Will Amazon truly shake up the homeowners’ insurance market?
![Amazon Home Insurance Robot](https://www.gethomeinsurancequotes.com/blog/wp-content/uploads/2018/06/amazon-home-insurance-robot-600x400.jpg)
Amazon is heavily invested in developing robots for the home as well as other smart home products. The robots they are developing will be able to wander around your house performing a variety of tasks, one of which is searching for safety issues.
A recent report from The Information, a technology centered website, found that Amazon may be getting into the home insurance market. While it seems like a long-shot and the report concluded that Amazon currently has no plans to start offering homeowners insurance, the mere prospect of the e-commence giant joining the industry sent the stocks of major insurance companies down.
Amazon Would Probably Start Small
Major insurance companies probably have little to fear from Amazon entering the homeowners marketplace, at least at first. The most likely scenario, should Amazon decide to actually get into the homeowners insurance game is that they would start small with simple policy offerings.
“If Amazon does offer home insurance, it would probably start small with simple, bare-bones” coverage,” Joshua Shanker, a Deutsche Bank AG analyst, said at a recent insurance industry conference.
While the odds of Amazon getting into homeowners insurance seem relatively small at this point, if it does decide to jump in it could be a lucrative move. According to data from the National Association of Insurance Commissioners, insurers in the U.S. and Canada took in roughly $92 billion in homeowners insurance premiums last year.
Why Amazon is Interested in Insurance
Amazon is heavily invested in developing robots for the home as well as other smart home products. The robots they are developing will be able to wander around your house performing a variety of tasks, one of which is searching for safety issues.
The robots may be equipped with sensors and cameras that could detect carbon monoxide, smoke, heat or even loud noises such as a window breaking. The thinking is that the robots could help detect issues early or when the homeowner is gone, possibly preventing a fire or burglary. This keeps a home safer, hopefully resulting in fewer claims, allowing Amazon to offer cheaper insurance products.
Big Hurdles for Amazon
Despite the potential for big sales, there are also major hurdles to getting into the homeowners insurance game. Here are just a few challenges to Amazon selling insurance.
- Regulation: Insurance is a heavily regulated industry and if Amazon decides to enter it they will be subject to a variety of new regulations. Compiling with the various requirements, that differ by state would be both a challenge and most likely a deterrent to Amazon getting into the insurance business.
- Customer Loyalty: While Amazon is an extremely well known brand, customers tend to be fairly loyal to their insurance company. Insurance is complicated and there may be a fear among potential customers that Amazon may lack the expertise to deal with customer claims.
- Industry Data: Insurers rely on decades of data and statistics to price risk, data that Amazon does not have, making it more difficult for them to accurately price policies.
- Earnings Volatility: Insurance is a volatile industry with earnings taking a huge dip when there is a major storm or other disaster that results in thousands of claims.
The Most Likely Scenario
Most industry experts predict that Amazon would start out as an insurance brokerage if they decide to get into the insurance market at all. They could help guide their customers to existing insurance products and earn money from referrals.
This would give them a start in the insurance industry without all of the regulation and hoops to jump through. Regardless of how it gets started in the insurance world, the name recognition and trust that Amazon enjoys will certainly be a major advantage.