Amazon is eying entry into home and motor; insurer share prices are rocked on reports
Insurers across the world are rocking amid reports Amazon is eyeing an entry into home insurance, with experts stressing brokers are most at risk from the tech giant.
Shares at Direct Line, Aviva, Ageas and Munich Re fell between one and two per cent, although they have since rebounded since the Amazon home insurance story last month.
Respected tech online publication The Information reported Amazon had been plotting ways in which its Alexa voice recognition device could be used to monitor perils such as fire, burglaries and flooding to offer cheaper premiums.
Technology experts agreed that Amazon’s threat to insurance is very real.
Altus Consulting director of general insurance Mark Andrews says clumsy and outdated legacy systems have the potential to hold many insurers back if the data giant were to wade into the market.
However, brokers are most at risk because Amazon will want to take over their role most directly.
“If you look at Amazon’s business model, it’s all about aggregation of products and services,” says Andrews.
“It is not necessarily about creating it itself. It is about using other people’s existing products and services and re-selling them and making a margin. Amazon is being a broker, being a gateway for customers.”
Insurers needed to be wooing the tech giant, Andrew says, or otherwise work on a compelling proposition to convince customers that they are still king.
Insurer partnerships
A source of comfort for insurers looking to partner up with the tech giant can be found by looking at its Amazon Protect relationship.
Amazon Protect is a white-label service providing accidental and theft insurance on consumer goods sold through the Amazon marketplace, was launched in the UK in 2016, and has since expanded into Europe.
Amazon’s insurer partner, The Warranty Group, was snapped up by Assurant for $2.5bn.
And this may open up the scope for Amazon Protect to expand into new territories and markets under the auspices of Assurant’s lifestyle protection products.
On motor, Amazon is speaking to UK insurers, eyeing a potential deal to become a motor MGA with insurer partners providing capacity.
Perhaps the biggest prize for insurers looking to partner Amazon is in home insurance as the tech giant has the Alexa voice recognition device.
Neil Cooper, VP marketing for sound recognition tech firm Audio Analytic, said it was a ‘natural evolution’ for Amazon to use its Alexa voice recognition home device to make its way into home insurance.
Over 31m Alexa-enabled Echo devices have been sold, which Cooper described as “home security assets”.
Amazon is currently offering a range of other smart home security offerings, including video doorbells, cloud cam and blink security cameras.
Over 2m video doorbells and 12m cameras are expected to be sold globally this year.
Cooper said: “Amazon could easily upgrade the millions of Echo devices we have in our homes to be able to recognise and react to sounds; such as breaking windows, dogs barking and smoke alarms.
“By being able to recognise and react to security and safety relevant sounds, Alexa (empowered with sound recognition capability) could offer enhanced security features, greater peace of mind for consumers, and reassurance for Amazon’s potential home insurance service that its customers are helping to reduce risk and payouts.
“Plus it includes the advantage of not needing installation or line of sight to the threats it needs to detect, like a camera, making it suitable for a wide range of rooms, like bedrooms or family spaces.”
Amazon’s calculated approach
Market intelligence firm CB Insights said Amazon’s business strategy is to spend a few years plotting its entry, and make such a big impact upon entrance that it takes out slow-responding established rivals in a big way.
“If history provides a useful lesson, it’s that Amazon first builds core product pillars for itself, where it is the only and most important customer,” a CB report on Amazon says.
“Only after years of building a product and iterating on features for itself does Amazon launch and expose a key product pillar to other customers. By then, it will likely be too late for incumbents who have not responded.”.
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