Why Google won’t put the moves on insurance


Thin profit margins, regulatory hurdles and the inability to understand risk will keep Google from eating the insurance industry’s lunch in Asia Pacific, according to research firm Ovum.

Charles Juniper, Senior Analyst, Financial Services Technology at Ovum pointed to these key reasons as to why Google is unlikely to make a move into Insurance. The size of the industry will also be factor, he said:  “One of the ways insurers have survived is through consolidation to achieve scale. While Google is big, it would be taking on some very large global organisations with a very strong reason and the resources to fight back.”

A recent report by Google and BCG India concluded that insurance is among the top five product categories in which the web is the dominant purchasing channel, raising the question as to whether insurance giants the world over should fear the imminent entrance of players such as Google and Facebook as disruptive competition in their industry.

Although Google’s entrance is unlikely, Juniper suggests that there are points in the insurance value chain in which the tech giant  could take a strong position, “The insurance industry has been woefully bad at communicating with its customers… the reality is that change is only happening very slowly… Google, however, does understand how to communicate and market to large numbers of people.”

John Shew, Head of IT at RHB Insurance in Malaysia, said insurance companies across the Asia Pacific region would not know how to leverage Google into business opportunities. He suggests that Google would have trouble penetrating the industry and would need a deep thinking process in order to successfully move into becoming an insurance provider.

“Insurance is governed by regulation, and also risk management, which I do not think Google can penetrate easily without a deep thinking process,” he said. Juniper suggests there is more value for Google in taking on the role of an aggregator, which by definition is an application which aggregates related, frequently updated content from various online sources and consolidates into one place for viewing.

He suggests this is something the tech giant has already begun to do with the acquisition of BeatThatQuote.“The best place for Google to leverage these assets is as an aggregator making commission on each policy sold without having to underwrite the actual risk being covered… I think Google will be actively looking at other acquisitions globally as the role of aggregators becomes increasingly important in other regions,” he said.

Finding another avenue

Shew said that a potential entry by Google into the insurance industry could be risky for Google itself, because of limitations in fraud detection and big data analysis, “Going on Facebook or Google can be a messy with data and overwhelming, which means not being able to detect potential fraud, which can put the business in danger.”

With Google well-placed in its ability to capture and organise a vast amount of data, an area where it could play a significant role, according to Juniper, is in becoming a telematics service provider; capturing and processing data from vehicles for usage-based-insurance (UBI) products.

“While UBI products within the auto industry account for under three per cent of policies sold currently there is massive growth in the UK, US, Italy, Canada, Brazil and China. UBI relies on the capture, processing and management of massive amounts of data – which clearly plays to Google’s strengths,” he said.

Shew pointed out that Google still has a way to go before it can provide insurance to customers, “The mass market will certainly bring in more revenue and higher risk. No doubt the digitalisation era is marching in, to reach the insurance market, Google still needs to put in place some processes and policies to nurture the market locally, and regionally.”

Google already captures a significant amount of data from mobile users of android devices, something which Shew suggests could help in determining factors on deciding on premiums, “That is the trend and be prepared, as our data is being collected from our smart phone now,” he warned.