Where might Amazon target next?

Fraser Edmond

Chief executive, Broker Insights

Amazon is best known as a digital distribution channel which connects manufacturers or suppliers of goods and buyers through great technology. So, its next likely target will be another sector where it can deploy its digital capabilities to connect more companies selling products to potential buyers.

How will it target the insurance industry? I don’t see Amazon underwriting insurance products; that would be an unusual route for it to take. Amazon may wish to work with underwriters to develop new and existing product lines and offer these closely aligned to their core offerings.

In personal lines insurance, I could see Amazon replicating the role of an aggregator. But could Amazon replace a broker in commercial insurance? Not where there are complexity and advice required; that’s firmly where brokers add value to customers and not somewhere I see Amazon in the near future.

Amazon has had huge success disrupting the sale of commodity products in many established markets, therefore I believe brokers need to continue to focus on adding value for customers by thoroughly understanding their needs, delivering sound advice and procuring the best product, service and price for their customers’ needs.

 

 

Mark Andrews,

Domain director - general insurance, Altus Consulting

I don’t think Amazon is going to go after mass market motor insurance. I don’t think it is going to try and disrupt that market straight away. It will position itself as a digital broker, so not necessarily trying to be a full-stack insurance company. It will probably do something along the lines of its existing warranty or product insurance and will try to offer it a bit slicker than most insurers do at the moment, so there will be no huge extended question sets, and no need to ask customers 30-40 questions to get a policy.

Home insurance is possibly a more disruptive place where it could enter the market. Amazon knows what its customers buy and own because they buy products from Amazon. It knows where they live, as it delivers there.

It should also have a pretty compelling proposition in terms of the connected homes, so that’s possibly a more exciting place to enter the market than getting a new extended warranty product and sell it quicker.

It knows everything about the customer. It knows what the customer owns because they probably bought it from Amazon. I think they know enough about their customers to create a pretty dynamic home insurance product.

 

 

Nick Pester

Head of insurance and insurtech, Capital Law

At a recent panel, I was sat with a head of innovation at a big insurance company and the debate turned to Amazon. He was firm of the view that Amazon would not enter the insurance market because claims are a nightmare to deal with. However, Amazon will not approach things like claims like a traditional insurer. Plus, it has consumer buy-in already. Let’s be honest, insurance companies have never had the most consumer-friendly image. Amazon is already starting a lot further ahead.

Amazon has billions of dollars on its balance sheet. That gives it incredible leeway to experiment. If Amazon wanted to, it could go down the full carrier route.

The insurance market says it won’t like regulatory hurdles, but Amazon’s lawyers could deal with this. 

The view is: Because that is how we’ve handled claims for last 200 years, that is how others will. However, Amazon will rely on AI and team up with innovative companies.

The rumour is that Amazon was looking at a motor MGA. I think it will dip its toe in first. It will partner with somebody, whether that’s an insurer or a new entrant. Once it gets the formula right, it will roll out its own general insurance carrier.

I suspect that if you interview the millennial age group, 90% would switch to Amazon.

I think we will be in a very different position at the end of this year. Look at what is happening on the high street now, with stores closing. That is identical to what Amazon could do to insurance. I see absolute parallels between the two.

 

 

Tony Tarquini,

European insurance director, Pegasystems

How Chinese online insurer Zhong An went from zero to hero, a digital insurer a third the size of Allianz globally in 48 months, offers clues to how Amazon could break into the sector, not least because Zhong An is supported by China’s Amazon, Alibaba.

Firstly, it’ll be about Amazon offering a customer experience model that takes distribution out of the hands of the insurer. The model will be something like an Amazon protection service linked to their Prime business that makes it easy to buy and protect. Secondly, like Zhong An, Amazon may enter the market with micro products. This approach suits an AI-driven approach. For example, pothole damage cover looks like an ideal product for Amazon.

Thirdly, I can see one of Amazon’s own biggest operational problems offering cover for an attack on home insurance in the next year or so. The cost of lost, misdelivered and redelivered parcels because customers aren’t home is a huge operational issue. The purchase of Ring, the smart doorbell and lock company, and the launch of a secure delivery service seeks to remedy this. But Amazon users who give Amazon delivery drivers the digital keys to their homes invalidate their home insurance. It’s not too fantastical to expect Amazon to bundle insurance cover for any losses linked to its drivers having access to a home. On this basis, mightn’t Amazon go further and say: “Why don’t we insure your whole home at the same time?”

 

 

Greg Brown

Partner, Oxbow Partners

Insurance is an obvious move for Amazon given the broad relationship with consumers and the deep relationship with sellers. Amazon has a history of extending the offer well beyond what seems possible with the brand (remember when Amazon was an online bookstore?). It may well surprise us with a whole new product category such as motor or home.

There is industry-wide concern that this is a sign of a broader move by the GAFAs (Google, Apple, Facebook and Amazon) into insurance, but I would challenge that assumption. Amazon is in a unique position – it is known for selling products.

The opportunity for the other GAFAs is much less clear and their reliance on advertising income from insurers creates a significant conflict. For example, Google dropping Google Compare.