Opening my LinkedIn feed some days ago and I couldn’t help but notice it seems everyone is getting into the insurance business.
The first one I saw was Amazon, who has begun to offer auto-insurance in India through their Amazon Pay platform. Amazon had previously invested in Acko (back in 2018) and now seem to be expanding their involvement, with this new insurance offering.
Amazon isn’t the only tech conglomerate interested in insurance. Google bought an insurance aggregation site in the UK (in 2011) and one in the US (in 2015) but it seemed it eventually backed out. However, in 2019, along with Amazon and Apple, there was talk of trying to disrupt the health insurance marketplace. Maybe these companies decided to put this on the back burner. But with all the holes in the health insurance system being revealed during the pandemic, they may eventually pick the idea back up.
And then there’s Tesla. It’s no surprise that Elon Musk has decided to take in house the insurance for his electric vehicles. He has always been a break the mold kind of guy. In 2019, Musk announced his hopes to reduce the cost of insuring a Tesla by 20-30% in the United States by offering an in-house option. And now, he is expanding in China and ramping up coverage in Europe.
What is driving this trend?
You don’t have to be an insurer to know that insurance is a complicated business that requires complicated processes, not to mention the regulations that go along with it. It’s not as easy as creating a website and voila, you’re in business.
Technology makes the world go around
There are several reasons for the trend, but first and foremost is the technology. Digitalization in the insurance world has accelerated in the past few years. Automation for processes, underwriting, and artificial intelligence has moved insurance from its manual model to a new sleek one. This is evident in companies like Lemonade in P&C or Ladder in the life insurance sphere. With technology in hand, processes which once took weeks can now churn out a policy in 15 minutes or less.
Amazon already has great technology as part of their core businesses. They understand how to harness it to roll out new products connected to that core. Add ‘Insuretech’ and the increasing digitization of insurance services to the mix and you’ve got a winning formula.
Consumers Demand More
Digitilization in insurance has also been driven by customer expectations, a place where Amazon and Google have set the ‘gold’ standard. These two companies, along with digital savvy entrepreneurs know where and how to meet their prospective customers. Once the customers are there, the experience is customized and painless. People looking to buy insurance expect the same experience and level of personalization.
Insurance products and the services that support them are being commoditized. You want easy on-boarding? Strong, responsive customer service? Digital access to information? There’s an app for that (or a solution) for all this and more. It’s there because the customers now demand it.
One Stop Shop?
Today’s busy consumers like to multi-task to save time. This is where Tesla steps in. You can now buy your car and your car insurance. Your insurance can be tailored to you on the spot giving you the best policy based on individual factors rather than a generic risk set.
You don’t have to be Amazon or Tesla to harness the power of technology such as the cloud, digital portals and customized customer service. So, who will be next in line? And how will these initiatives revolutionize the insurance industry? Stay tuned to see who else might join the club…