LONDON (Reuters) - More than 40 percent of insurers see Google (GOOGL.O) as a potential threat because of its strong brand and ability to use customer data, a report released on Tuesday said.
And young, mobile phone-friendly consumers may bypass traditional insurers for "new, more nimble" competitors, consultancy Capgemini's annual world insurance report said.
Insurers are looking to use technology to gain more information about their customers and potentially offer them lower-cost insurance.
This has already happened in car insurance with telematics - the use of a black box in cars to see how safely customers are driving.
One of the next areas for insurers is the connected home - with technology that enables you to turn off your oven from a distance if it has been left on, for example, potentially avoiding a fire.
Google owns connected home products maker Nest, which could act as a springboard to providing insurance.
"To withstand the coming competition, insurers must build up their brands, learn to take advantage of real-time customer data, and develop agile operating models," Capgemini said.
However, some insurance industry specialists doubt that technology companies will enter the heavily-regulated insurance sector directly, seeing them as more likely to form partnerships with insurers, potentially giving those firms an advantage.
In the United States, Liberty Mutual (LMAC.O) has already joined up with Nest to offer insurance discounts for Nest users.
"Google will not become an insurance underwriter," said Nigel Walsh, head of UK insurance at Capgemini.
But with products such as Nest, "they are a massive part of the insurance value chain, because of what they know about consumers," he added.
The insurance industry also needs to improve its service if it is going to win business among younger customers.
Only 34 percent of customers below the age of 35 reported positive experiences with their insurers, compared with 55 percent of over 35s, a Capgemini survey of more than 15,000 customers in 30 countries found.
Reporting by Carolyn Cohn; Editing by Alexander Smith