Hangouts support is offered as an add-on. This can be purchased in the "Add-Ons and Upgrades" area of the settings.

Otherwise, double check the Incoming Message Handling section of the settings to make sure you have configured the app to announce or read out incoming messages.

Also, if your device runs Android 6 (Marshmallow) or lower, you will need to have the Android Wear app installed on your phone.  You do not need an Android Wear watch and do not even need to run the Android Wear app.  Ultimate Driving Mode uses the same mechanism that Android Wear does to read and reply to Hangouts messages.  Hangouts will not post the information needed to generate a reply unless the Android Wear app is installed.