Online retailer Amazon is making a big leap into the insurance market. In the United States, the company launched the Amazon Insurance Accelerator, which helps protect customers from property damage or personal injury from defective products. The partners indirectly include the Munich reinsurer Munich Re and the wholesale broker Marsh.
The news is not well received on the boards of directors of major insurers. Because they have a lot of respect for the internet giants. Amazon, Google, Microsoft and Apple have huge amounts of data on their customers – and can manage it and come into direct contact with insurer customers. If you are interested in buying a house, Google can easily offer you building insurance; if you order a drone from Amazon, the online shipper will provide you with the appropriate liability coverage.
Amazon has already made several forays into insurance: The group works as an insurance broker in India. Along with Berkshire Hathaway and JP Morgan, the online retailer founded a health insurer in the United States in 2018, but it was disbanded again after three years. In addition, Amazon has a long history of offering warranty extensions with the help of insurers.
Compensation and related lawsuits are a big deal
But now it’s getting serious. Amazon directly interferes with the liability insurance of retailers. Anyone who buys a drill from Amazon and is injured because the machine is faulty wants to be compensated. The same is true if a defective toy causes a fire. Compensation and related lawsuits are a huge problem, not just in the United States. The insurance of companies against such claims is very current.
Amazon wants to facilitate the claim. Anyone who in the future has purchased a product through the online marketplace that causes damage can contact the group directly, and not the reseller who sold the goods as was the case before. Amazon will cover damages up to $ 1,000 without seeking reimbursement from the retailer. So far, this only applies to customers in the United States, but Amazon wants to expand the offering.
However, for the warranty to take effect, dealers must have taken out liability insurance. The group makes very specific specifications of what the policy should include. Among other things, the coverage must be at least $ 1 million, and the deductible that dealers must pay must not exceed $ 10,000.
To this end, the company has launched the Amazon Insurance Accelerator, a network of insurers through which Amazon offers liability insurance to retailers. The well-known companies Munich Re, Chubb and Hiscox are already participating. Wholesale broker Marsh has adjusted policies to Amazon specifications. With this, Amazon takes a big step in the direction of insurance brokerage and demonstrates its market power: the group sets precise rules on how insurers should behave.
Amazon wants to keep the strings in hand
Dealer insurers are expected to handle damage over $ 1,000 on their own. But Amazon reserves the right to recheck a claim if the insurer has refused payment. If the online giant is convinced that a claim payment is appropriate, it compensates the customer itself and then recovers the money from the insurer.
Even if a business doesn’t process a complaint quickly enough, Amazon can step in and handle the complaints itself. Insurers have 30 days to settle a claim. Amazon itself sets the standards for handling complaints, a critical part of the insurer’s business model.
Nonetheless, companies participate in the Insurance Accelerator: they rightly believe that they can gain a huge market for lucrative business with small and medium-sized businesses through Amazon. In return, they accept that they are only suppliers and that they must strictly adhere to Amazon’s rules.
One of the basic principles of the online retailer is to adapt developments and use proven technologies for other regions and offers. So it’s very likely that the team of Amazon boss Jeff Bezos will soon compete with the Insurance Accelerator in other countries – and expand the offering. Then policies for private customers and business offers that go beyond liability protection can be ordered with the click of a mouse.