When I got to know that there was a suggestion at the Gartner symposium that google is the next big entrant insurance carriers should be scared off, the first though that came to my mind was - Balooney - why would google enter a totally unrelated business which has no leverage from its existing business - at best I though they could come out with insurance products for the cloud computing space - i.e data security insurance , open source indemnification(which is really an insurance business). It was not until later I realized that there were in fact a lot of synergies between Google and Insurance Companies.
What is Google's greatest asset? I would argue that it is - They know their customer too well. By knowing there customer I do not mean the traditional meaning implied by having a CRM , some excellent relationship managers etc. What I really mean is having the ability the drill down to each individual customer and knowing what is going on in customers life- what is on his mind(google search) , what kind of news is he/she reading(google news) , what does the customer watch(youtube), where does he generally travel and at what speeds does he travel (google Android) , What kind of friends he has (open social) etc.
If you ask an Insurance executive what is the key product differentiator for an insurance company? You will probably hear - Underwriting and Rating. And what makes better underwriting and rating - Knowing your customer very well. DMV records , Credit history , Claim history ,Demographic information and a whole bunch of other factors- most of it available as Pay for use data by data vendors like DNB, Choicepoint etc.
So needless to say that there is a clear leverage google has from its existing business to the insurance space. and getting into this space will further strengthen its dataset on each customer as it will get a different aspect of data on the customer.
Irrespective of whether google enters insurance or not I do feel that the next generation insurance company (Insurance 2.0) will have to be a Web2.0 company - that harnesses every interaction of an individual in the digital world (Searches , Movement - via android like technology , Relationships-via social networking ) to better its underwriting and rating capability and choose a better risk.
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4 comments:
Insurance can be tricky and sometimes confusing. It's good to have a basic foundation on what insurance is and what it's suppose to do for you.
Insuring an individual is essentially a physical real world proposition. Which is something people are getting better at tracking everyday. I think the insurance industry will see a renaissance of analytics and become much more knowledgeable about their customers.
Allan - you phrased it quite well -"physical real world proposition"
I think the most challenging aspect in Insurance 2.0 would be the legal and privacy concerns as a result of pricing based on the meta understanding of the individual.
Giving a relevant search result or a news feed based or a music recommendation on meta understanding of the customer is fine as there are no losers. but if you price a product based on this , there are bound to be legal issues.
Using credit score to decide the insurance premium keeps on getting questioned again and again. What would happen if we put a "black box" like onto the customer (in the form of google android) ans use that data to price is a question we will have to struggle with for some time
The clarity in the risk that the insurance co is taking is fairly attractive and obvious. The privacy implications are un-nerving! I hope such a company never sees the light of the day.
The myriad securities in the financial services industry though could use a dose of analytics..
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