10 Sep 2020
Posted in Coronavirus
Struggling insurers face another threat as Amazon gears up to enter motor insurance market, says GlobalData
Insurers around the world have endured an extremely tough 2020 due to the significant fallout from COVID-19, and they appear to face another unwelcome threat in the form of Amazon selling car and motorcycle insurance, says GlobalData, a leading data and analytics company.
Ben Carey-Evans, Insurance Analyst at GlobalData, comments: “The tech giant is launching it in India, but has an enormous global reach, and could eventually make it a strong competitor for incumbents around the world. Motor insurance has been one of very few product lines relatively unaffected by COVID-19 so far, with claims largely declining, due to people traveling less. However, insurers will not welcome the extra competition as vehicle sales are expected to decline in the wake of the pandemic, as consumers continue to work from home.”
Amazon’s entry into the insurance market will help shift consumer expectations about buying insurance products from non-traditional players. Large global tech companies such as Google, Amazon, and Facebook have enormous customer bases that they can leverage when selling insurance. However, consumers are still hesitant to purchase insurance from them. GlobalData’s 2019 UK Insurance Consumer Survey found that 62% of consumers would prefer not to purchase an insurance product from Amazon. Likewise, 63%, 66%, and 78% of consumers would not purchase insurance from Google, Apple and Facebook, respectively.
Yasha Kuruvilla, Insurance Analyst at GlobalData, comments: “Since customers are reluctant to purchase insurance from tech companies, partnering with a third-party provider is the better strategy, at least until they become recognized names in insurance. Amazon’s partnership with insurtech Acko rather than an incumbent also highlights the retailer’s desire to work with digital and agile companies. This will put added pressure on incumbents, not only due to the emergence of a new large entrant in the market, but also the need to digitalize if they want to work with tech companies in any other future insurance ventures.”