Why Amazon failed in its bid to disrupt the price comparison market

Amazon’s brief foray into the insurance price comparison market came to an end last month - just two years after its launch. Unless you work in the insurance market, chances are that you never even knew Amazon attempted to get into this space.

Like most people, I’m a regular user of Amazon’s retail services – but I never once saw them try and cross sell me to their insurance comparison. I doubt we’ll ever see the final scorecard for how much they spent and how many customers they served – but I imagine the former number is large and the latter is embarrassingly small.

Right from Amazon’s entrance into this market, it felt like a misguided decision. The UK price comparison arena has been dominated by four businesses (Compare the market, Moneysupermarket, GoCompare, Confused) for the past two decades. And while it absolutely is a market that’s ripe for disruption, Google had already proved that you need much more than deep pockets and a big brand to shake things up.

Amazon’s main differentiator was that it required some minimum levels of cover for products to be listed on the site. But as I pointed out at the time, their minimum standards were not high enough – and the whole proposition was completely undermined by the fact that they started with only three insurance brands on the platform. By the end, they still only had five.

A missed opportunity

It's hard not to let off a little cheer when a large arrogant company spectacularly bombs in its efforts to enter a new market. But the UK price comparison market is in desperate need of some disruption – and it’s a disappointment to me that Amazon spent all that money and effort in such an unoriginal proposition.

The main problem with price comparison is that people struggle to understand what cover they need – and whether the products presented to them meet those needs. Instead, the incumbents continue to drive customers to focus on price, and provide them an enormous choice of brands – most of which they’ve never heard of.

Without getting close to the boundary of regulated advice, comparison sites could be doing so much more to find out what customers need and to help match them up with suitable products. Instead, their priority continues to be on closing the sale and keeping customer journeys as slick and fast as possible – safe in the knowledge that the majority of customers won’t make a claim, and even if they do, they’re unlikely to blame the comparison site when they wake up to the inadequacy of their cover.

Consumer duty should be catalysing change

The Financial Conduct Authority’s Consumer Duty rules, which came into force last July, should have acted as a wake up call for comparison sites. These regulations force all financial services businesses – comparison sites included – to prove they are working to deliver good customer outcomes.?

So far, however, there’s little evidence of any major change.?

I continue to believe that the next true disruptor in this space will be an app that supports customers in making better decisions – both in terms of cover and service – and pares back the amount of choice that customers have. People don’t want to look at a list of dozens of brands when they are searching for insurance. They want to see a limited number of choices that meet their needs – and understand what easy trade offs they can make on coverage and excesses in return for a saving on price.?

Buying insurance still feels too much like a hit and hope experience. There’s little chance of closing the widening expectation gap between what people are buying and think they are buying – without comparison sites, or a new challenger app, helping people make informed decisions.