June 2017, thunderbolt in the world of mass distribution: Amazon officially announces the acquisition of Whole Food, and pushes the door of entry of the physical distribution. Three months later, another started news circulating, 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. New operation in partnership with an institutional insurer or real launch? For the actors of the place, the question arises.

Why Amazon chose not to operate on its own before

Several times over the past few years, the company has formed and unwound partnerships to offer its clients insurance products. Amazon Protect, launched in 2016 in collaboration with The Warranty Group, allows the customer to purchase a warranty extension policy (5 years maximum) on affinity products (tablet, TV, smartphone, etc.) at the time of the purchase. Another collaboration with Allianz offers the customer an alternative to the equipment via Amazon in the event of an emergency.

These forays into the insurance world remain strategically neutral from Amazon’s point of view as the honored part of the contract remains close to its core business: product distribution. As far as insurance is concerned, crossing the border of mere partnership is not a sinecure, and the Seattle firm understands it. Considerable capital formation (in particular due to Solvency II), compliance with ever-increasing regulations (GDPR, DDA, PRIIPS, etc.) and understanding of an inverted economic cycle. A set of complexities that is discouraging even the giants of the web and their unlimited resources.

So what are Amazon’s motives for overriding this complexity?

First element of answer, the financial aspect. Amazon’s strategy has long been the growth of its market share to the detriment, often, of its margins. But investors are not so enthusiastic about this vision. An incursion into an industry like insurance, where rates of return are known to be important, would be a welcome diversification. Second element of this investment decision: the company is recognized for the innovation it demonstrates in the construction of its customer journey and the design of its services. All these assets would give him the freedom to apply this skill in an industry that is slow to evolve.

Why is Amazon a competitor to take seriously?

The Seattle firm excels where traditional insurers are struggling. The example of cross-selling is the perfect illustration. While insurers have identified multi-equipment as a main growth driver but have difficulties to transform the test (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 against its future competitors: big data. This skill is now a key competitive advantage in all industries in which Amazon operates. And insurance will not, tomorrow, be an exception to the rule. The field of possibilities in insurance is immense, and the use that is currently made is still minimal. However, it is important to note that to deal effectively with the data it is necessary to have a large qualitative and organized database. But again, Amazon is dangerous in being able to boast a customer knowledge and a reputation far more important than the majority of institutional insurers.

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