Just how vulnerable are traditional carriers to this kind of disruption?
by Denise GarthMs. Garth is Senior Vice President Strategic Marketing at Majesco, responsible for leading marketing, industry relations and innovation in support of the company’s client centric strategy. Reprinted with permission. Visit majesco.com
Sep 20, 2018 — India is a market that is ready to capture all that Digital Insurance 2.0 has to offer, as we note in our report, Digital Insurance 2.0: Reshaping India’s Insurance Sector. It has a demographic position that is perfect for insurance penetration and growth and a government that is pushing technology solutions to alleviate economic and social pressures. It also has outside support from global insurers, reinsurers, tech companies and investors.
So, it is no surprise that this week Amazon made news in India by revealing in corporate filings that it is aiming to sell life, health and general insurance as a corporate agent, not as an insurer.[i]
When Amazon, Apple, Google or any other platform tech company makes insurance news, it causes brief tremors and conversations surrounding the vulnerability of insurers to this kind of competition and channel disruption. On the flip side, if we can make sense out of Amazon’s push into the area of insurance, we may find that it represents more of an opportunity than a threat. Let’s consider two high level questions.
How is Amazon pursuing global strategies to capture some share of insurance revenues?
How can insurers prepare their organizations to capture market share both inside and outside of Amazon’s sphere of influence?
Amazon’s Strategy is Customer-Aware
Amazon’s vision and mission statement says it all – “Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”
In fulfilling this, Amazon has gently expanded its brand over its 24 years to enable growth by diversifying across many industries and markets. Amazon’s expertise in the use of data and artificial intelligence to create a compelling customer experience, often termed the “amazon experience,” makes it a potential channel for nearly any industry if the products can be easily and digitally available and sold. You can witness Amazon’s market-awareness through the lens of its news.
In India, for example, Amazon recognizes both the lack of insurance penetration (3.7% in 2017) and the Digital India push, that are likely to soon open the floodgates of digitally enabled insurance opportunities. India will need digital solutions to handle large volumes of young families and consumers who lead busy lifestyles and are growing up in the knowledge of financial security. It is perfect for Amazon’s platform – and similar to what Alibaba did with Tencent and PingAn in China with the launch of ZhongAn, which offers insurance, embedded in Alibaba, becoming the first InsurTech valued at over a billion. Also in India, Amazon is investing in digital and platform startups, such as Acko, HouseJoy, BankBazaar, QwikCilver and Emvantage.
In the UK, Amazon has recently been asking European insurers about their interest in the creation of an insurance price comparison site.[ii] This step makes sense for the UK, a geography with insurance maturity that has had a plethora of digital, online brands and comparison sites emerge over the last 10-20 years. According to a CNBC article, this move also makes sense in light of Amazon’s interest in facilitating financial transactions. According to Zacks Equity Research, Amazon is also responding to the expected growth of the digital insurance platform market — estimated at 13.8% between 2018 and 2023.
In the US, Amazon’s footprint is larger, and it seems to have broad insurance interests. Its cooperative healthcare effort with Berkshire Hathaway and J.P.Morgan in the U.S., and its interest in further in-home device development, signals that any segment of the industry could be an area of market development. [iii]
InsurTechs like Lemonade, Slice and Ladder that are embedding their business into other markets are taking a page out of Amazon’s playbook, making it easy for people to find and buy insurance. While Amazon’s potential for penetration into insurance will need to consider regulatory requirements, its brand recognition and customer experience will be its strength. In our consumer and SMB research, we found nearly an 80 point differential in net promoter scores (NPS) between insurance and Amazon. And according to statistics from a recent J.D. Power survey, 1 in 5 consumers say they would use Google or Amazon for Home Insurance. The numbers climb for Millennials — 33% say they would have interest in using Amazon to insure their homes.[iv]
Home is Where Alexa Lives (Shouldn’t Insurers Live There, Too?)
Now we turn to the crux of the matter: digital channels. When we say that Amazon is poised to get into insurance, what we’re seeing initially is a move to open new channels for digital insurance distribution. This is specifically what they are doing in India. There is the possibility that Amazon could pick up other portions of the insurance value chain, such as claims, leveraging their infrastructure and capabilities to improve operational efficiencies and enhance the supply chain management perspective of claims.
Amazon’s forte will always lie in facilitation. Its Echo devices, with its Alexa personality, are home portals into a digital retail landscape. Alexa is a storefront without a screen, bundled with valuable informational insights, similar to Apple’s Siri. The Echo has impressive market share; it accounts for 70% of intelligent assistant devices sold.[v] A number of US based insurers and technology companies are already actively embracing Alexa in different parts of the insurance value chain – from paying the bill to service and claims. Could Alexa be your company’s next BFF?
This is what Digital Insurance 2.0 is all about — creating a new business model, process and products that are digitally enabled across any channel or ecosystem player. The easier a channel is for the customer, the more the insurer should want to be there. Channels will always be shifting and changing. It is the Digital Insurance 2.0 insurers that will be able to rapidly adapt to the changing market dynamics. The sooner insurers begin to redefine their business around the Digital Insurance 2.0 model, the sooner they will position themselves for a future, removing some of the competitive fear of being left behind.
In the age of Digital Insurance 2.0, participating in ecosystems, embracing a multi-channel world and focusing on customer expectations and experience is mandatory. Amazon fits well in this scenario — being an insurance facilitator, channel option and digital platform. Amazon’s UK interest in multi-insurer comparisons makes perfect sense — leveraging their platform and creating another revenue stream if it receives a percentage on every policy purchase. The question is … are insurers ready to plug their products, services, pricing and even claims processes into Amazon’s platform and pipeline to reach a growing majority of consumers?
On the back end of the relationship, insurers are going to want to be “friends” with Amazon’s ecosystem. Amazon is just one of many companies that are using new technologies and devices to communicate and engage customers in all aspects of their lives. Smart devices touch every line of insurance, from health to life, auto and property. And as preventive risk management becomes just as commonplace as protective cover, Digital Insurance 2.0 will enable insurers to offer value-added services and partner with companies offering services that align to this high interest area by customers – with up to 80% interested in value added services based on our most recent consumer and SMB research.
Every insurer stands to benefit from Amazon’s platform and ecosystem – they just need to determine the right approach and begin to move to a Digital Insurance 2.0 model. Why? Because Digital Insurance 2.0 is built on a platform and ecosystem to extend reach to customers where, when and how they want to engage — dynamically in real-time. This is where the Majesco’s Digital1st EcoExchange is focused, to provide a platform for insurers to dynamically plug and play with new channels, embed in other platforms, and use new data and capabilities to create a personalized customer experience. So, the question is … Will you be ready to offer your products and services on a platform? Will you be ready to provide dynamic, real-time quoting? Will you be ready to create personalized customer experiences?
Digital is Bigger than Amazon
Digital Insurance 2.0 insurers, prepared to use technologies like mobile, social, AI, IoT, cloud platform and others to their best advantage, will strategically position themselves to reach and engage in areas that Amazon currently doesn’t touch. Today, Amazon can merely become a partner, player or competitor. No matter what Amazon does, digital innovation will benefit insurers. If Amazon is a partner, a Digital Insurance 2.0 framework will help the business utilize Amazon’s channel to compete and to serve. If Amazon is a competitor, a Digital Insurance 2.0 framework will be helping your organization to reach all of those markets and opportunities untouched by Amazon and to compete more effectively in the markets in which they operate.
The constant in the equation is digital preparedness. The most effective response, therefore, is organizational and platform transformation so that Digital Insurance 2.0 becomes part of an insurer’s everyday DNA foundation. To take your next step toward Digital Insurance 2.0, be sure to read Majesco’s thought-leadership report, Future Trends 2018: Catalyzing the Shift to Digital Insurance 2.0.