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Insurance industry already views Amazon.com as competition

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Insurance industry already views Amazon.com as competition

A new article marking the homeowners insurance business as a potential target of Amazon.com Inc. relied on an anonymous source and conceded to a lack of evidence that the online retail giant had made any definitive plans.

But the concept outlined in the article did not seem far-fetched on its face given Amazon's track record of disrupting industries and the proximity to the company's January announcement of a new partnership with JPMorgan Chase & Co. and Berkshire Hathaway Inc. to address the rising cost of healthcare for their U.S. employees — news that initially rattled shares of managed care insurers.

Prospects for the likes of Amazon and Google Inc. to enter insurance have long served as fodder for discussion in the industry, though it has been more than two years since the latter company decided to discontinue its Google Compare auto insurance aggregation site.

Barriers to entering insurance underwriting are considerably higher than aggregation, lead-generation or distribution. A new player could conceivably fast-track the process through an acquisition or partnering with an existing insurer to issue white-label products as certain technology-driven startups in the space have done: Homeowners products sold by an agency subsidiary of Berkshire's GEICO Corp. and underwritten and serviced by third parties like American Family Mutual Insurance Co. S.I.'s Homesite Group Inc. is one such scenario that comes to mind.

But a number of industry executives view the more immediate competitive threat posed by those entities on an entirely different plane.

"From a customer experience, every industry is competing with the 'born-digital' companies," said Lincoln National Corp. President and CEO Dennis Glass during a February appearance at an investor conference, echoing remarks he had made on multiple occasions over the years. "So the service expectations that we have in the life insurance business aren't being compared against [peer life insurers]. They're being compared against Amazon and Uber. ... Every company that's going to be successful over the long term has to elevate the customer experience to the same level as the 'born-digital' companies."

Christopher Swift, chairman and CEO of The Hartford Financial Services Group Inc., offered similar thoughts during an April conference call.

"With customers expecting us to provide digital service and capabilities similar to what they experience at other companies like Amazon, we must continue to build better digital interfaces for agents and policyholders," he said. "These investments will create faster turnaround times, reduce cost, improve ease of use and increase efficiency and customer service satisfaction."

While some in the industry have conceded that Amazon and its digital peers have a considerable headstart in creating that sort of seamless integration, existing homeowners insurers would have a first-mover advantage in various other ways. Amazon, for example, would hardly be the first company to offer discounts based on the policyholder's implementation of smart home technologies.

The June 6 article on The Information cited discounts of the sort as one way Amazon, which sells a range of smart home devices and systems, might attempt to make inroads in the business. It also notes that incumbents like Liberty Mutual Holding Co. Inc. already offer discounts based on the use of various smart home security devices. Product filings obtained by S&P Global Market Intelligence identify a range of similar discounts and initiatives underway among homeowners insurers.

Some homeowners insurers, including Liberty Mutual and United Services Automobile Association, have partnered with home telematics provider Roost. That company sells smart devices that monitor smoke alarm batteries, garage doors and water leaks to provide notification to homeowners to help them mitigate scenarios that could potentially trigger claims.

"We believe that Smart Home technology has great potential to prevent Homeowners claims and to mitigate the losses that do occur, in addition to other value-added services," said USAA in a series of product filings in late 2015.

It is doubtful that Amazon would ever become as bullish on selling insurance, particularly a catastrophe-exposed business like homeowners, as it is in furthering the ubiquity of smart home technologies. But it is a safe bet that the June 6 article will reignite the speculative discussion on the topic among its prospective competitors.