Amazon in the UK has launched a new online store to sell home insurance, prompting executives from Canadian insurance companies and brokers to ask, “Could it happen here?”
“In my opinion, this is a turning point,” Intact Insurance CEO Louis Gagnon said Thursday during a panel discussion at the 2022 annual conference of the Insurance Brokers Association of Ontario (IBAO). “The distribution of financial products is becoming something very different now.”
Gagnon went on to say he was “a bit concerned” about the impact of Amazon’s entry into the distribution sector of the insurance industry, noting that Intact’s UK operations were preparing for it. for over a decade. But now that it’s happened, insurers in Canada should take notice, because Amazon is more than just a digital disruptor.
“In my opinion, Amazon [goes beyond] what is a digital actor… Amazon is a marketplace. Amazon is an ecosystem, not a digital game. If you look at who buys on Amazon, it’s everyone. So we’re talking about a whole other [distribution] approach.”
Gagnon said Intact’s UK operations had developed a strategy on how to respond to Amazon selling insurance. He said the move means insurers and brokers will need to be very clear with consumers about the products insurers offer, their branding, their value to consumers and where and how consumers can find the products to buy. .
In the United Kingdom, the new “Amazon Insurance Store” offers a basic home insurance product initially underwritten by three insurers (Ageas UK, Co-op and LV = General Insurance). Consumers can customize their home insurance policies by adding features and getting instant online quotes on the package cost if certain policy features are added or subtracted.
“All Amazon Insurance Store policies start with the same level of coverage, called the Amazon Standard of Cover, which includes protection for some of the most common home insurance claims,” as Amazon describes its home insurance offering at United Kingdom in a press release.
“In developing the Amazon Cover Standard, the company has conducted extensive research into the UK home insurance industry to determine which aspects of home insurance are most sought after by customers.”
Customers can add items to their home insurance policy if they want to go beyond basic coverage, according to Amazon. “Customers can compare quotes and further customize their policy in the areas that matter most to them,” the company explains.
“If a customer chooses to add to their policy, quotes are updated in real time to see how one insurer’s policy compares to others. Once a policy is selected, customers can pay using their preferred payment method on Amazon.
So, the question then becomes: will people buy their insurance products online with Amazon?
Some CEOs of Canadian insurance companies and brokerages are skeptical. According to them, financial products are complex and therefore not really suitable for the environment of online shops. Since consumers don’t really know how to interpret the language contained in their insurance policies, brokers have ample opportunity to provide advice, expertise or advocacy – it’s all part of their value proposition, said Matthew Turack, president of CAA Club Group Insurance.
“I wouldn’t buy my financial products from an Amazon store,” Turack said during the CEO panel. “Why? There’s no advice. There’s no consultation. I don’t have a personal relationship with Amazon.
“Great, I buy my stove and razor blades there, but I wouldn’t buy financial services products. I don’t trust him, I haven’t built a personal relationship with him, and he doesn’t give me advice.
“I’m not saying you can’t get advice online. I am saying that I need to establish a relationship with a broker, a financial adviser, to advise me on a very valuable product that I am going to buy. I think the broker channel continues to leverage that value…and to me, no online site will.
The Amazon news sparked new discussions among CEOs about the aggregator’s sales distribution model. Insurance aggregators are intermediaries that operate an online platform, whether hosted on a website or a mobile application, that compares prices and facilitates the underwriting of insurance on behalf of insurance companies .
Aggregators generally play a much larger role in the UK insurance market than in Canada. GlobalData’s 2021 UK Insurance Consumer Survey found aggregators to be the third largest distribution channel in the UK non-life insurance market, with a market share of 29.2%.
The role of online quotes is growing in Canada. “From 2008 to 2013, Canadian consumers getting insurance quotes online grew from 23% to 40%,” as a 2015 Deloitte report noted. That number could now be as high as 69%, according to a study referenced during the IBAO Roundtable by Definity Financial President and CEO, Rowan Saunders.
Of course, just because consumers get insurance quotes online doesn’t mean they buy the product online or through the aggregator channel, as Saunders observes. “Even today, 30% of transactions are not done solely through digital channels,” he said. “There is an indicative preference, but it is not followed.”
Carol Jardine, president of Canadian operations at Wawanesa Mutual Insurance Company, says she would hate for Canada to go the UK’s way, with more aggregators eclipsing the broker’s market share, which at around 60% is 1% higher than it was. 10 years ago, as the panel members observed.
To combat the rise of aggregators in Canada, brokers must ensure they add value beyond finding the best price for the consumer, which aggregators offer, CEOs observed.
“I worry about aggregators who are basically trying to commoditize insurance and do everything for price,” Jardine said. “When I see a question around Amazon in the UK, my first thought is, ‘Oh my God, please don’t let this happen here.
“I think it’s up to each of you as a broker whether you want to commoditize the product you’re selling, which is a strategic choice you could make, and it’s your choice. We do not want to trivialize insurance as a mutual [insurer].”
Jardine said Wawanesa’s strategy has been to pursue activities that enhance the value that brokers bring to the insurance transaction. This therefore means, among other things, offering personalized insurance products designed to meet the specific needs of clients, as identified by brokers, such as sustainability products.
It also means providing brokers with risk mitigation and prevention messages for consumers who want to reduce their risk of making a claim. This kind of value is not offered in the Amazon marketplace, as she observed.
Image courtesy of iStock.com/kasinv