Google, Amazon eye car insurance
The move into car insurance by tech giants - just when the industry faces the problem of a shrinking risk pool - was the topic du jour at a recent insurance industry gathering in Florida’s Boca Ratan.
The conference delegates concluded that car technology and shared mobility is creating massive opportunities for disruptors to capture 20 per cent of the US$400 billion global car insurance market by 2020.
Data analytics and consumer experience are key to the future of auto insurance, according to an Association of Insurance and Financial Analysts panel discussion where it was agreed that Google and Amazon are clear winners when it comes to these skills.
In fact, they noted, Alphabet has experimented, albeit unsuccessfully, with Google Compare, an online auto insurance shopping website.
“We think car safety technology and shared mobility could bring non-traditional players to the global auto insurance market,” said Boston Consulting Group in a post-conference report which collected participants' views.
“Tech giants have the benefit of proximity to potential customers with their high frequency of interaction and depth of engagement. We see it more likely that tech firms will foray into insurance distribution (rather than actual underwriting), given the lower level of returns on capital and tail liability from underwriting.
“These firms could push tailored insurance products to customers via smartphones. They also have access to driving behavior data from map apps, data that is highly valuable in motor insurance pricing. Partnering with an insurer to supply such data for pricing is the most likely initial scenario.”
Boston Consulting claimed Alphabet’s failure to nail the car insurance business was due to a lack of support from the big insurance carriers.
“This is vital to success. That said, we think Alphabet gained additional insights in this venture to better serve its core search business, with insurance among the highest pay per click.”