This latest Opinion piece is by Rory Yates, who has more than 24 years of business leadership experience spanning client, agency, consultancy, start-up, and private equity roles. As EIS’ SVP, Corporate Strategy, Rory helps insurers achieve their transformation goals and evolve toward ecosystem-based futures via insurance core systems transformation, including truly personalised engagement, taking innovation from concept to market quickly, and growing efficiently.
The creation of Amazon’s Insurance Store is the latest in its deliberate strategy to dominate every industry on the planet. Yet, its initial three-insurer play (including Ageas UK, Co-op, and LV=General Insurance) seems light. Couple that with limited customer access, and you’ve got to wonder, what’s the real ambition behind this?
Let’s look at the facts. Amazon knows how to start small and learn fast. Its tech foundation and ability to use customer data is unparalleled, even amongst ecosystem drivers. The Insurance Store, then, is a useful start that will inevitably see more insurers and lines of business added over time.
Jonathan Feifs, Amazon’s general manager of European payment products concurs. He says, “This initial launch is only the beginning, ” adding that the company will “continue to innovate and make refinements” to the store with the aim of “providing the most convenient shopping experience possible.”
With 86% of UK consumers shopping at Amazon, it’s a powerful leverage point, and they know how to use it.
This, of course, presents an opportunity for ambitious insurers. Amazon is likely to be successful, providing more choice and better experiences. If insurers can meet Amazon’s quality measures, integrate successfully, and compete in the store, then there is a lot to gain from the relationship:
· The unparalleled access to customers becomes highly attractive
· A service built around simplicity and convenience (e.g. the Amazon Standard of Cover) making it easier to understand and compare is better for customers. And, unlike aggregators today, takes any comparison beyond simple price-based decisions.
· Its access to customer data, creating knowledge of the customer, and the ability to act on it, means Amazon will know which customers to target and when, but this data can also be valuable in the insurance process as well. Using the data to more accurately price policies, and so on.
· Leveraging machine learning (ML) and artificial intelligence (AI) tools, filling data gaps, and making better decisions creates a competitive advantage few can compete with
· Even in this early MVP stage, Amazon has already worked with the pioneering insurers to streamline the questionnaire, ask only the essential questions and offer the familiarity of the Amazon experience
· Endless innovation opportunities, e.g.: combining Amazon’s supply chain in claims processes or venturing models for the use of risk-mitigating purchases, such as smart water valves.
Perhaps the crucial questions that should concern insurers are the looming threats Amazon’s move presents. These include:
· Can insurers take advantage of this further proliferation of distribution?
· Do the costs and technology allow insurers to participate in the first place?
· Who will ultimately own the relationship? The difference between Amazon and the incumbent aggregators is that Amazon knows how to own the relationship through data and has a proven ability to act on it. In a head-to-head race, I know who I’d back to create personalised, highly relevant, and beautifully simple experiences centred around the customer.
· Can insurers withstand Amazon driving down the value chain, as they have with healthcare?
· Why would Amazon make insurers richer? Surely, if they learn to sell it, and they have the technology-driven advantages, why not own more of the value?”
· Last and most importantly, could this stimulate a more aggressive big tech move into the insurance market?
Apple is widely expected to enter the health insurance space and both Apple and Google are deepening their relationships with insurers. With the potential revenues on offer, they are unlikely to be the last big tech firms to make this move.
Ultimately, big tech is only a threat if you aren’t in an ecosystem business model with ecosystem-enabling technology. Ecosystem-enabling technology allows for integration, new business models, and customer experience capabilities that make this an opportunity to participate and drive long-term customer relationships.
At a minimum, ambitious insurers will want the same adaptability, customer centricity, and capacity to increase relationship value through experiences as well as the ability, if appropriate, to integrate and participate in the store and outcompete the other insurers.
With Coretech evolving at pace, becoming an ecosystem driver like Amazon, is now within the grasp of insurers. This is key. Technology has historically let insurers down, more often than not, creating barriers rather than offering the freedom to innovate that’s needed.
Further, Amazon’s ability to understand the truly complex nature of insurance and build the regulatory knowledge and organisational capacity is a barrier to entry. In fact, it provides a reverse opportunity. If insurers make their long-awaited shift to their digital futures, this might only be an opportunity and not a threat at all.
So, Amazon has thrown a cat amongst the pigeons. The debates about what will come next will continue, but time will give us the answer. For now, though, insurers should be asking themselves a couple of questions:
· “Do I want to participate, observe, or indirectly compete in some way?” And
· “Do I genuinely have these options, given my ability to attract customers, keep relationships, and provide unparalleled truly multi-channel services?”
In an industry slow to transform, we need insurers and insurance to become more integrated into our-lives, and for it to be embedded, risk-removing, adaptable, and human centric. The Amazon Insurance Store may well be the market force necessary to drive these new propositions and others that meet new customer expectations, such as the ones created by Amazon itself.
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