This Could Be Bigger Than E-Commerce for Amazon

From The Motley Fool:

Amazon has set its sights on the multibillion-dollar insurance industry in India. Bloomberg reports that the e-commerce giant wants to “carry out the business of soliciting, procuring and servicing insurance as a corporate agent” according to its latest filings with the regulatory authorities — a move that could disrupt the way insurance is sold in this market.

Amazon is clearly looking to boost the popularity of its e-commerce platform by adding yet another product to its offerings. But this time it’s targeting a large and underserved market that could help it mint big money in the long run.

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The Indian insurance industry is expected to be worth $280 billion by fiscal 2020 according to a joint survey by the Associated Chambers of Commerce and Industry of India and APAS. Even then, there will be a huge underserved market, as insurance penetration in the country was just 3.7% last year.

For comparison, India’s e-commerce industry is expected to hit $188 billion by 2025. As such, Amazon is going after a much bigger market, one that has the potential to grow at a solid pace in the coming years as penetration increases.

The Boston Consulting Group estimates that online insurance sales in India will increase 20 times from 2016 to 2020, hitting a size of just over $2 billion. That’s because a good chunk of Indians are now looking to buy insurance online rather than through traditional channels, since they can choose from a wide range of plans to suit their requirements and get the best available price by comparing different providers.

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Amazon started laying the groundwork for its insurance push in India earlier this year when it led a funding round for digital insurance start-up Acko. The start-up is providing insurance services for ride-hailing apps and other travel-centric areas such as flights. Rumors suggest that Amazon and Acko will eventually move to provide coverage for items sold on the e-commerce site, such as smartphones.

The bigger play for Amazon, however, will come once it applies for a license from the Insurance Regulatory and Development Authority and uses its digital payments platform, Amazon Pay, to roll out more insurance products. The e-commerce giant’s executives have already hinted that it is going to launch insurance products using the Amazon Pay platform, which is a smart thing to do as the company’s vast user base can buy insurance with just a click.

Amazon reportedly holds a 31.1% share of the Indian e-commerce market, and it is now targeting 70 million online shoppers in the country through Amazon Pay, providing financial services such as loans and EMIs (equated monthly installments). Amazon Pay already allows customers to book bus tickets, pay bills, purchase movie tickets, order food, or buy car insurance. The company also offers lucrative discounts and cash back to those customers who purchase items on its site using this platform in a bid to boost adoption.

Link to the rest at The Motley Fool

PG is anything but an expert on the Indian insurance business, but, on a world-wide basis, insurance is a huge (and profitable) business. OTOH, at least in the US, most insurance companies have a relatively low share of consumer awareness.

Amazon’s widespread name recognition and its reputation for innovation, low prices and good customer service would give it an immediate and substantial market advantage over traditional companies who don’t necessarily have that advantage. If/when Amazon enters the US personal lines insurance markets, PG would certainly investigate.

The other characteristic of insurance consumers is that, for a large proportion of them, insurance tends to be a set-and-forget purchase, providing an excellent long-term stream of reliable income.

7 thoughts on “This Could Be Bigger Than E-Commerce for Amazon”

  1. The Amazon is overflowing its banks again and this time the insurance field will get inundated.

    And yet elsewhere it is reported that the EU is determined to build strong dikes to try to control the flow. Who will win? The raging river or the bureaucrats?

    • If the dikes are not diligently maintained, the result is disaster; zB, New Orleans after Katrina. Same thing applies in law. Federal law prohibits Digital Audio Tape (DAT) because DAT gives the consumer to create a copy of master quality. This law is a relic of the ’80s. Do you think anyone cares anymore or that its prohibition prevents piracy?

  2. Because everyone knows Indians are bad drivers. And there are a lot of Indians. So that’s a lot of insurance policies.

    • A lot of that “bad driving” is more the environment. Cities that are severely congested – and were so long before the invention of the IC engine. Much like many of the older cities in the US, actually, which have higher accident rates than areas that were, for the most part, laid out after automobiles became ubiquitous.

      (As for Amazon getting into insurance here in the States – probably, eventually. But doing so is far more like trying to set up for fifty different countries, not just one.)

  3. Great! An insurance company with no physical presence, that has no phone number, and sends automatically-generated boilerplate responses to email enquiries.

    What could possibly go wrong?

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