How good is transparency in a market? That answer may depend solely upon where you are on the supply side of the equation or whether you are a consumer. If Google is exiting its auto insurance inside of Google Compare, this could end up being great news for the insurance companies themselves. It might also be bad for consumers.
24/7 Wall St. wanted to see if any analysts or research shops had made comments or opinions on the story that Google would shut down its auto insurance comparison efforts. it turns out that Merrill Lynch sees this news as a net positive for profits of auto insurers.
Some of this may seem irrelevant on the surface. After all, if one search and compare result is gone, who cares — or should you care? When it is Google, then YES.
Merrill Lynch said that if Google Compare became very successful, it could result in an increase in commoditization of the auto insurance market. Their report said:
Increased price transparency and ease of shopping both by consumers has negative implications for auto insurance profitability over time as the market becomes more efficient. As this trend plays out, smaller companies that do not have a particular niche or ample scale will find it increasingly difficult to compete with the scale companies, in our view. This hiccup in the road is a net positive for auto insurers as it may delay the further commoditization of the product – potentially for a number of years. We cannot rule out another disruptive player or technology in the near future.
The Merrill Lynch report further said:
News outlets have reported that Google Compare, the company’s comparison shopping site for auto insurance will shut down. This should be a net positive for auto insurers as it may delay the further commoditization of the product. We cannot rule out a re-entry of Google to the market or another disruptive player or technology in the near future… News reports have also suggested that Google may not permanently be out of the auto insurance space and may be “going dark” for retooling, so we cannot rule that scenario out… We believed Google’s entry into the market was potentially an important development in the evolution of auto insurance distribution.
So, does this have a meaningful impact on insurers on Tuesday? Not on the surface.
Allstate Corp. (NYSE: ALL) was last seen down 0.9% at $63.85, with a 52-week range of $54.12 to $72.51.
Progressive Corp. (NYSE: PGR) was last seen down 0.25 at $31.98. its 52-week range is $25.92 to $33.95.
Maybe Google is putting the car insurers in good hands after all — or maybe progressive’s own comparison tool for auto insurers is something that Google thinks it can’t help much with.