Last month, Amazon made its entrance into the Indian insurance market when it partnered with Acko General Insurance to sell auto insurance products for two- and four-wheeled vehicles in the country. The move reflected a broader trend of technology giants showing increased interest in the insurance industry.
Nonetheless, insurance agents in the US shouldn’t be shaking in their boots just yet. One expert says that Amazon is far from taking over the auto insurance market in this part of the world.
“Markets such as India, as well as the UK and the EU all have drastically different markets and regulations than you see here in the United States,” said Laird Rixford (pictured), CEO of Insurance Technologies Corporation (ITC).
Moreover, even in India, Amazon isn’t launching its own insurance product backed by an Amazon-led underwriting team – it’s simply reselling someone else’s product. Additionally, noted Rixford, “If you look at the metrics and the dynamics of how that works, it’s paperwork free claims, three-day claims servicing guarantee, one-year repair warranty, instant cash settlements for low value claims – that reads a lot like something that you would see coming out of Lemonade. While that works really well for a renters market or a differently regulated market that you would see in somewhere like India or the EU, that is not applicable to how insurance is underwritten and sold here in the United States.”
Nonetheless, the recent Amazon news still holds valuable lessons for independent agencies, as well as carriers. Insurance companies need to focus on meeting the needs of consumers who want a frictionless buying experience, like the one provided by Amazon. If they instead make customers go through a lot of hoops, such as long claims processing and lots of paperwork, they are bucking the trend of the easy, quick, and frictionless service that consumers are looking for. This is a critical misstep considering that when it comes to selling insurance, agencies’ competitive advantage lies in how they engage with the client.
“That is the big differentiator and creates that competitive advantage, and Amazon has made it its job to make purchasing things quick and easy,” said Rixford. “What they’re doing in India is that they’re including Amazon Pay, which is becoming ubiquitous like PayPal or other online purchasing methods, to make payments. They are able to leverage what they’re doing to make other purchases frictionless and apply it to buying insurance.”
The other competitive advantage that Amazon offers is name recognition since with an Amazon Prime account, users get access to other benefits. In turn, the tech giant is creating customer loyalty where those individuals who already have an account with them can simply add on insurance, rather than go to a separate company for their insurance needs.
As Big Tech continues to make waves in the insurance industry, independent agencies can do a few things to stand out. From Rixford’s perspective, it comes down to marketing.
“They need to leverage technology so that they have the latest tools to drive their businesses and enable their customers to interact with them when and where that customer wants to interact them,” he said.
The other key takeaway for agencies is recognizing that by offering choice, just like Amazon does with its traditional retail goods shop, they are a step above the tech giants trying to invade their turf.
“In this release about Amazon, they only have one insurance carrier, and Lemonade is just one insurance carrier,” said Rixford, “and that’s what’s surprising about the Amazon announcement is that it is a single carrier … We need to see that the advantage that Amazon brings to the retail purchasing markets is also what agents provide the clients – it’s the ability to have choice.”