent eye-opening Celent study found that less than 10 percent of North American consumers actually choose financial service products based on better results. Instead, a vast majority prefers ease (26 percent) and convenience (26 percent) when making a decision. Based on these findings, Google is using a business model that embodies the preferred consumer experience, a notion that is being reinforced by their initial pilot results in California.
According to Stephanie Cuthbertson, group product manager of Google Compare, millions of people have used Google to find quotes since its launch in March, and more than half received a quote cheaper than their existing policy. Other new entrants, like Overstock, have reported issues with completion of purchase because consumers will browse their offerings but still hesitate to complete their purchase online in a single visit to their website. Google’s platform is attempting to avoid this issue by announcing agency support through its partnership with Insurance Technologies Corporation, allowing consumers the peace of mind in speaking to an agent before purchasing a policy — but maintaining the online price quote throughout the buying experience.
Potential for Future Growth
While Google Compare is beginning with auto insurance, working with CoverHound gives a glimpse into where they may be looking in terms of expansion. CoverHound’s platform specializes in homeowners’ and renters’ insurance, the latter of which is growing exponentially with the millennial generation, who prefer to rent rather than buy. In fact, according to a recent TransUnion study, seven out of 10 millennials prefer to conduct research online with their laptop, computer or mobile device when searching for a new home or apartment to rent.
Google Compare has also already shown momentum by recently announcing its expansion of services to Texas, Illinois and Pennsylvania, while adding a ratings system for each company it works with — much like the insurance version of TripAdvisor or Expedia.
The Bottom Line
Nearly every industry undergoes disruption when consumer expectations shift and businesses are forced to adapt and keep up. For decades, insurance didn’t have the kind of pressure from outside entrants that it is currently facing. Whether Google fails or succeeds early on, it makes little difference: Its entrance is a wake-up call. The more tech companies enter the space, the more traditional insurance must struggle to play catch-up.
These new entrants are helping to not only force innovation from a technology standpoint, but also to bring an innovation culture to the industry, so they can stay ahead of consumers demands around the buying and customer service experience. Agents and insurance carriers have a level of expertise that is unmatched by the Googles of the world, but it will be wasted if they can’t figure out a way to integrate that expertise in a modern way and connect to consumers through different social channels. The signs are written on the wall, and how traditional insurance reacts will ultimately decide its relevance in the industry of the future.
This article originally appeared on Recode.net.