Is Google Buying CoverHound? The Curious Case Of The California Insurance License

It’s one of the worst-kept—and surely most disruptive—secrets in the US insurance market.  Soon, Google could be piloting its Google Compare auto insurance comparison shopping site in the US, following the lead of  its 2012 Google Compare UK site roll out. 

But the launch of Google Compare in the US apparently hasn’t been easy.  Even though insurers have been mentioning Google overtures to participate on the comparison site to me for more than two years now, the Google Compare US site launch keeps getting pushed back.  As late as last month the site was expected to launch in California, to be followed in Q1 2015 with likely launches in  Illinois, Pennsylvania, and Texas. Last I heard was that California pilot wouldn't begin until sometime in Q1.

And one thing’s for sure:  Google Compare is going to have big implications for US insurers.  While doing the research for a report on what Google Compare is going to mean for insurer strategies in 2015, I took a look at a bunch of state insurance commission filings to see just what was up with the entity now officially doing business as Google Compare Auto Insurance Services Inc.  What did I learn?

  • They’re licensed to business in more than half the states.  Along with California, the entity is licensed to do business in at least Alaska, Arkansas, Arizona, Delaware, Florida, Idaho, Illinois, Indiana, Louisiana, Massachusetts, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, New Jersey, Washington, West Virginia, Wisconsin, and Wyoming. There may be more in process.
  • They’re working with a handful of identified insurers.  Among the insurers that Google is authorized to transact business on behalf of are Dairyland, MetLife, Mercury,  Permanent General Assurance, Viking Insurance of Wisconsin and Workmen’s, meaning that many others were likely taking a wait and see approach before jumping on. 
  • The corporate officers haven’t worked in insurance. Stephanie Cuthbertson, Kenneth Yi, and Meredith Stechbart are acting as the President, Secretary, and Treasurer, respectively.  Their jobs at Google, at least according to LinkedIn?  Roles like Project Manager, Securities and Corporate Governance, and Regulatory Operations Program Manager, respectively.  The lack of insurance chops means that they may think differently about insurance or at least are good at dotting the i's and crossing the t's that state insurance departments demand.
  • The  Corporate Treasurer added  CoverHound to her California producer license.  Most interestingly, on December 9, 2014,  Ms. Stechbart, the Corporate Treasurer for Google’s insurance entity and who has the job of Regulatory Operations Program Manager at big Google, added San Francisco-based CoverHound as one of the companies she’s authorized to transact on behalf of in addition to  Google Compare Auto Insurance Services  Inc. on her California individual producer license.

So, what could this last point mean?   

As much as I’d like to imagine someone could become so enthralled with the insurance industry that they’d leave a job at Google to become an insurance agent, there’s a more logical explanation for the addition of CoverHound on Ms. Stechbart’s license.  An acquisition of CoverHound gets the Google insurance entity to market faster in the US than they’ve been able to get  on their own; it gets them a national full service independent agency with more insurers that have already signed on; CoverHound’s San Francisco headquarters is conveniently close to Google’s Mountain View Campus; plus CoverHound gets Google the kind of insurance chops that the company will really need should they decide they really like the insurance business.  And an acquisition might explain this most recent delay. 

I did reach out to Ms. Stechbart through LinkedIn to see if she'd answer a couple of questions I had about her California producer license,  My request did prompt a look from her at my LinkedIn profile, but not a response back.

Time will tell. 

Questions or comments? Feel free to ask them here.

Comments

Good investigative work

Good investigative work Ellen. Also interesting is that Coverhound’s early funding and guidance came from start-up incubator AngelPad who was founded by 7 Ex-Googlers. http://techcrunch.com/2011/03/29/angelpad-round-two/

Larry

Suggestion

I can't tell if the other commenters are being facetious or not, but I thought this was a good read. Getting exposure to the start-ups is a really big deal for them. It's also interesting to see what people are spending their time on.

And calling the startups boring is generally low class. Just cause you're not interested in something doesn't mean someone else wouldn't be.

Larry, a very interesting

Larry, a very interesting additional insight--thanks for sharing it.

Google Selling Auto Insurance

This should only be the beginning for Google. Access to millions of subscribers who all buy insurance. The banks have already done it.

When I first read this all I

When I first read this all I could think of was fuel cells. I may be completely off base here, but I think most of Google's weird investments are to lower the cost of power. So I thought, how might insurance lower the cost of energy. Well, I thought about their current investment in autonomous cars (cars that are autonomous are better drivers than people, inherently better fuel economy, fewer wasted cars built, less traffic jams so higher average speed). But, they want electric autonomous cars. The downside to electricity is the energy density of batteries is abysmal compared to chemical fuel, so either huge breakthroughs in batteries have to happen (lots of competition to buy batteries between all the things that use batteries) or create efficient in-car-generators. Now, Honda made a fuel-cell car a while back but it didn't do so hot. And, one of the biggest challenges of any new fuel type is the chicken and egg problem of infrastructure. That's not the hurdle for fuel cells though, it's super expensive (often platinum) catalysts. Which, oddly enough isn't so much of a hurdle (because they could in theory be recycled) as the challenge of insuring a car that costs so much to make, but so little to lease (average person won't pay several hundred dollars a month on insurance). That whole issue could be sidestepped if Google were its own insurer for its self driving cars, if they were to say have expensive catalysts and fuel cells. Fuel cell innovation, adoption and manufacturing ensues, less fossil fuel consumed, and by dint lower energy costs. As a side note, the search for insurance gets easier and for less than 15 minutes you could save more than 15% on car insurance.

Ellen - Thank you for this

Ellen - Thank you for this very interessting blog. An idee what does this mean for the european market?

Google...might be trying to access OPM

Great article. Most of us focus on the INVESTMENT strategy, but the FUNDING strategy of Berkshire Hathaway is even more important. I think this is where Google is going.

So...where does Buffett get the money to invest? Does he borrow? Is it all his? This touches on it a little bit: https://www.quora.com/If-Warren-Buffett-had-to-start-today-could-he-stil...

Doesn't Social Trump Search?

Great post, Ellen. I can hear your voice. :-)

Word of Mouth referrals have always trumped blind Search. Before the internet, a recommendation from a friend was always better than flipping through the white pages, right? The same holds true today, doesn't it? So doesn't Social Trump Search?

Plus you have the issue of trust. Everyone knows Google has all the data and is making big bucks from it. But not everyone wants to then pay them a monthly premium.

Quick story: Yesterday I scrolled through my Google Now app on my Droid. One of the "Cards" showed that I had a payment due on my credit card next week, including the BALANCE. OK, that's irritating. The card info was never shared with Google.

... But then again, I guess it was because they have it. Rats.

GOOGLE COMPARE

This concept has been working in a lot of places the past 20+ years. Can remember in 1994, State Farm sent one of their Vice Presidents to see how a similar company in the UK could become the #1 rated carrier with NO AGENTS.( Cutting out the middle man, Agents, can save as much as 10% of the premiums collected by the carrier.) I remember Ed telling us vividly. Ed Rust Jr was the President of State Farm and we were all in a meeting in Vienna, Austria at the time he told the group of agents in attendance. But rest assured State Farm was not going to do this.

Google Insurance Quote

Is more completion better?
Sure! As long is not an unfair competition.
Is this a good decision for Google?
Let’s think about for a second. Google is a search engine that gets Billions from Geico; Progressive; Esurance; etc. Why should they continue to invest advertising with Google if they are now in competition with Google? Do they thing Google is not change the search engines to benefits their interest?
It is all good have billion at not know what to do with the money; Instead of continue to develop advances in software and technology and stay the leader is now attempting to be a disrupter and opening themselves to class actions law suits for conflicts of interest from everyone that advertises in Google. I saw large companies fold for making wrong decisions.
I am just a small agency that everyone is trying to get the small 5% to 15% commissions we get by going direct. We as a small agency have employees that depend on us; buy software; equipment; advertise on Google and give personalized advise and responsive services and we take responsible for the clients we represent.
At end the business of disputers can just closed the web and suddenly clients by be sorry and want to go back to a local service representative and they might not be there anymore.
They were forced to close and with them lots of employees and supporting companies that support the independent agency system.
May be is time for Government looks into protect the public from monopolies that can disrupt an industry that service the public well for generations.

Google and Auto Insurance

Ellen, very interesting article. My thoughts are more aligned with Levi King's comments. In my view this is more long term and aligned with Google X's autonomous vehicle project. Apart from the technology challenge, the obstacles are current auto insurance and related products and liability laws. The disruption of the reinsurance market by the alternative market will seem small relative to how a full fledged autonomous vehicle will impact the insurance industry. What is personal lines, will either become commercial lines, or just warranty or service contract insurance through manufacturers (including software), their captives and the excess/reinsurance market. Considering the auto volume in the insurance industry this will restructure the industry and impact the bond market over time. It will also be the precursor to adjusting law to start to deal with higher levels of robotics and artificial intelligence. I doubt this is lost on Google, who may also want to build an alternative database of risk and loss costs to the insurance industry. I am surprised that Amazon and a number of the bank and other credit card companies have not done the same.

Licensed?

Hi Ellen,

What I found today is that Google Compare is registered with the Corporations Division in Oregon, but not licensed with the Insurance Division. It's an interesting position in the insurance business if the company does not have to be licensed by the state. Granted, it's not an insurer or an agent. But it's receiving some fee from sales. How does that work?

Insurance opportunity

Ellen,
I would love the opportunity to speak with Stephanie Cuthbertson, Kenneth Yi, and Meredith Stechbart about the big picture and where they plan on taking this business model. Is there a way to get introduced?

I think Google buying an

I think Google buying an insurance comparing company is a great idea. With the power of Google behind your searches you will be able to find the best deal on insurance hands down. I can't wait to see this come out and help tons of people find the perfect insurance for them. http://www.village-insurance.com/auto-insurance.html