Weekly Wrapup: Amazon's overtures to insurance continue

The Weekly Wrapup is an analysis of the week's insurance tech news from the editors of Digital Insurance.

Last week, Amazon's investment in an Indian insurtech led to the insurance industry positing the retail company's possible role in selling some smaller insurance products or acting as a broker -- relatively minor stuff compared to Amazon's potential ability to disrupt the sector given its deep wallets and deeper customer reach and data prowess.

But The Independent poured rocket fuel on the spark of curiosity in a June 6 article titled "Amazon considers offering home insurance." According to the website, the online giant "has contemplated offering home insurance as an offshoot of its development work on robots and other connected devices for the home, according to a person familiar with the discussions." The article elaborated that there were "no concrete plans" for Amazon to enter the insurance business, and that it was only planning to deploy certain robots in employees' homes later this year.

Bartek Sadowski/Bloomberg

That was enough, though, for a brief scare to ripple through the sector. Stocks dipped momentarily as the market processed the information. However, by the end of the day, skepticism that Amazon was ready to shove established insurers to the side had dissipated, according to Bloomberg.

However, analysts closer to the insurtech and insurance IT portion of the industry agree that carriers should read in these tea leaves clear interest in their sector from Amazon. The Indian move from last week adds a curious new wrinkle. Amazon's key rival in that market, Flipkart, is already selling insurance products through its platform, indicating a trend toward online retail giants moving into the industry. The fact that Flipkart is owned by one of Amazon's biggest domestic rivals, Walmart, means that the hometown competition will be learning how retail and insurance interact in one of the biggest emerging markets, providing insight into how that could affect the U.S.

"Insurers should be keeping a close eye on the moves of the GAFA companies in general (Google, Amazon, Facebook, Apple), plus the dominant Chinese tech companies like Alibaba and Tencent. All of them have a massive customer reach, extensive data, and world-class analytics capabilities," says Mark Breading, partner at SMA.

The ability for Amazon to grow insurance products out of its aggressive smart-home product line shouldn't be discounted, adds Matt Josefowicz, president of Novarica. What form that incursion could take, however, is still undefined.

"Amazon is focused on wrapping themselves around the consumer in their homes. With Prime, Alexa, and Ring, Amazon has unprecedented access to and information about consumers in their homes. Leveraging that into homeowners protection is a natural fit," he says. "Insurers should watch closely to see how Amazon understands consumers' understanding of their own risk and protection needs."

With such a clear roadmap, however, insurers can pre-empt potential disruption from Amazon through savvy partnerships that allow them to lead in the area of providing homeowners insurance enhanced by smart-home technology, Breading adds.

"If insurers don’t aggressively engage, players like Amazon and others will usurp the role of insurers," he says. "New ecosystems are rapidly evolving and insurers must determine how they participate and add value."