Google has the German insurance industry trembling in its boots. For months, there have been expectations that the search engine giant will enter the German market with a comparison site for insurance policies, making life difficult for the industry, as is already the case in Great Britain.
More and more people are buying insurance on the Internet, often with the aid of comparison websites. This has led insurance companies to fear more competition, especially if such a deep-pocketed company such as Google plunges into the market. At a recent symposium, Christian Lindner, the leader of the pro-business Free Democratic Party, predicted that it would take less than 10 years before Google started selling customized insurance policies.
The companies that would be initially affected by the Google site are those that sell simple insurance products for which consumers require little to no advice. Providers of automobile and household insurance, in particular, can expect to see a significant increase in new policies concluded via the Internet by 2018, predicts the KPMG consulting firm. In Britain, 20 percent of new policies today were bought as a result of searches on online comparison sites.
“We have nothing to announce about a possible launch in Germany at this time.”
But Google is taking its time in Germany. “It’s correct that we offer an insurance comparison product in Great Britain called Google Compare. However, we have nothing to announce about a possible launch in Germany at this time,” according to a Google statement.
Google’s hesitancy is understandable, given that another comparison site, Transparo, just disappeared from the scene when it was acquired by Verivox. Market observers attribute this to the tough competition between Transparo and Check24, the top German comparison site.
A consortium of auto insurers founded Transparo in 2001, in response to the threat of Check24 gaining a monopoly in the market.
The founding members, headed by HUK-Coburg, included Talanx and Stuttgart-based WGV.
The idea behind the site was that more providers would lead to lower commissions, thereby making the comparison sites less lucrative. Market observers believe the strategy worked. They note that before Transparo was launched, commissions ranged from €80 ($107) to €90 for each policy sold, but then declined to €60.
But competition was also costly, and the insurers eventually pulled the plug, leading to the sale of Transparo. This explains why the impact on the insurance industry could in fact be positive at first if Google joins the fray and forces down average commissions, said Jürgen Thiel, an analyst at Roland Berger Strategy Consultants.
But it’s a different story in the long term.
“There is a risk that Google only views the comparison site it is apparently planning as a first step,” Mr. Thiele warns.
Experts believe that it is unlikely that the threat from Silicon Valley could now prompt the industry to make a decisive move into Internet-based sales. Insurance companies tend to “take a wait-and-see approach when it comes to investing in new technology,” Martin Köhler of KPMG said.
Translated by Christopher Sultan