Insurer, MGA, broker or insurtech - how could Amazon enter insurance?

By Content Director Saxon East

Who remembers BeatThatQuote? It was a UK aggregator that Google snapped up for £37.7m in 2011.

At the time, it was feared Google was about to enter the UK insurance and disrupt.

What actually happened was very different. 

Five years later it closed in 2016. Google found it couldn’t charge insurance firms, while at the same time promoting their aggregator above them. 

History appears to be repeating itself, with voices raised following Amazon’s partnership with Indian insurtech Acko.

When we talk about true disruption, we mean the impact that Direct Line had on brokers in the 1980s. 

So how could Amazon enter UK insurance and how seriously should we take it? 

Amazon’s entrance options 

For argument’s sake, let’s say Amazon does want to enter UK insurance. 

There are various different routes it could take. Let’s look at them:

• Setting up an insurer

We can rule out Amazon setting up an insurer. 

It is capital-intensive and highly-regulated. Moreover, the return on equity on insurance is quite low compared to a tech. 

Justifying it to shareholders would be incredibly difficult. 

There’s no indication Amazon wants to buy a financial services firm, let alone an insurer. 

• Setting up an MGA

The next option is some intermediated form of entrance.

Amazon could set up an MGA, possibly in partnership with a reinsurer, such as Munich Re supplying the capital.

Less capital intensive than becoming an insurer, but Amazon would still face onerous new regulation.

It would also face the complexity of organising its own claims, underwriting, sales and marketing. 

Amazon has the advantage of distributing on its own popular site, but competition is fierce for UK customers.

Amazon would gain some market share, but would it be enough to make it worth their while? Probably not, unless there is something truly disruptive up their sleeve that nobody has yet imagined.

The MGA is possible, but unlikely. 

• Setting up a brokered insurer panel

Here are the more likely entrance options for Amazon.

Amazon could certainly contract a broker, or set up its own broker, organising a panel of insurers. 

For its own products, there is Amazon Protect. Amazon customers can obtain warranty, theft and damage cover through a white label deal with the The Warranty Group’s London General Insurance Company.

Now let’s say Amazon wanted to be more ambitious. It could sell products motor, home, travel and health on its website brokering into product-specific insurers on its panel.

This is certainly possible. It would take some market share off brokers and aggregators, while adding revenues to its insurer partners and those not on the panel would lose out. 

Compared to an MGA or insurer, the regulation would be manageable.

Amazon would have some extra data - perhaps helping it price more accurately and distribute more aggressively than competitors - but nothing truly revolutionary. 

It could also offer some kind of reward through its own site, or partnership with a supplier, to gain UK insurance customers. 

In summary, Amazon would gain market share, but whether it could offer something truly disruptive to up-end the market remains to be seen. 

• Partnering with an insurtech 

This is another distinct possibility for Amazon. Amazon could provide funding and technological expertise. 

Amazon is keen on Acko because the Indian insurance market is antiquated and ripe for digital disruption.

The UK market is a different beast altogether.

Amazon would need an insurtech with something unique. What could that be? Let’s toss in a few ideas. 

• An insurtech with claims qualities One that settles and pays claims vastly quicker and more easily than competitors. There could be opportunities in the commercial space with parametric solutions. 
• A unique underwriting proposition This might allow for either very short (hours or days) or long insurance policy duration (five years), with interesting pricing propositions. 
• Ease of purchase For example, a voice-activated or automatic renewal mechanism that saves customers time and aggravation. Amazon already has its Echo and Dot devices with voice control. Voice commands will be a bigger feature of our purchase future.

In summary, there are various options for Amazon. It may take some market share from intermediaries or insurers.

Can it disrupt the market? That’s a whole different proposition altogether.