How Amazon’s latest insurtech tie-up could be template for disruption

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Tech giant Amazon recently partnered with an insurtech instead of an incumbent, Altus’s consultant Patrick Hayward tells Insurance Times why this move is an important one

With rumours of Amazon preparing to enter the motor insurance market gaining attention, the firm’s latest partnership with insurtech Acko could be a “template for disruption in any territory”, Insurance Times was told.

“The retail and technology giant’s decision to financially back and partner with a startup, rather than an incumbent capacity provider is important,” Patrick Hayward, consultant at Altus General Insurance (GI) told Insurance Times.

Amazon provides financial backing to Indian insurtech Acko with Munich Re Ventures leading the funding round, bringing the raise to $200m.

“Being digital-first, in Acko, Amazon has chosen a partner that is ready to plug into a wider ecosystem.

”For established insurers, with a maze of policy administration and claims systems, bringing real functionality to the surface on an Amazon UI [User Interface] could be a significant technical challenge.

“An API-led [Application Programming Interface] approach, built on a highly configurable and coherent technology stack, will mean that customers can interact with Amazon directly, rather than be re-directed to the insurer for even the simplest transactions,” Hayward continued.

Barriers

“This decision could be linked to Acko’s customer experience proposition – a fast quote process, starting with submission of the vehicle reg and a handful of questions, means that Amazon is able to offer insurance through a process that aligns with its single button, three-click purchase approach,” Hayward said.

Giving examples of major UK insurers Aviva and Legal & General providing shorter quote processes, Hayward said that the insurance industry has been slow to capitalise on the availability of external data and use it for improving the application process instead of pricing.

In January, SSP teamed up with Amazon Web Services to bolster broker software management.

Hayward said that the extent to which price comparison websites dominate the UK market is another barrier to progress in this area.

This is because insurers develop question sets to fit the technical requirements of distributing through this channel.

Relationship

Although the independent threat of insurtechs and technology in general to the industry is nothing new. In the past insurtechs have been seen as disruptive, however the sector now works on a much more collaborative basis.

Meanwhile, Hayward warned against minimising the importance of the Amazon-Acko relationship, as the model combines Amazon’s customer reach, data analytics and technological capabilities.

Considering this and the flexibility of an insurtech has to deliver on product innovation and policy lifecycle management while absorbing regulatory burden, he admits “could mean a more a rapid entry and level of growth than many currently anticipate”.

“I would look beyond the fact that Amazon’s recent foray into GI is in motor. Ultimately, Amazon’s role in this relationship as a distribution channel and user interface for claims means that it does not need extensive experience of pricing and underwriting or repairing vehicles to provide this product, Hayward continued.

“The same would be true for the complexities that apply to other lines of business, and we have previously identified home insurance as a potential area for Amazon to target, with elements of its existing retail and AWS [Amazon Web Services] offerings enabling a much deeper, hands-on integration into the insurance product lifecycle.”