Google’s investment arm has purchased a minority stake in Applied Systems, an Illinois-based global provider of insurance technology and cloud-based software for independent agencies.
Google has pursued involvement in the property/casualty insurance industry before, most prominently in 2015-2016 through a failed experiment selling auto insurance online via its now-defunct Google Compare site, which offered online comparison shopping for auto insurance and other financial products. This time, the global search engine giant is investing in technology specifically focused on agents and brokers. Applied CEO Reid French said that Google’s participation is a good opportunity for agents rather than a threat.
“There are many agents that have wanted to have greater access to high technology. The vast majority will view this, with the facts, as super-duper positive for Applied and for the industry,” French said during an Oct. 16 press call held to discuss the partnership between the two companies.
The investment in Applied comes through CapitalG, the growth equity investment fund of Google’s parent Alphabet that has also committed financing to companies including Lyft, Airbnb, SurveyMonkey and Zscaler. Neither side is disclosing financial terms about the deal, which both parties closed about 10 days prior to the formal announcement. French confirmed that Google/CapitalG will become minority investor, but he also said that Google/CapitalG’s financial stake is significant.
“It’s not small,” he said during the conference call held to discuss the deal. “They made a legitimate commitment…it’s real money.”
CapitalG’s Gene Frantz said in prepared remarks that the company views Applied Systems as “a pioneer in the industry” that transforms “the way insurers, agents and customers do business on the cloud.”
He added that the company looks forward “to bringing some of the world’s leading experts at Google and Alphabet [together] to drive innovation within the global insurance ecosystem.”
In return for the Alphabet/Google/CapitalG investment, Applied gains access to Google expertise in areas including artificial intelligence, machine learning and digital marketing. Affiliates of Hellman & Friedman will keep majority ownership of Applied Systems, though Capital joins JMI Equity and Stone Point Capital as a minority investor.
French asserted that Google would not tap into any of Applied Systems’ insurance data residing in the cloud or within various customer applications.
“If you were going to be misinformed, you might say Google entered this partnership to get access to all the insurance data that exists in Applied’s cloud or customer applications. The short answer is none of them have any rights to our customer data,” French said.
Should Agents Fear Google This Time?
French said that Google/CapitalG wouldn’t be interested in Applied if it wanted to reduce or do away with the P/C insurance industry’s reliance on agents and brokers.
“They wouldn’t have made the investment if they did not anticipate this continuing,” he said.
French acknowledged that Google will be learning about the insurance industry through this deal, but he said the deal, for it to be successful, will need the current network of agents and brokers. In turn, the technology infusion that Google will bring will benefit everyone, he added.
“Our industry deserves the ability to use that kind of technology, and I think it sets us up really, really well for the next digital age of insurance,” French said.
How Will the Google Investment Be Spent?
French added that Applied Systems hasn’t decided where all the money will be used just yet, or specifics about where the company plans to apply Google technology in its products and systems, but it will gauge customer interest first.
“We will talk to our customers and see where they are most interested in research — is it Gmail, AI, machine learning?” French asked. He added that the company will continue to spend liberally on research and development independent of the Google deal, north of $60 million next year.
Applied Systems is a privately owned company that has grown considerably in recent years since launching in 1983. It produced $194 million in revenue in 2012, and that figure has grown robustly, reaching $331 million in 2017, according to numbers from the firm. Through the 2018 third quarter, Applied Systems has generated $388 million in revenue.
Part of that growth has come from expanding globally, with locations now in Canada, the United Kingdom and Northern Ireland. More than 1,500 people work for Applied Systems, according to the company’s website.