Google’s Entry Into Auto Insurance May Scare Many Agents

No Name - No Grade

One problem is that Google designs self-driving cars, which gives it a huge advantage in the auto insurance market.

"It means Google knows the rules for driving on every road in the United States and they're working on Europe. So they know that on this block you can go 25 and on the next block you can go 35. They know where you can take a right turn, a left turn or whatever," Berkley said. In that respect Google has the capacity to change auto insurance because it will be able to charge a different amount for every driver and every car.

"They can give you a plug in device, not unlike Progressive, and they know exactly when you're breaking the law and when you're not. They can rate you exactly on how good a driver you are. Every day," he said.

In addition, the better a person drives, the less this person will pay so Google's platform will likely appeal to regulators. That's because it's a self-correcting model. Drivers who notice their car insurance going up because of poor driving can change their driving habits.

"There's something else. I no longer pay by the car, I pay by the driver. You plug it in and they know how many miles you drove. And they know what kind of car it was," Berkley said

And they charge in accordance with that, making it a real risk-based system. Plus, because Google has Gmail, they can charge direct and sell direct, he said.

These technology driven changes are based on information and facts and will provide Google with better predictability.

"It's exciting, it's challenging. … It's change," he said. And agents can either embrace it or lag behind.

Softening the blow, Berkley said agents will continue to have an important role in the auto insurance business because people will still be willing to pay for the service agents provide. "But we need to start by asking — 'what do our customers want, how do we serve them, what are we going to do to make money and see that that they are happy?'"

He likened the impact of Google's entry into auto insurance to that of Geico when it pioneered its model of selling coverage online and direct.