Google Could Revolutionize Auto Insurance

Google (NASDAQ: GOOG, GOOGL) does not just want to be your insurance agent; it might also want to be your auto insurance company. The Wall Street Journal even speculated that the search giant might soon start underwriting its own auto insurance policies in a recent article.
The Journal’s theory is that the company will use its Google Compare auto insurance marketplace to gather vast amounts of information about drivers before offering its own policies. The feature might also allow Google to offer some sort of insurance along with its self-driving cars, Tech Times speculated.

The idea would be that people would buy the insurance along with the car when they bought a self-driving car. That could give Google access to a huge market because it could offer policies along with its cars or with those of other more traditional automakers; for example, Ford or Toyota insurance.

Incurring the liability costs associated with the rollout of the self-driving auto technology could also help Google roll it out faster. Robotic cars could be a very hard sell if traditional insurers refuse to underwrite them or charge owners higher rates.

Free or low-cost insurance could also be a great perk to use to convince buyers to give such an exotic concept as a self-driving car a chance. It could also help lure drivers away from established automakers, some of which have a lot of brand loyalty from certain segments of the population.

Google faces an uphill battle in rolling out its technology because established automakers like Tesla, Audi and Mercedes Benz are moving to introduce their own autonomous vehicles. Those companies have such advantages as a dealer network and proven reputations.

Google and the Accurate Data Problem

The concept also makes a lot of sense because high insurance costs do deter some people from driving or buying cars. As I have pointed out elsewhere, the auto insurance market is highly inefficient, much like advertising before Google entered it.
One of the biggest drawbacks to current insurance is that insurers are not able to get accurate or up-to-date information on individual drivers and their habits. Part of the reason why insurers use bizarre criteria like credit histories and grade point averages to set rates is that they often lack detailed knowledge of a person’s actual driving habits.

If Google could supply such data, it could dominate the auto insurance market, much as it currently dominates online advertising and search. A number of questions remain here, including whether the government would let Google have such a monopoly on insurance. It could violate antitrust laws and raise concerns about the power of big business in today’s political environment in which anti-business feelings are running high.

Will Uber Enter Auto Insurance?

Then there’s what could be the $50 billion question here: Would Uber enter the auto insurance market or not? The networked transportation company is hiring roboticists, and it has launched its own self-driving car project to compete with Google’s. Google, for its part, is reportedly developing its own hire-car app to compete with Uber and is planning on fleets of robotic taxis.

Entering auto insurance would make a lot of sense for Uber because insurance has been one of the barriers blocking drivers from adopting its service. Some communities, like Kansas City, Missouri, have even banned Uber because of inadequate insurance. Offering insurance could remove that barrier and defuse one of the taxi cab industry’s main objection to Uber.

One thing is certain: The auto insurance industry is going to change drastically over the next few years, and Google will be a big part of that transformation. The big question we need to ask is what companies will survive that transformation and what companies will not. Some old, trusted and familiar names in insurance could disappear in the coming years.