How can Amazon disrupt the insurance industry?


There has been a lot of exciting talk about Amazon breaking into the insurance market, without any real demonstration as to where they can actually disrupt. Altus has carried out the analysis on our General Insurance Capability Model to indicate where we think they’ll have most success.

In a market controlled by aggregators, Personal Lines insurers are starting to fight back by providing customers with a smarter, direct to consumer proposition. Fewer questions and data enrichment is the flavour of the day, and aggregators could suffer if customers choose to trust and engage with insurers again.  But Amazon can do this too, and perhaps even better than the insurers – given what they know about their customers. Just as insurers are starting to differentiate themselves and win back customers who favour aggregators, Amazon could come in and disrupt the distribution chain again.

For insurance brokers, this is exactly the space they operate in – either providing specialist advice or taking the pain away from customers who don’t want to engage with lengthy insurance journeys. Just as aggregators impacted Brokers in the highly commoditised Personal Lines market, Amazon could pretty much finish them off by operating as an “intelligent” digital aggregator rather than the one-size-fits-all model that existing price comparison websites do.

Amazon can also win from a new propositions perspective – vast numbers of InsurTech start-ups operating as “digital brokers” are using insurers to take on the risk for new, exciting propositions in the form of different shaped products and more exciting user journeys.  But these InsurTech’s are not securing significant market share as they don’t have the brand, trust and loyalty that insurers have – and by association, they can’t get the customers. Amazon, on the other hand, already has the customers and all of these other attributes to boot.

Where Amazon could impact the insurance broker space:

  • Pricing and Underwriting – Amazon don’t need the actuarial skills to become a full-stack insurer.  They just need to be a Broker or MGA.
  • Channel Management – the Amazon Marketplace could become an “intelligent” aggregator that pushes brokers out of the Personal Lines space, whilst also disrupting price comparison websites.
  • Product Development – Launching new innovative products on their huge customer base using their test and learn approach. Brokers can take weeks or even months to get a new product to market.
  • Policy Enquiry – Voice Assistants are already in place with some insurers. You need never speak to your insurance broker again…

 If Amazon does decide to take the plunge further into general insurance, and the complex regulatory framework may be a saving grace here, then you can be sure that it will be a decisive and disruptive step, will make use of their extensive knowledge of their customers, and will provide a simple but compelling journey for these Customers. Incumbents in the insurance industry simply cannot wait for this to happen and need to be thinking, and acting, now to combat this threat. They need to be taking the Amazon route to success before Amazon take it themselves.

Mark Andrews, Domain Director – General Insurance at Altus Consulting