Will Amazon mount an assault on the UK insurance sector?

The insurance industry is an extremely lucrative entity, and one that has benefitted from an increasingly diverse product range in recent times.

This market is also extremely competitive, with online giants Amazon said to be plotting an assault on the industry as it looks to extend its vast portfolio of interests.

We’ll explore this further in the article below, while asking whether Amazon can successfully conquer this space while also minimising its regulatory burden in the UK market.

What are Amazon’s plans?

According to Reuters, Amazon recently met with a number of major European providers to discuss its latest expansion plans.

The firm, which already has a partnership with The Warranty Group and offers co-branded credit cards in the UK and Germany, is committed to listing their financial services on a brand new price comparison site. Sources suggest that this could offer both home and motor insurance, potentially posing a considerable threat to existing competitors in the marketplace.

This would create a new, one-stop shop from which customers can buy products such as GAP insurance while also accessing savings on their home premiums.

The announcement of these plans saw an estimated £80 million wiped off the share value of Moneysupermarket, while the iconic Gocompare and Comparethemarket brands were also hit hard.

Aside from this, there’s a growing concern that Amazon’s entry into the market would put a squeeze on existing players, as the brand’s vast wealth and resources would enable it to accept considerable lower fees from insurers and create a dominant product.

Disruptive Amazon – but can it cope in a highly regulated insurance market?

This represents Amazon’s latest attempt to disrupt an established marketplace, with entrepreneurs across the globe intimidated by the corporations size and ambition.

Amazon has recently invested heavily in the groceries industry, for example, while also purchasing the rights to stream a package of 20 Premier League games from 2019.

Many have argued that this expansion is primarily motivated by a desire to garner more customer data, with the insurance sector offering incredible exposure. After all, an estimated 85% of Brits have used price comparison websites at some point in their lives, with this number likely to increase in the future.

Despite this, there are potential barriers to entering such a competitive and highly-regulated marketplace. After all, insurance firms are required to adhere to strict regulatory guidelines in the UK, which is one of the reasons why Amazon is looking to enter this market with a comparison site.

This means that the brand will enable its customers to access insurance products from a variety of providers through its platform, enabling it to avoid the highest level of regulatory burden and hefty capital requirements.

This would definitely increase the brand’s chances of succeeding and becoming profitable in the market, while it’s currently hard to imagine Amazon attempting anything that was ultimately unsuccessful.