Google Rises

We’ve all seen it on the big or handheld screen.

The protagonist vanquishes the enemy and is ready to ride into the sunset when out of nowhere, the bad guy rises from the dead.

The Terminator. Any number of Zombies. And of course the White Walkers.

The phoenix is a mythical bird that also dies and is reborn. Some may remember Fawkes, Dumbledore’s phoenix from the Harry Potter novels.

After living for hundreds of years, the phoenix spontaneously combusts and dies in the ensuing flames. But as the remains cool on the ground, a new phoenix is born from the ashes.

Just two years ago Google was trying to make inroads into the U.S. auto insurance market with an effort known as Google Compare.

The concept was both novel and mundane. You provide your rating info, they ping various carriers and comparative rating engines, and deliver quotes.

The purchase experience was a bit uneven, as some policies could be bound on-line, while others required you to talk with agency or carrier representatives. If you didn’t purchase, Google helpfully offered to reprice your coverages from time to time when you used their search engine.

On the whole, the potential shown was a bit scary. Google’s ability to know their customers is second to none, they focus relentlessly on customer experience, and they have exceedingly deep pockets.

After a year of experimentation, they decided that selling auto insurance via Compare was taking focus away from other initiatives more core to the mainline business.

They exited the market.

Backslaps All Around

Upon hearing the news, the industry heaved a sigh of relief.

The whole process fit a story arc that plays very well in the IA system. We live behind the white walls of our capabilities and the complexity of our industry. Outsiders are doomed to perish as they try to scale those walls.

Having vanquished the Google monster, the industry congratulated one another and got back to writing business.

Google had too many irons in the fire, and they turned to those non-insurance related projects.

But sandwiched in the crush of news right before the holidays last month was an interesting announcement.

In conjunction with the imminent start of allowing passengers to ride in fully autonomous vehicles, a Google business unit would be partnering with an insurtech to provide insurance.

Another Universe: Waymo

In August of 2015, Google rebranded itself as Alphabet. While there are any number of reasons why they did this, one was to create a parent company that would be able to work on multiple independent initiatives, so that work didn’t detract from Search, the core business of Google.

A year later, Google’s self-driving car project was rebranded Waymo.

Self-driving cars have gotten attention inside the insurance industry, much of it revolving around how and who will provide coverage. Still, much confusion surrounds exactly what constitutes a self driving car.

When the topic is ‘self-driving cars’, many immediately think: no driver, passengers sit passively as the car navigates to the desired destination. This however is the end game, and both the vehicle manufacturers and technology companies are in various stages of getting to that point.

The Society of Automotive Engineers has actually defined 6 different levels of autonomous capability. In the first three levels, the driver is responsible for monitoring the driving environment, in the last three, the vehicle is responsible for monitoring the driving environment.

  1. No autonomous capabilities; driver responsible for all functions
  2. Autonomous control of either speed or steering to remain in the lane; driver responsible for other functions
  3. Autonomous control of both speed and steering; driver responsible for other functions
  4. All aspects of the driving are controlled by the vehicle; driver intervenes if requested by the vehicle
  5. All aspects of the driving are controlled by the vehicle even if the driver does not intervene
  6. All aspects of the driving are controlled by the vehicle; the driver need not monitor the driving environment

Waymo is hard at work building the software and hardware to build vehicles that perform at the highest levels of automation. That work is being done in both the virtual and real worlds. At this point, Waymo vehicles with capabilities ranging from level 2 through 5 have logged millions of miles on streets and highways around the country.

More impressive, virtual cars have logged billions of miles in a Waymo virtual driving simulation known as CarCraft. Waymo runs a tightly integrated testing environment that combines knowledge gained from both driving situations IRL as well as insights from CarCraft.

For example, when a test vehicle encountered difficulty with traffic in a round-about, the Waymo software engineers created a version in CarCraft in order to run multiple iterations. In this way, problematic situations can be run hundreds of times in a single day.

They also have a facility in rural California where they build test tracks to further prove the software in those same situations.

All this has led to autonomous car testing in Phoenix over the past year. And now Waymo is about to start trials with level 6 vehicles that have passengers on board.

Life From the Ashes

On December 21, 2017, Waymo and Trov announced that they would partner to offer insurance to riders. Although some of this smacks of the same marketing hype of which we’ve accused Lemonade, it is probably far more than pure hype.

Trov is an U.S. based insuretech that started providing on-demand, short-term property coverages. Although they got their start overseas, they have announced their intent to provide coverages here; targeting all 50 states by end of Q1 2018.

Perhaps you’re a college student with no homeowners coverage. But you’re headed out for a ski vacation over spring break and you want to cover your skis while out west. Turn the Trov coverage on via your mobile phone before you leave, turn it off when you return.

The result is coverage when needed at a fair price.

Reasonable insurance minds can argue whether or not these types of ‘micro insurance’ are a genuine innovation or a fools errand.

What we as an industry need to recognize and accept is that buyer needs are shaped by their perceptions, not our theories of exposure and risk transfer.

Investors see the promise. Trov didn’t get $ 85 million in investment over the past few years because their ideas are considered crazy.

The joint announcement from Trov and Waymo indicates that they will use the Trov on-demand capabilities to provide coverage for riders. Policy coverage starts when the rider gets in the Waymo vehicle and terminates at the end of the trip.

Waymo will be paying the premiums for three coverage components: physical damage for rider personal property, trip interruption coverage, and medical coverage for injuries sustained in an accident.

Doesn’t any reasonably insured individual already have protection for these exposures? Other than the trip interruption cover, the answer is, as always, a ‘qualified yes’.

A big to-do about a whole lot of nothing, right?

Maybe, Maybe Not.

Long Story Short

As we’ll explore in a future post, new entrants in an industry often focus their efforts at the margins, on the business for which incumbents aren’t necessarily competing.

These new entrants cut their teeth and improve their capabilities in segments overlooked by their more established competitors and then turn their sights on more desirable market segments.

Google’s valuation of almost a half trillion dollars and annual revenues of $ 66 Billion make even the largest insurance companies seem puny by comparison. More important, they have interactions with hundreds of millions of U.S. insurance purchasers virtually every day.

It’s probably wishful thinking to believe that their initial experience in the U.S. insurance market has permanently soured them on the industry. Google is relentlessly profit driven. If they see an opportunity to make some money, they’re going to take it.

This is new terrain for Trov as well. Until now, their coverage offerings have been 100% property based. Does this foray offer opportunities for Trov to get into the on-demand market for medical coverages? How about auto insurance? A logical extension might be offering coverage extensions for drivers for Transportation Network Companies.

Think I’m full of it, and that this is just one more non-event? Respond below and we’ll get a dialog started.

Good Selling, Marty