Amazon Home Insurance’s Utility Questioned for Absence of Consumers Benefits

Amazon Expands Its Frontiers

Media outlets report that the involvement of Amazon in insurance may soon go beyond its health insurance project to include home insurance. This new project will reportedly complement the tech giant’s production of smart home devices. A report indicates that as at December 2016, Smart home devices were present in over 50% of homes in the United States which translated to about 21.8 million households.

Amazon’s next project in the insurance industry focuses on home insurance

Although it is settled that the tech giant plays a prominent position in the smart home sphere, sources claim that home insurance may not be as easy as Amazon currently believes and the tech company still has a long way before it can truly achieve its aim of disrupting and causing a positive change in the insurance industry.

Features of Amazon Home Insurance

Sources claim that cost reduction is one of the major features of Amazon home insurance. Reportedly, Amazon’s smart home devices are being marketed as more time efficient and cost-effective. Media outlets posit that if the price is as claimed, it will cost lesser than traditional insurance institutions. Insurance Information Institute in 2016 reported that over 30 percent of homeowners deemed homeowner’s insurance a burden financially. The institution, however, reported that some do not think price reduction will be a feature of Amazon home insurance.

Reports also indicate that Amazon’s smart home devices will give insurers access to a large mass of consumer data.  As noted by the founder and CEO of the 311 institute in London, Matthew Griffin, the devices will give insurers new insights into homeowners’ behavior and patterns.

He added that through the summation of all consumer data, insurers will have better insights into the behaviors and living patterns of individual in specific neighborhoods.  Analysts claim that this will make insurers more reactive rather than being proactive since they have insights that will help in detecting problems before they arise and how to fix them.

Amazon smart home devices will give insurers access to a large amount of consumer data

Rationales For Scepticism

Sources claim that one major reason for skepticism on Amazon’s involvement in insurance is the industry’s complicated nature.  Speaking on the nature of the industry, a member of the Insurance Information Institute representing Florida and a director of disaster response, Lynne McChristian stated that Insurance cannot be placed in a box and ship. He further mentioned that the industry stands among the most regulated in the U.S.  He added that if Amazon wants to get involved in insurance, the company has to work with different state regulators as insurance rules differ from state to state which is the reason why insurance companies often begin operation in a specific state and subsequently expand after mastering the original market.

McChristian further highlighted that financial backing will also stand as a major hindrance to Amazon’s entry into the insurance industry. He stated that the business of insurance requires upfront fund for settlement of anticipated claims and the business cannot be started without determining where the finances will flow from.  Observers of the insurance industry have also stated that this financial backing is a different ballgame for Amazon as it totally differs from their customary mode of operation.

Another issue that may arise is that the home insurance seeks to prevent or detect things that do not constitute the most costly insurance claims. Insurance Information Institute reported that between 2012 and 2016, bodily injury, fire and lightning, water damage, wind, and hail were the most costly injuries. Another research also showed that student loans also constituted high claims and the class of property damage, theft, and fraud which are the subjects of Amazon’s smart home device detection cost less to homeowners.

Media outlets suggest that most of what the tech giant has in the home insurance industry is basically name recognition, a large amount of consumer data and ability to effectively analyze the data.  Analysts indicated that if Amazon had a viable home insurance policy, it would be easy to use by the several American consumers currently running an Amazon prime premium membership.

Lynne McChristian mentioned that financial backing will be a major hindrance to Amazon’s home insurance

However, experts have expressly stated that the insurance scheme has sparse details which makes it difficult to see its benefit to the company itself and its potential consumers. Further, experts have opined that the best way for Amazon to launch into home insurance would be to partner with an institution that has a better understanding of the workings of the insurance industry.  According to Megna who works with Insurance.com, the project may just be similar to Google’s experiment with the sale of car insurance and so there is a need to wait for what Amazon has planned.

Even though sources claim that home insurance companies are unperturbed by Amazon’s declared intention in joining their industry, this has however been said to signify that changes will keep occurring in the insurance industry.