- Where Insurance & Technology Meet

Insurance vs Amazon: Does Risk Differentiate?

If you read enough insurance trade magazines, you would swear that 75% of agents / brokers / insurers would be on the dole in the next year,  The balance of survived insurers would have to compete with large, technology organizations which will eliminate underwriters and claims managers in favour of AI and blockchain tools.

Who is the lead attacker?

The most recent boggy-person is Amazon.  Insurance Busienss Magazine noted that  “Almost 30% of customers globally would be willing to buy insurance from BigTech firms like Google and Amazon, according to a new study.” (The 2018 World Insurance Report).

Anirban Bose, global head of Financial Services at Capgemini, believes that threats from new entrants are “more real that the insurance industry might want to admit.”

Customer experience is a critical success factor.  According to the article, “Insurance firms ranked third after retail and banking in the report’s cross-industry customer experience scores.”  

Millennials represent the cohort with the greatest interest in new suppliers.   They place high value on websites to support transactions.  Also, “40% feel that mobile apps are important channels.”

The result?  Amazon is gaining traction and “29.5% of customers would be willing to buy at least one insurance service” from Amazon or from another BigTech firm.

Is Amazon serious?

Short answer: Yes.  It is leveraging the penetration that Amazon already enjoys from a variety of other offerings.  As well, Amazon is looking at requirements in a number of countries.  Last November, writing in InsuranceBusiness , Ryan Smith noted some of the overlapping services.  As Amazon continues to recruit insurance professionals, Smith notes: 

Amazon sees many of its technology products, such as voice-activated digital assistants like the Amazon Echo and Dot, as entry points to providing for customers’ insurance needs, according to analytics firm GlobalData.

Amazon is considering personal lines as well as looking at new coverages.  Not surprisingly, the first world wide product is “Amazon Protect”.  A Reuters report in November 2017 noted this product  “provides extensions to manufacturers’ warranties for items like mobile phones or washing machines bought on Amazon’s website, launched last year in Europe.”  So far, Amazon Protect is the only global product from Amazon.

So, is this the beginning of the end for product and distribution?

In March this year, I addressed the question about non-insurers taking a position at the expense of existing insurers in a post on this blog.  I relied heavily on David Wright, an actuary in New York.  (Point of reference: David has a new blog,  The Not Unreasonable Book Club – Episode 1.  I am looking forward to reading it.)

Wright contends that insurance is different from other financial services.  To put it bluntly, Risk is the sine qua non for insurance.  As good as we think we are in projecting the impact of losses, there are some levels of the unknown, outside of our control. And, there will always be new risk elements. 

As Artificial Intelligence and other tools improve, there will be better estimations with greater precision.  As organizations such as Amazon will also bring new methods to estimate risk.  But this won’t occur overnight.

And, with new complexities of risks and losses, it is difficult to see a time when all risks can safely ignore human estimation completely.

What do you think?

Do we see insurers changing to organizations like Amazon, or will InsurTechs  learn the roles of insurance?  



Editor’s Note:  Insurance-Canada is preparing for the second InsurTechTO event which will focus on “Driving Advantage From InsurTech”.  This one-day, highly interactive event will provide insights to the next generation of insurance.  

Wednesday, 7 November 2018 @ The Toronto Sheraton Centre.  Details here .  See you there!