Google car insurance us
The following is a guest column written by Rory Joyce from CoverHound.
Last week Google Advisor made its long-awaited debut in the car insurance vertical -- in the UK. Given Google’s 2011 acquisition of BeatThatQuote.com, a UK comparison site, for 37.7 million pounds ($61.5 million US), it comes as little surprise that the company chose to enter the UK ahead of other markets. While some might suspect Google’s foray into the UK market is merely a trial balloon, and that an entrance into the US market is inevitable, I certainly wouldn’t hold my breath.
Here are three reasons Google will not be offering an insurance comparison product anytime soon in the US market:
1) High Opportunity Cost
Finance and insurance is the number one revenue - generating advertising vertical for Google, totaling $4 billion in 2011. While some of that $4 billion is made up of products like health insurance, life insurance and credit cards, the largest segment within the vertical is undoubtedly car insurance. The top 3 advertisers in the vertical as a whole are US carriers -- State Farm, Progressive and Geico -- spending a combined sum of $110 million in 2011.
The keyword landscape for the car insurance vertical is relatively dense. A vast majority of searches occur across 10-20 generic terms (ie - “car insurance,” “auto insurance,” “cheap auto insurance,” “auto insurance quotes,” etc). This is an important point because it helps explain the relatively high market CPC of car insurance keywords versus other verticals. All of the major advertisers are in the auction for a large majority of searches, resulting in higher prices. The top spot for head term searches can reach CPCs well over $40. The overall average revenue/click for Google is probably somewhere around $30. Having run run similar experiments with carrier click listing ads using SEM traffic, I can confidently assume that the click velocity (clicks per clicker) is around 1.5. So the average revenue per searcher who clicks is probably somewhere around $45 for Google.
Now, let’s speculate on Google’s potential revenues from advertisers in a comparison environment. Carriers’ marketing allowable is approximately $250 per new policy. When structuring pay-for-performance pricing deep in the funnel (or on a sold-policy basis), carriers are unlikely to stray from those fundamentals. In a fluid marketplace higher in the funnel (i.e. Adwords PPC), they very often are managing to a marginal cost per policy that far exceeds even $500 (see $40 CPCs). While it may seem like irrational behavior, there are two reasons they are able to get away with this:
a) They are managing to an overall average cost per policy, meaning all direct response marketing channels benefit from “free,” or unattributable sales. With mega-brands like Geico, this can be a huge factor.
b) There are pressures to meet sales goals at all costs. Google presents the highest intent of any marketing channel available to insurance marketers. If marketers need to move the needle in a hurry, this is where they spend.
Regardless of how Google actually structures the pricing, the conversion point will be much more efficient for the consumer since they will be armed with rates and thus there will be less conversion velocity for Google. The net-net here is a much more efficient marketplace, and one where Google can expect average revenue to be about $250 per sold policy.
How does this match up against the $45 unit revenue they would significantly cannibalize? The most optimized and competitive carriers can convert as high as 10% of clicks into sales. Since Google would be presenting multiple policies we can expect that in a fully optimized state, they may see 50% higher conversion and thus 15% of clicks into sales. Here is a summary of the math:
With the Advisor product, in an optimized state, Google will make about $37.50 ($250 x .15) per clicker. Each cannibalized lead will thus cost Google $7.50 of unit revenue ($45 - $37.50). Given the dearth of compelling comparison options in insurance (that can afford AdWords), consumers would definitely be intrigued and so one can assume the penetration/cannibalization would be significant.
Of course there are other impacts to consider: How would this affect competition and average revenue for non-cannibalized clicks? Will responders to Advisor be incremental and therefore have zero opportunity cost?
2) Advisor Has Poor Traction in Other Verticals
Over the past couple of years, Google has rolled out its Advisor product in several verticals including: personal banking, mortgage, and flight search.
We know that at least mortgage didn’t work out very well. Rolled out in early 2011, it was not even a year before Google apparently shut the service down in January of 2012.
I personally don’t have a good grasp on the Mortgage vertical so I had a chat with a high-ranking executive at a leading mortgage site, an active AdWords advertiser. In talking to him it became clear that there were actually quite a bit of similarities between mortgage and insurance as it relates to Google including:
- Both industries are highly regulated in the US, at the state level.
- Both verticals are competitive and lucrative. CPCs in mortgage can exceed $40.
- Like insurance, Google tested Advisor in the UK market first.
Hoping he could serve as my crystal ball for insurance, I asked, “So why did Advisor for Mortgage fail?” His response was, “The chief issue was that the opportunity cost was unsustainably high. Google needed to be as or more efficient than direct marketers who had been doing this for years. They underestimated this learning curve and ultimately couldn’t sustain the lost revenue as a result of click cannibalization.”
Google better be sure it has a good understanding of the US insurance market before entering, or else history will repeat itself, which brings me to my next point...
3) They Don’t Yet Have Expertise
Let’s quickly review some key differences between the UK and US insurance markets:
- Approximately 80% of car insurance is purchased through comparison sites in the UK vs under 5% in the US.
- There is one very business-friendly pricing regulatory body in the UK versus state-level, sometimes aggressive, regulation in the US.
- The UK is an efficient market for consumers, the US is not. This means margins are tighter for UK advertisers, as evidenced by the fact that CPCs in the UK are about a third of what they are in the US.
As you can see, these markets are completely different animals. Despite the seemingly low barriers for entry in the UK, Google still felt compelled to acquire BeatThatQuote to better understand the market. Yet, it still took them a year and a half post acquisition before they launched Advisor.
I spoke with an executive at a top-tier UK insurance comparison site earlier this week about Google’s entry. He mentioned that Google wanted to acquire a UK entity primarily for its general knowledge of the market, technology, and infrastructure (API integrations). He said, “Given [Google’s] objectives, it didn’t make sense for them to acquire a top tier site (ie - gocompare, comparethemarket, moneysupermarket, confused) so they acquired BeatThatQuote, which was unknown to most consumers but had the infrastructure in place for Google to test the market effectively.”
It’s very unlikely BeatThatQuote will be of much use for the US market. Google will need to build its product from the ground up. Beyond accruing the knowledge of a very complex, and nuanced market, they will need to acquire or build out the infrastructure. In the US there are no public rate APIs for insurance carriers; very few insurance comparison sites actually publish instant, accurate, real-time rates. Google will need to understand and navigate its way to the rates (though it’s not impossible). It will take some time to get carriers comfortable and then of course build out the technology. Insurance carriers, like most financial service companies, can be painfully slow.
I do believe Google will do something with insurance at some point in the US. Of the various challenges the company currently faces, I believe the high opportunity cost is the toughest to overcome. However, the market will shift. As true insurance comparison options continue to mature, consumers will be searching exclusively for comparison sites (see travel), and carriers will no longer be able to effectively compete at the scale they are now -- driving down the market for CPCs and thus lowering the opportunity cost.
This opportunity cost is much lower however for other search engines where average car insurance CPC’s are lower. If I am Microsoft or Yahoo, I am seriously considering using my valuable real estate to promote something worthwhile in insurance. There is currently a big void for consumers as it relates to shopping for insurance. A rival search engine can instantly differentiate themselves from Google overnight in one of the biggest verticals. This may be one of their best opportunities to regain some market share.
Confirming earlier reports that Google has been plotting a move to help sell consumers auto insurance in the U.S., the search giant announced this morning it’s launching a new feature called “Google Compare for Auto Insurance,” a comparison-shopping site that lets you compare the rates from different insurance providers. The option to compare rates will begin popping up after a consumer does a Google search for “car insurance” using Google’s search engine. Initially, the service is being made available to California residents, but Google says other states will soon follow later this year.
Consumers who enter in this search query will see a small, gray questionnaire appear, asking for their zip code, and other information about their vehicle. If they choose to fill that out, Google will return a comparison unit listing insurance premiums, provided by its insurance advertiser partners. Alternately, users can also go to www.google.com.com/compare to kick off the same experience and get quotes.
Google’s insurance partners, which include Mercury Insurance and MetLife, as well as local providers, is based on a flexible cost-per-acquisition (CPA) model, Google notes, adding that payment isn’t a factor in ranking or eligibility. The insurance providers can also use the service to highlight what makes them unique, as the Compare product has a field where they can mention their differentiating features – like safe driver discounts, or “A”-rated customer service, for example.
Today, Google already provides auto and travel insurance quotes, as well as mortgage quotes in the U.K., and it operates a credit card comparison site in the U.S., all of which fall under the “Google Compare” branding. However, recent job postings have hinted at Google looking to bring a similar mortgage comparison service to the U.S., and Forrester also said earlier this year that it expected Google would roll out a car insurance comparison service in Q1, beginning with California.
The auto comparison U.K. site has been live since 2012, but the U.S. launch has continually been pushed back. However, as of this January, Google Compare Auto Insurance Services, Inc. was licensed to do business in more than half of U.S. states, Forrester noted. The firm also found that Google was working with San Francisco-based car insurance comparison startup CoverHound, and speculated they had been acquired – a guess that CoverHound shot down soon after.
Google says that its comparison technology was built in-house, but did confirm it’s working with “many partners” including CoverHound and Compare as part of the quote aggregation process.
The move to offer insurance comparisons to web searchers could help Google generate additional revenue through commissions, but several of the major insurance carriers in the U.S. have been declining to work with Google on this new effort, we understand, including names like Progressive, State Farm, GEICO, and Allstate. (We asked Google if it would list its current partners, but the company declined. However, its website lists the logos of several providers including The General Insurance, 21st Century Insurance, Infinity, Kemper Speciality, Titan Insurance, Stillwater, CSE Insurance Group, and others.)
“Many of the major carriers are very resistant to participate on the Google Compare platform,” explains Joshua Dziabiak, a co-founder at car insurance comparison startup The Zebra. “Based off what they’ve built in the U.K., carriers see this as a price-only comparison…and they don’t want to be compared only on the price,” he says.
More Data For Google’s Self-Driving Car Biz?
It’s unclear how much revenue Google would generate from this auto insurance comparison site, as consumers may not be prepared to buy from an aggregator like this at present. But auto insurance companies write $175 billion in premiums for private passenger auto insurance yearly, and the typical insurance commission is somewhere around 10%. (Some of that may be shared with partners like CoverHound, however.)
But for Google, the comparison site may not be just about an additional revenue stream – it could be about collecting more information on how the different insurance companies price the same risk. Google can use that information if it wants to underwrite auto insurance itself in the future.
“If you think about what’s going on with self-driving cars in the future, Google is really going to have to understand how insurance companies price risk because the whole model is going to change,” notes Forrester analyst Ellen Carney. “And I imagine that some component of insurance is going to be included with the car,” she adds.Featured Image: suphakit73/Shutterstock
Giant search engine Google, which already offers auto insurance online in the United Kingdom, could soon be selling auto insurance online in the U.S.
Google Compare Auto Insurance Services Inc., its online auto insurance shopper, has been licensed to sell insurance in at least 26 states and is working with several insurers including Dairyland, MetLife and Mercury Insurance, Forester Research’s Ellen Carney reported in her blog this week.
Carney reports that Google has been working on the project for more than two years and could finally launch later this quarter in California, followed by Illinois, Pennsylvania and Texas. According to the Forester Research technology expert, Google could be working with CoverHound, which currently offers online quotes for multiple insurers including Hartford, esurance, 21st Century, Travelers, Safeco, National General, Progressive, Foremost, Plymouth Rock and others.Partnership Report
Also, Conor Dougherty of the New York Times technology blog Bits reported that Google recently formed a partnership with the Virginia-based insurance comparison shopping site CompareNow.com. Comparenow, which was launched in 2013, allows users who complete a single, simplified form to obtain comparison quotes from multiple carriers, and buy a policy online, by phone or through a local agent.
Google could present formidable competition for other insurance sellers. As many as two-thirds (67 percent) of insurance customers said they would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon, according to research by Accenture.
“Competition in the insurance industry could quickly intensify as consumers become open to buying insurance not only from traditional competitors such as banks but also from Internet giants,” Michael Lyman, managing director for management consulting within Accenture’s Insurance industry practice, said in February upon release of his study.
However, another report, this one by TransUnion, indicated that shopping for auto insurance online may have peaked already. It found that shopping rates for auto insurance were down about 3 percent in the 12 months ending Feb 2014 relative to a year earlier.
Related: Has Online Shopping for Auto Insurance Peaked?
“We are finding that despite billions of dollars being spent on advertising each year, the percentage of consumers shopping for auto insurance has been dropping for approximately the last two years,” said Mark McElroy, executive vice president of TransUnion’s insurance business unit at the release of the study. “This places additional pressure on insurance carriers as their pool of potential customers declines.”
Google Compare (google.co.uk) launched in the UK in 2012. In addition to insurance, the service allows consumers to comparison shop for credit card offers, travel insurance and mortgages.
Google has also been in the forefront of the development of driverless vehicles.
Google Inc. does own the site, GoogleCompare.com, however the site is not operational.
Google has not responded to Insurance Journal requests for more information. The tech giant told Reuters and the Wall Street Journal it does not comment on speculation.
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- Insurance Keywords Add Big to Google Profits
- Google, Detroit Take Different Routes on Driverless Cars