Data giant Amazon is eyeing up the insurance market. What next?
Amazon’s latest moves suggest that it is looking to crack the insurance market.
Most recently, the online behemoth has invested $12m in digital insurance start-up Acko Technologies.
Before that, reports circulated that Amazon was seeking to set up a motor MGA with UK partners and was hiring people with insurance skills in London.
The industry needs to be prepared for an entrance by Amazon, which could happen within the next 12 to 18 months, according to Altus consulting director of general insurance Mark Andrews.
The consultancy has performed a next level analysis on Amazon’s potential impact on the market, using an insurance model (see infographic below).
The industry must act
Insurers need to be wooing the giant, says Andrews, and proving that they are worth partnering up with.
Otherwise, they need to be working on a compelling digital proposition to convince customers that they are still king.
Clumsy and outdated legacy systems have the potential to hold many insurers back if the data giant were to wade into the market.
Brokers, too, need to up their game and are most at risk from an Amazon entrance, warns Andrews.
Amazon’s marketplace model places is in a prime position to whip business away from current players.
“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.”
Despite Amazon’s aggregator characteristics, Andrews thinks it unlikely that they will try to usurp price comparison sites.
Dipping a toe
Amazon probably won’t foray into the mass market yet, says Andrews.
Mass market motor, in particular, is probably off the cards for now.
However, if it doesn’t target extended warranty or product insurance next with a slicker question set, Andrews says it could aim to permeate the home market.
Amazon knows what its customers buy and own and where they live, in addition to having a “compelling” proposition in connected homes.
“That’s possibly a more exciting place to enter the market than making a new extended warranty product and selling it quicker,” says Andrews.
He continues: “They know everything about the customer. They know 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.”