Measuring the scale of Amazon’s threat to the insurance industry

Where the real risk of the tech juggernaut’s move into insurance lies

Measuring the scale of Amazon’s threat to the insurance industry


By Alicja Grzadkowska

Amazon’s movement into the insurance industry picked up pace in the second half of 2018, as Travelers announced a partnership with the technology giant that will see the insurer sell smart home kits that include security cameras, water sensors, motion detectors, a wireless smart home hub and an Amazon Echo Dot to its customers at discounted prices. In September, Amazon also entered the Indian insurance market with life, health, and general insurance product, and rumors in June hinted that Amazon was considering offering home insurance.

After the 2018 World Insurance Report revealed that almost 30% of customers worldwide would be up for buying insurance from tech firms like Google and Amazon, insurance companies might be worried about their ability to compete should these giants take the plunge. One expert outlined just how concerned insurers should be about the Amazon threat.

“They’re just trying to disrupt the distribution channel of leads, so when they have a device in every house and they’re able to integrate with any carrier, they’re effectively using themselves as a lead provider,” said Laird Rixford, CEO of Insurance Technologies Corporation (ITC). “But then you have a lot of carriers, such as Travelers, that are going to continue to distribute those leads to their own agencies, so they’re trying to keep their agencies in the mix for the time being.”

The real risk, added Rixford, is when we look further down the road.

“As more and more carriers either look to create their own call centers or funnel leads only to key partners, that’s a strategy that Amazon or Google, or anybody out there, might take advantage of by becoming the source of leads,” he said. “However, while Amazon is extremely ubiquitous – it’s all over the place and they have lots of reaches into people’s world – it’s not the end-all, be-all.”

A lot of services available through Amazon today are not ones that normal consumers are purchasing on a regular basis because they prefer traditional ways of doing things, Rixford told Insurance Business, and that could continue with insurance. It’s also not the first time that the industry has faced a disruptive threat and come out the other end intact.

“There was the big worry about the internet disrupting insurance lead distribution and it really hasn’t happened,” explained Rixford. “Some channels have changed, but agencies that have embraced the internet and embraced technology, they’re still getting leads, they’re still generating leads, and then they have the added benefit of actually having relationships and building that one-to-one relationship with their clients, and building that rapport that leads to long-term clients and not just a single-day customer.”

As for smart home kits, agencies and carriers have been providing roadside kits, home planning kits, and home inventory applications for a long time, and they in turn create a deeper bond between the insurance provider and consumer. Amazon’s AI capabilities are also not unique, with agencies and carriers starting to leverage AI to better serve their customers, alongside exploring the integration of other technology solutions into business processes.

Yet, while Rixford doesn’t see Amazon becoming an insurance carrier or direct agency anytime soon, the industry should still feel some pressure.

“We as an industry need to operate in a way that continues to make sure we are protecting ourselves from any threat, whether it be Amazon or Google or anything that might disrupt long-term the current way of how insurance is distributed to consumers,” he said. “We just need to be, as an industry, cognizant of that and make sure that we’re leveraging the same technologies that they do.”

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