In the second part of this exclusive interview, Nicolas Weng Kan, CEO of Google Compare, spoke with INN’s Chris McMahon about insurers’ marketing costs, the appeal of the aggregation model to insurers and consumers, as well as the future of agents.

INN: What makes the Google Compare model appealing to insurers?

NWK: Everybody's excited that this is an easy way to acquire customers. Instead of having a display model, where you pay to be advertised, this is a fixed-cost model. We, as Google Compare, are taking all of the marketing risk. We are displaying all of those prices for free. We do not get remunerated unless there is a sale of a policy. Our objectives are entirely aligned. I think that's one of the most exciting things about this one, is that it allows everybody to advertise on the same level.

INN: Why do they decline?

NWK: Of course. A lot of people are afraid of what kind of change will be coming. My response to that is: Change will be coming; learn how you can utilize that change to your benefit. What we have seen -- and I keep on giving this as an example -- is if you look at the top five insurers in the UK 20 years ago, and the top five insurers now, four of them are not the same anymore. That became due to the emergence of Internet and how they embraced new technology.

INN: The idea that the agents would be disintermediated is a big concern for the agents. I'm wondering how the insurers view it. It could be argued it’s a net positive; insurers could control the customer experience more readily, from sales to claims. They could establish closer relationships and interact with those customers more frequently and on different topics rather than going through the agent.

NWK: I think that there's a wrong perception here: that our objective is to displace the agent. We are currently working with some partners with that exact model that integrates the agent into our distribution model. What happens is that the customer sees a price and then when they want to fulfill, we direct them to an agent. Who controls the agent is the insurer. But at the end of the day, there is a close relationship between the agent and the carrier that we feel is valuable and do not want to destroy.

INN: And yet, there are 10 percent fewer agents now than there were in 2005. I'm not saying it's your responsibility or Google Compare’s fault, but it's measurable. It's true.

NWK: Yes, it's true, but we were not there for the last ten years! (laughs). We just got here!

INN: It's arguable that trend could accelerate if these aggregation sites gain traction in the U.S. You're only in California; there's 49 other states.

NWK: I think that you will see probably an emergence of smarter agents. Agents bring a lot of value to the carriers. If you look at the UK, people keep on saying that it's all about online fulfillment. One of the key discoveries here is that, even with price comparison, more than half of the sales that happen in the UK will be happening through a live person, be it on a call center or an agent on the ground. It doesn't happen completely online. There is a level of complexity and a level of comfort that customers need before they make the commitment to buy the policy.

INN: I believe that. And yet we see their numbers declining. The first thing you said was direct sales. I'm just curious as to what you're thinking about that as a manifestation of the model. I noticed that the largest P&C insurers in the U.S. -- State Farm, Nationwide, and Allstate -- are not yet participating in Google Compare. Metlife is, and they're big, for sure. But is there something about this that appeals to smaller insurers more so than large?

NWK: I think that you have to address that question to them. I'm not going to answer that one.

INN: I did speak to Andrew Rose, CEO of Compare.com, and he said they are hoping that the large insurers are not ready yet to do this, that this is a way for smaller insurers to potentially gain some ground and market share. Any thoughts about that?

NWK: Let me put it back in context. When we build up this kind of tool in the UK, peoples' perceptions have always been that it's all about price and that's what people focus on. What we have discovered in the UK is that the brand matters a lot. If you are within a certain price range, and you have a big brand, the conversion will be stronger. You don't have to be in position No.1 to be the first to convert; you can be in position No. 5 and -- with a strong brand -- you'll still be pulling conversion over smaller brands who are on top of you. In a way, this tool just enhances what the customer's perception of the brand can be. It's really up to the brands to leverage that for the distribution model.

INN: We talked about the direct model emerging; are there other factors that are influencing the distribution of insurance in the U.S. What do you see as particularly interesting or important?

NWK: The amount of marketing dollars being spent in the U.S. for the amount of traffic is staggering. I've heard $6.4 billion for 2014. That is mind boggling! I don't know if you're familiar with how the UK markets operate. A branch used to advertise directly and spend a lot of money. As you know, I used to work for one of those carriers. We spent money in the hope of driving calls or quotes through our systems and then converting them.

What you do is generate a lot of hype around your brand, driving people to get a quote online and then convert online or offline. You spend a million pounds or a million dollars; I'm expecting a certain number of quotes, an X number of conversion, keeping their cost per conversion [constant]. That was the traditional model as it has worked in the UK The emergence of price comparison made this model a little bit obsolete. Because price comparison has multiple brands, they tend to have a higher conversion. If you say that your normal conversion was X, then you might end up on a 2X conversion because you’re on a price comparison website. The emergence of the price comparison then made it more economically viable for price comparison to advertise the price on TV and take a step over more direct channels. They have better efficiency in how they're converting those customers.

I would wish marketing would expand or shift to the price-comparison website. At the end of the day, this will benefit the insurers because the cost to sell remains fixed. The people taking the risk are the people who are taking the risk of advertising, not the insurers. As a carrier, I'm fixed on the cost per sale. I'm not taking any risk here. This is really one of the key benefits of a price comparison proposition, as it exists now.

INN: What other questions are insurers asking of you? What are their other concerns or interests?

NWK: There’s a recurring theme about how the model will end up. As much as anybody, we are developing new features. We are working very closely with the insurers to make sure this is a tool they want to use. One of the reasons we are doing this is that we feel customers were coming to Google, looking for car insurance and not finding the answers; or they were guided toward bad experiences, such as the lead-generation model, where your data would be collected and sold to multiple carriers, without any resulting pricing being available.

What we're trying to do is give the customer a better experience and also the possibility of fulfilling their needs by making a like-for-like comparison and then enabling them to buy the policy. We are doing this to help the consumer, and we have to work very closely with the insurers to make sure the tool also benefits them.

INN: How quickly, when, and where will you expand Google Compare?

NWK: We're working on the next states at the moment. We'll be, very soon, launching in three more states.

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