Why Amazon Doesn’t Care About Your Insurance Offering

Summary: Traditional products such as Property Insurance are of little interest to companies like Amazon. New products such as Brand Insurance, Live Parcel Insurance or Cyber Recovery Service might be of more interest.

Previously, I argued that Commercial Insurers are opening themselves up for disruption by catering for the ‘Old Generation’ of clients, while neglecting the ‘New Generation’.

Property Insurance: Amazon vs Walmart

Let’s dig into the reasons behind why newer companies might not be very well catered for. Walmart is a big buyer of property insurance and it is not difficult to see why, property (worth $117bn in 2016) accounts for whopping 53% of its market capitalisation ($221bn in 2016). If we compare this to Amazon, property ($29bn in 2016) accounts for only 7% of its market capitalisation ($427bn in 2016).

If you were an Amazon executive, how much time would you spend worrying about your Property insurance? Probably not a lot.

What Insurance Would Amazon Care About?

So, the natural question is: what would Amazon care about? Let’s consider some things that might be more valuable to them: it might be their branding, logistics network or IT reliability. What could these products look like?

1)  Brand Insurance - a product which will aggregate data from social media and the press and create a Brand Index, which will compensate Amazon if they fall below a certain threshold.

2)  Live Parcel Insurance – an insurer can plug into Amazon’s logistics data and provide live insurance for every parcel ever delivered – if it gets delayed or lost, Amazon gets paid.

3)  Cyber Recovery Service – if Amazon gets hit by a cyber-attack, they might not care much about the monetary pay out (as they have over 2x cash vs Walmart), but they might instead care about recovery, contingency and reputation management.

This is the kind of thinking Insurers need to do to make sure that they are still relevant for the new generation of companies.