In the movie Poltergeist, Carol Anne, the five-year-old daughter of the family who is about to be haunted, announces the arrival of the spirits named in the movie’s title, by stating “They’re here.” Of course, the family initially discounts her story, but eventually her prescience is accepted as fact.
There have been rumors that Google and or Amazon were going to enter the insurance marketplace for quite some time.
Recently, the rumors seem to have been confirmed, as public records indicate that Google is taking concrete steps to start up an insurance business. And while they aren’t live yet, they are clearly primed to move forward, possibly in Q1, 2015.
But unlike some of the other folks in the industry, I’m not about to get all sanguine on how Google is just going to open up a comparison site, and the independent channel has less to fear than the captives and directs, because they’ve got all that low hanging fruit.
Because if they made me King For a Day (aka Google Compare Auto Insurance Product Manager), I’d play a much bigger, and more profitable game.
And if I were running an independent agency or insurance company, I’d be figuring out how I could respond to a very real threat to my organization’s existence.
In this post, we’ll review what the existing evidence tells us about Google’s short term intentions. In a follow up post, we will explore who is at risk and some other options that might be Google’s ultimate end game.
So It Begins
The Google strategy as espoused by others, including Ryan, is that Google built this business in the UK, and they are going to import it to North America. Let’s call it the British Invasion, V2.0. (Cue the 60’s Sound Track.)
Insurance shoppers vote with their clicks. They want insurance options, and Google has the traffic statistics that tell them that. Even though I’m biased, I’d bet that consumers would rather have multiple options rather than the single offering presented by most of the captive and direct insurers. From a consumer standpoint, Google Compare Auto Insurance makes SENSE.
What should give everybody pause is history.
Students of the internet know that Google creates the rules that determine which websites show up on page one, and that there are two ways to get there:
- Be the best site
- Pay to get there
What if Google unilaterally decides that their insurance comparison site is best? “Can’t happen” you say.
Google has a little-remembered failed experiment called Google Health. Overnight, their pages went from unpublished to the first spot on page one of a search engine results page. Meaning that, as ranked by Google, their page on the flu was the best, most authoritative page on the internet.
Higher than WebMD. Higher than the MAYO CLINIC! Does that sound like straight pool? Nope. Somebody jacked up one end of the table for sure.
The other way to get to page one is to buy an ad. If Google wants to show up in the ad space, they get it for free.
How do you compete with free when you are paying for the same ad space? Check out the image in Ryan’s post, and you will see that Google’s ad is in the number 3 position. Sure, they might be taking cash out of one pocket and sticking it into another, but essentially it costs them nothing.
These two strategies will drive LOTS of traffic to the Google Compare Auto Insurance site. There are two strategies that Google could choose to employ to turn that traffic into cash: selling leads and generating commission.
Small Ball – Lead Aggregator
In the most basic iteration, Google could aggregate traffic from consumers looking for insurance, provide some pricing guidance via a comparative rating tool, and then direct the consumer to one or more agencies to bind, issue, and service the customer.
There are a number of ways that a lead aggregator can monetize their investment, but they all revolve around ‘selling’ the value of a lead.
- Create a ‘bid’ marketplace where the agencies compete for each lead by placing a bid or offer for each type of lead. For example, my agency will bid $10 per standard auto lead, but only bid $3 for non-standard auto leads. Yours will pay $9 for standard, and you don’t bid anything for non-standard. Because I’m the high bidder for standard leads, I’ll get all of them until I’ve reached my budget amount. Then you will start to get the standard leads and you will never get a non-standard lead.
- Set a flat rate per lead. In this example, each lead costs $x, and your agency sets a budget. You get leads until your budget is used up.
- Create a flat, all-you-can-consume cost. In this model, the cost is $y per day (or week, or month) and you get your share of leads because you have chosen to participate.
This last model is a variation of how TrustedChoice.com works today. An agency subscribes, their listing shows up in the directory, and consumers choose an agency with whom to work. Google could choose to give an agency an exclusive for a specific territory, or leads could be distributed equitably as they came in.
Odds are good that if Google were to get started as a lead aggregator, they would utilize a bid marketplace (Option 1), as it is demand-driven and highly efficient at maximizing revenue per lead.
Exactly the model that Google AdWords employs today.
Intermediate Ball – Own an Agency
In this model, Google could use the sales and service infrastructure of an existing agency to quickly get up to speed. Even though Google would bring its considerable web sales experience to bear, industry statistics indicate that a significant portion of buyers still want to complete their transaction with a live agent.
The advantage of concentrating all of the business with a single entity provides Google with a degree of control that doesn’t exist in any of the models above.
There are some tantalizing clues that Google might be creating a relationship with a West Coast agency that would write all of the business from the traffic that they generate. Ellen Carney of Forrester Research has determined that one of Google’s employees has added Coverhound, Inc. as a an Agency with whom she is licensed to transact business. And Coverhound is licensed as a property and casualty broker agent in the state of California.
Smart money says that Google’s initial foray into insurance will be made using this model. Coverhound has time to market, control and existing expertise to leverage, but another big digital-sales focused agency could augment or replace them.
Long Story Short
Google appears poised to enter the insurance comparison marketplace. The consumer has voted with their browsing habits, and they want options. Google leverages the experience of one or more established players, on both the technology and agency sides, and uses existing carrier products to provide options.
This strategy for entry into the market will teach Google the intricacies of the insurance business, while maximizing their chances for short term success. But I’d say that Google’s real opportunity will present itself after they learn the insurance ins and outs.
I’ll be speculating on Google’s ultimate intent, who is exposed, and how the independent channel can respond in a future post here on Agency Nation, so join today to stay informed.
How do you think Google is going to try to sell insurance online? Does your agency or company stand to benefit? Or will you be negatively impacted, or remain unscathed?
Let’s get the discussion started.