Thunderclap in the world of mass distribution: Amazon officially announces the takeover of Whole Food and kicks in the door of physical distribution. Three months later another news circulated, in the ranks of European insurers this time: this same American giant is actively recruiting a team of insurance professionals in London to operate in Western Europe. The new operation in partnership with an institutional insurer or real launch? For the market players, the question arises.
Why Amazon has chosen not to operate on its own before
A sector that offers good prospects but which also has major barriers to entry
Several times in recent years, the company has formed and broken partnerships to offer its clients insurance products.
- Amazon Protect began in 2016 in collaboration with The Warranty Group, enables the customer to get a guarantee expansion policy at similar goods ( TV, smartphone, etc.) at the time of purchase. control.
- Another collaboration with Allianz offers the customer an equipment replacement solution via Amazon in the event of a home disaster.
These forays into the insurance world remain strategically neutral from Amazon's point of view as the part of the contract honored remains close to its core business: product distribution.
As far as insurance is concerned, crossing the border of a simple partnership is not an easy task and the Seattle firm has understood this well. Constitution of substantial equity (in particular due to Solvency II ), compliance with increasingly important regulations ( GDPR, DDA, PRIIPS, etc.), and understanding of an inverted economic cycle. A set of complexities that has enough to discourage even the giants of the web and their unlimited means.
So what are Amazon's motivations for overriding this complexity?
- The first element of the answer, the financial aspect. Amazon's strategy has long been to grow its market share, often to the detriment of its margins. But investors are no longer as enthusiastic about this vision. A foray into an industry like insurance, where rates of return are known to be high, would be a welcome diversification.
- The second element of this investment decision: the company is recognized for the innovation it demonstrates in building its customer journeys and in the design of its services. So many assets that would give him the freedom to apply this skill in an industry that is slow to evolve.
Why is Amazon a competitor to be taken seriously?
- The Seattle firm excels where traditional insurers struggle. The example of cross-selling is the perfect illustration of this. While insurers have identified multi-equipment as the main lever for growth but find it difficult to transform the trial ( 2 contracts per insured in France on average ) Amazon announces that 35% of its sales are the result of cross-selling.
- Another advantage for the American giant over its future competitors: big data. This skill is today a key competitive advantage in all industries in which Amazon operates. And insurance will be no exception to the rule tomorrow. The field of possibilities in insurance is immense, and the use which is currently made of it is still only minimal. However, it is important to note that to process data efficiently it is necessary to have a large qualitative and organized database. But here again, Amazon is proving to be dangerous by being able to boast of customer knowledge and notoriety much greater than the majority of institutional insurers.
According to a GlobalData study, 18% of policyholders would be ready to buy their home or auto insurance from Amazon, a figure that gives an idea of the market share that insurers currently inactivity can expect to defend.
In the end, a project that is already well advanced ...
A taste of the industry through collaborations, strategic diversification that makes sense, and internal skills that perfectly match the expected evolution of the industry. Amazon lacks only the skills specific to insurance to quickly compete with the biggest names in the market. The wave of recruitments spotted, therefore, confirms that the project is already at an advanced stage of maturation on the side of Jeff Bezos' group. Does it remain to wonder who will be the next GAFAM to follow suit?