How do you define an InsureTech? According to Investopedia.com, “Insurtech refers to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model.” Their description goes on with some common words many use when talking about InsureTechs: startup, innovation, disruption, game changers.
Novarica defines InsureTechs as startups in four different groups: Analytics Arms Dealers, Beneficial Bots, Creative Carriers, and Digital Distributors. Many of the InsureTech companies mentioned focus on a specific component of the insurance lifecycle and apply new technology to provide a more efficient, digitally-delivered, customer-focused, and/or data-informed approach.
Recent articles have implied that Amazon.com is entering the InsureTech space, or could be considered a new InsureTech. News from Amazon itself on entering the pharmaceutical distribution market along with potential expansion of their product protection insurance, Amazon Protect, have fueled the most recent rumors that Amazon will be more active in the insurance space. In the past few years, I’ve been in more conversations than I can count about how a giant like Amazon or Google could greatly disrupt insurance, either as an insurer or through distribution. Let’s consider the elements of the definitions above to examine how Amazon could become an InsureTech, and how insurers could leverage their capabilities like an InsureTech.
Amazon can no longer be considered a startup, but its early history looks like some InsureTechs. Amazon’s initial focus was selling books via the then-new digital medium of the Internet, “squeezing out cost savings and efficiency” with a customer-focused approach. They broke down the book-selling process and focused on leveraging technology for customer preference analytics and direct delivery without brick and mortar stores. Amazon went on to become a leader in innovation and disruption of the retail industry, and would certainly be considered a game changer.
Could Amazon apply these lessons to insurance? Arguably the answer is yes, but maybe not necessarily to become an insurer or distributor. Amazon may be able to leverage its considerable capabilities in digital delivery, customer focus, and data analytics to provide InsureTech-like capabilities to the insurance value chain more efficiently than insurers could do it themselves.
If Amazon is interested in expanding its insurance offerings, as the articles hint, then insurers could partner with them as underwriters. This could give access to knowledge of Amazon’s considerable capabilities for customer data analytics along with a sophisticated distribution channel.
Insurers could also leverage Amazon’s technology capabilities from Alexa. Some insurers—Liberty Mutual, Safeco, Farmers, Allstate, Nationwide, and Grange Insurance—are using the Alexa platform for less complex customer service requests. As the Alexa platform evolves to other devices, including vehicles and other consumer products, insurers could find additional ways to use the platform to collect risk-related information and provide more advanced services.
Perhaps the most impactful way insurers could leverage Amazon as an InsureTech would be rethinking the way insurers interact with their customers. As insurers face technology disruption, look for ways to innovate and become more efficient, and focus more on customer experience, Amazon could provide new thinking as a proven game changer.