Amazon.com Inc. should not expect automatic success in the already crowded U.K. insurance price comparison market, but incumbents also should not be complacent about the online retail powerhouse's potential entry.
Reuters reported Aug. 16 that Amazon had asked some of Europe's top insurers whether they would list their products on a U.K. price comparison website. While Amazon itself has been silent on the matter, the company has long been rumored to be seeking an entry into the insurance market. It already offers Amazon Protect product warranty insurance, underwritten by Assurant Inc. subsidiary Warranty Group Inc., and has reportedly filed applications to allow its Indian subsidiary to offer life, health and general insurance in the country.
'Sensible' entry point
If Amazon wants to break into the European insurance market, launching a price comparison tool for home and motor insurance in the U.K. "would make sense," according to UBS analyst Jonny Urwin.
"Brand and advertising are key in the [price comparison website] arena, clearly a key strength for Amazon," he wrote in an Aug. 16 research note.
Amazon is likely to be a fierce competitor in the insurance space from the get-go, said Canaccord Genuity analyst Simon Davies.
"If they decide to take the plunge, I imagine they will go in reasonably aggressively because, given the size of the company, there is no point just dipping their toe in the water," he said in an interview.
Because of the nature of its business, Amazon lacks the constraints that are thought to have contributed to the closure of Google's ill-fated Google Compare service in March 2016. Had Google promoted its price comparison services heavily in search results, it could have lost revenue from the other price comparison sites that pay to appear prominently on relevant Google searches. It could also have attracted negative attention from competition regulators.
Tough to crack
Although Amazon could be a powerful competitor in theory, it will still need to win over both the insurance buying public and the insurers and brokers that sell their products through price comparison sites. According to a survey of 1,319 people conducted in August by U.K. market research firm Consumer Intelligence, 42% of respondents said they would consider buying car insurance from Amazon and 43% said they would consider buying home insurance.
"While the entry of Amazon is undoubtedly a significant threat to incumbents, we would certainly say it's not a foregone conclusion," Phil Paterson-Fox, key account director at Consumer Intelligence, said in an email.
There are already four main price comparison sites vying for customers' attention in the U.K.: Moneysupermarket.com group PLC, GoCompare.com Group PLC, Admiral Group PLC-owned Confused.com and BGL Group Ltd.-owned Comparethemarket.
Paterson-Fox said Amazon may be able to use its existing customer data to make quotes quicker and easier. As a retailer, Amazon "may also be willing to accept lower margins and pass that benefit onto consumers," he said. However, the given that there are already a number of incumbent sites, getting consumers to "invest time" in yet another option could be difficult as one of the attractions of price comparison tools is that they cut down on the use of multiple applications.
Although insurers and brokers could welcome another competitor in the price comparison market, as it could lower the fees they pay, "managing another mainstream [price comparison website] is a very real cost to insurers," Paterson-Fox said. The recent failure of Google and others to crack the price comparison market may give some companies pause.
"Those failures will have cost insurers time and money and will not be a mistake they will want to repeat. So not all insurers may be keen to participate — initially at least," Paterson-Fox said.
The advent of price comparison has pushed down prices and eaten into insurers' profit margins; it is an open question as to whether the industry would want to encourage a very aggressive competitor who could create more pricing pressure, said Canaccord's Davies.
Though Amazon would face challenges in the space, it cannot be dismissed, according to Davies.
"It is certainly not guaranteed that they will be successful," he said. "But if you are looking around at people you would rather not be competing with, Amazon would certainly be on the list."
