The ripples from Amazon’s announcement that it was entering the UK insurance market with its own aggregator are still gently washing over the industry. I say ripples, because it was not
quite the shockwave that some in the industry have been holding their breath for ever since Big Tech first turned its attention to the market. As to how this involvement will develop is anyone’s guess, but insurers should take lessons from what Amazon
is doing, what it is not doing, and where the value to insurance customers truly resides.
As has been mentioned by many others, the move by Amazon to launch an aggregator in the UK is slightly odd. Whilst the FCA’s General
Insurance Pricing Practices rules are yet to spell the end of aggregators, they have certainly changed the role aggregators play in a market that has historically been very price driven. Comparison between insurers does still have its merits, however,
with the possibility that, unable to move much on price for similar products, insurers instead remove policy elements from their offerings to provide what looks like a better deal. Comparison sites can help on this.
This is something that the market should watch closely and there is certainly a need for insurers to provide greater education. Insurance literacy is decidedly
low, and the potential for insurance gaps to open due to the unwitting choices of consumers facing cost pressures is real. There are a couple of actions that insurers can take to help here. Firstly, insurance
terminology could be made clearer, given that the legalese that policy terms are often couched in can be a barrier to understanding. There is work being done on this already,
but a more concerted industry-wide approach would be welcomed. A cross-industry working group to establish standard, easy to understand language would be the best course of action; especially as the use of different terms by insurers for the same thing can
fuel more confusion. Another way insurance literacy can be improved is through insurers taking more proactive steps to educate their customers on what they are covered for and what they are not. This is important because poor understanding can (and will) lead
to insufficient insurance coverage with real world consequences when things go wrong. This kind of education initiative has been seen elsewhere in the financial services sector, such as NatWest’s efforts
to pass on digital skills to customers so that they can make efficient use of online banking and other services.
Another key area that insurers should address is playing a more proactive, interactive role in their customers’ lives. This takes us back to Amazon, and the many reasons that people think it could have such an impact on the insurance sector if it were to
make a more concerted effort to enter the market. An almost omnipresent brand; a deep understanding of its customers; extensive data analytics capabilities; a range of its own connected devices to which more and more of our homes, cars, and lives are connected;
Amazon has many tools at its disposal. What it does not have, however, is the deep industry expertise and historic data that insurers possess. Until such time that it does, insurers are relatively safe, but they should not sit on their hands and wait.
Creating the capabilities to leverage the many technologies and data insights that Amazon may also hope to take advantage of is well within the grasp of insurers if they put the correct systems in place. To do this, they need to leave their legacy systems
behind and make the change to smart core systems that are easily integrated with third-party data and devices and have built in analytics capabilities to elevate them to systems of insight.
If insurers take such a step, they can begin to add much more values to their customers’ lives through preventative measures that stop losses from happening in the first place. Leak
prevention, improving health
outcomes, and better home security are all use cases that we already see in the market today and are only going to become more prevalent. They are also services that customers are showing interest in and offer opportunities for insurers to differentiate
themselves on more than just the price paid for cover.
As insurers continue to contemplate the future of the industry, whether that includes Amazon or not, it is important that they do not get distracted and focus on the wrong things. Now is the time to double down on the benefits insurers deliver to their customers
and the meaningful value they can add.