Google Poised to Enter Auto Insurance Business



A number of media outlets are reporting that Google Inc. (NYSE: GOOG) is about to enter the auto insurance business.

Both The Wall Street Journal and The New York Times are reporting that Google is about to introduce a new service called Google Compare Auto Insurance Services that will sell automobile coverage directly to U.S. consumers. Google has apparently been selling vehicle insurance in the UK for about two years, The Times reported, so it has experience in the market.

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Google Compare would let you shop for auto insurance much as you would shop for airline tickets and hotel rooms through sites like Priceline and Kayak. Google Compare is apparently licensed to sell insurance from three different companies, The Journal reported.

Google Licensed to Sell Insurance in Half the States

Google is currently licensed to sell insurance in about half the states of the Union, Forrester analyst Ellen Carney noted. The states Google is licensed to do business in include some of the nation’s largest insurance markets, including Texas, California, New York, Florida, Pennsylvania, Illinois, and New Jersey. Carney thinks that Google has filed for licenses in other states; since her report was written last month, more states might have been added to the list.

The search engine giant has set up a separate company it calls Google Compare Auto Insurance Services Inc. to handle the vehicle coverage division. She also thinks there is a possibility that Google could be planning to buy an existing auto insurance comparison website called CoverHound Inc.

Carney’s theory is that buying CoverHound will enable Google to get into the U.S. insurance market faster. It would also give Google a working platform to tap and establish relationships with some top insurance providers. Currently Progressive, Travelers, the Hartford, Esurance, and Safeco polices are available through CoverHound.

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Owning CoverHound would also give Google entry into the homeowners, renters, and motorcycle markets because it sells those kinds of policies as well. CoverHound is a privately held company based in San Francisco.

Only one major insurance provider, MetLife (NYSE: MET), seems to have signed on to Google’s scheme, Carney reported. She identified five insurers that could participate in Google Compare, but most of them seem to be smaller regional companies like Dairyland, Mercury, Permanent General Assurance, and Viking Insurance of Wisconsin.

Carney speculated that other insurers are taking a wait and see attitude. What’s truly interesting is that some of the really big names like Berkshire Hathaway’s (NYSE: BERK.A) GEICO, State Farm, Progressive (NYSE: PGR), and Allstate (NYSE: ALL) are not mentioned. CoverHound is mentioned as one of the insurance providers in California. CoverHound’s website mentions nothing about a Google acquisition.

Google Insurance Not Ready for Prime Time

It is not clear when Google will launch its insurance service. Carney thinks that it could be rolled out in Illinois, Pennsylvania, Texas, and California sometime this year.

Google’s entry will really shake up the already competitive insurance business, but it may not be that disruptive. Since most insurance is sold through third party sellers such as agents, most insurers will not be affected.

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It isn’t clear what this could do for policyholders or if Google could save consumers much money. Insurance rates are determined by factors beyond industry control, the most important of which is state laws.

Google is not the only big company experiment with auto insurance sales; Walmart Stores Inc. (NYSE: WMT) is offering its own discounted policies in some states, including Pennsylvania. Google’s entry into auto insurance could also spur the largest online retailer, Amazon.com Inc. (NASDAQ: AMZN), to follow it into vehicle coverage.

Google’s presence in the insurance market could also lead to some intriguing experiments if it could combine Google Compare with experiments like the Google Car, Google Earth, and Google Maps. If Google could find a way to provide real time data about driving habits, it could save drivers a lot of money on premiums.

One has to wonder if Google’s entry into auto insurance could make insurance agents go the way of the milkman and become a curiosity. One thing is clear; the insurance industry will never be the same again after Google moves in.