Recent moves by Amazon suggest that it’s looking to expand into the insurance industry. Should traditional insurers worry?
Amazon’s advance into insurance took another major step after the online retail giant invested $15.7 million in Acko General Insurance, an online seller of insurance products based in India. The two companies will partner to develop new offerings, with Amazon acting as Acko’s distributor in the Indian market.
With Amazon’s extensive database of customer information in the country, Acko now has the ability to provide consumers with customized insurance coverage. The deal also furthers Acko’s footprint in the online insurance market in India, where only 3% of insurance products are bought online.
The deal could also be viewed as an experiment for Amazon as it seeks to expand into the insurance industry in other countries. Digital Journal reported in December that Amazon had begun to recruit employees with insurance and insurtech experience in the European Union. The ad stated that the online retailer was “launching a new business” with plans to offer “a palette of services.”
What’s Next?These efforts are not Amazon’s first forays into the insurance industry. Amazon Protect, for example, currently sells coverage to consumers who buy electronic devices on its site to insure against accidental damage, breakdown, and theft.
Reports have also surfaced that the retail giant has set it sights on the healthcare sector. CNBC reported in mid-January that the company had listed an opening for an expert in health privacy regulations. If the company complies with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which protects patient records, Amazon’s voice assistant, Alexa, could be of value to healthcare professionals by recording lab results and other medical information.
Amazon has already caused a stir in the healthcare marketplace with rumblings about an eventual entrance into the pharmacy business. The New York Times reported in October that the company had obtained wholesale pharmacy licenses in at least a dozen states.
An Amazon spokesperson downplayed speculation about a move into the online pharmacy business, telling the New York Times that the licenses are required in states where the company sells professional-use-only medical devices.
Nevertheless, rumors about Amazon’s impending expansion into the pharmacy benefit management segment may have prompted a merger between Aetna Inc. and CVS Health. By uniting, the merged company could form a formidable defense against Amazon’s presence in the healthcare and pharmacy marketplace. The deal is currently under review by federal regulators.
What the Experts SayAmazon’s entry into the insurance marketplace could affect established insurers and even insurtech startups. Shai Wininger, Co-founder and President of peer-to-peer insurance platform Lemonade, recently complained about Amazon poaching its employees with what he termed excessive salaries. Startups like his, he said, would be hard pressed to compete with well-capitalized companies like Amazon.
Amazon also presents a challenge for legacy insurers, particularly because of its digital prowess and reach within the consumer marketplace. “If they do something beyond the warranty business, then it’s likely to be disruptive because people will notice and pay attention,” Seth Rachlin, EVP and insurance lead at Capgemini, told Insurance Business.
Rachlin cautioned that if Amazon invests significantly in the insurance industry, it will likely be more successful than Google, which shut down its auto insurance division in 2016. “Amazon is far better positioned,” he said. “Their positioning is fundamentally different, and as a consequence there’s a real possibility that they could enter this space.”
GlobalData Analyst Patricia Davies issued a similar warning to insurers who may scoff at disruptors like Amazon. Like Rachlin, she pointed to the company’s familiarity with consumers. “If insurers are not careful,” she told Insurance Business, “they may be pushed out of having a direct relationship with customers and be relegated to the role of a price-driven risk carrier at the back end.”