When hikers who have packed the wrong equipment see a storm front approaching, they can take comfort, knowing that the storm is still far away. They're confident that they can reach a shelter in time. But what if insurance companies are the hiker and Amazon is the bad weather?
Amazon is ambitious to offer customers financial and insurance products. This is a well-known fact. And through initial cooperative ventures, Amazon customers already have the option to purchase additional insurance coverage when they buy products such as electronics and household appliances. This looks like peaceful coexistence. The question is, how long this will continue?
Warning sign # 1: India
As an agile company (LINK TO OTHER BLOG POST), Amazon never rolls out new products globally, but first seeks out smaller target markets in order to gain experience. Amazon adopts whatever works and then begins to offer it in other regions as time goes on. As an e-commerce giant, Amazon is very active in the financial and insurance sectors in India. Now, some insurance managers may take comfort in thinking that the Indian subcontinent is far away from Europe. But Amazon's approach has far-reaching consequences. Amazon started out in India with a digital wallet and has gradually expanded its product portfolio over the past four years. This was followed by a credit card and investment offers. And now, Amazon is preparing to enter the insurance business. The company promises a savings of 80 percent over other policies. It was obvious that Amazon would not begin with a complex product like health insurance or life insurance right away. And so, the company is now offering motor vehicle and bicycle insurance directly via app in India. And while doing so, the company will certainly be collecting and analyzing data in order to improve the offering and to adapt it to other regions.
Warning sign # 2: Generation Z is open for technology providers
India is far away, and so is the United States. A customer survey was recently conducted in the US, and the results should at least create some discomfort for managers in the financial sector. Nine out of ten Generation Z customers said that they would open an account with a FinTech or a large (tech) company. Amazon (28 percent) appears to be the first choice, followed by PayPal (22 percent) and the supermarket chain(!) Walmart (22 percent). These young people indicated that they are especially attracted to what they consider to be better technology. Other surveys have shown that loyalty is no longer a top priority for today's customers. What is new, however, is the extent to which brands from outside the industry are now taking on the role of suppliers.
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Certainly, India and the USA are not Germany, and the German market follows its own rules. But in terms of customer experience and customer demand, both regions present the same picture: the dominance of the smartphone as the command center in the everyday life of users and a constantly growing share of e-commerce. Just like in Germany. And that is precisely why the insurance industry in Germany must take these two events seriously, even though they seem so far away.
It is not so much a question of the initial tiny market shares in the insurance business held by those outside the industry. What is at risk, rather, is a paradigm shift in customer perception, and ultimately, losing access to customers. And customers are most valuable asset that every market has to offer. Therefore, insurers must not relax their efforts to consistently align their strategies with changing consumer expectations.
Mobile devices play a central role in this strategy. The simplification of purchasing options and touchpoints as well as the continued development of products also have their role. Pay-per-use options and cooperation with complementary offers from insurers and FinTechs should also be considered, to name a few examples. Without accelerating the pace of digitization, the storm is likely to arrive sooner than companies expect it to.
