What Amazon's Insurance Play Means

It's easy to imagine Amazon expanding beyond product liability and into other types of insurance for small businesses. For a lot of small businesses.


I've waited for years now to see how insurance might fit with Jeff Bezos' quote that "your margin is my opportunity." Amazon's announcement last week that it will help sellers find product liability insurance through a network facilitated by Marsh may provide the answer.

Assuming the product liability offering is popular -- and Amazon is relentless when pursuing new opportunities -- it's easy to imagine the company expanding into other types of insurance for small businesses. For a lot of small businesses.

Amazon currently has 1.9 million active sellers on its site, so offering product liability insurance could quickly give Amazon a massive base of small businesses that could be interested in buying other types of insurance through the company. Not all of those sellers will buy via Amazon, of course. Many don't meet the minimum level of sales ($10,000 a month) at which Amazon requires that they carry product liability insurance. Others will buy their insurance through other channels or are already covered by general liability policies. But what Amazon is calling its Insurance Accelerator could easily become the starting point for hundreds of thousands of small businesses purchasing product liability insurance.

Those customers will find it easy to buy, because the insurance offering will be embedded in the services that Amazon already provides sellers digitally. Those buying the insurance through Amazon will also benefit from the sort of simple, intuitive interface that Amazon provides customers, as opposed to the more complex approach that most insurance companies and brokers employ.

So, why wouldn't those small businesses perk up if Amazon offered them workers' comp insurance for whatever warehousing and shipping operations they have? Perhaps some business interruption coverage, too? Once these small businesses start buying from Amazon, why not go all the way to a general liability policy, property insurance, key man insurance and everything else a small business might need?

Now, it's always possible that the Amazon Insurance Accelerator is just a fancy way of handing off leads to Marsh, in which case the arrangement could turn out to not be that significant. This would just be a way for Marsh to extend its already considerable reach and not the long-anticipated move by Amazon into insurance.

But using product liability as a launching point for a broad push into small business insurance fits the Amazon model of innovation going all the way to its beginnings. Bezos always hoped to build what he called an "everything store" but knew he needed to start small and thus began merely as a bookseller in the mid-1990s. Once he had a foothold in electronic commerce, he expanded as fast as he could in every direction.

Amazon's approach to insurance also lines up with the model it has scaled to enormous success. Amazon is providing an interface but otherwise serving as a platform, using Marsh to pull together outside resources (insurers Chubb, Harborway Insurance, Hiscox, Liberty Mutual Insurance, Markel and Travelers, as well as technology from Bold Penguin and Simply Business to help match insureds to the right coverages).

It's even possible to imagine Amazon moving well beyond small business if this initial push succeeds as broadly as it could. Amazon doesn't shy away from complexity, so it could keep climbing the ladder, developing expertise that would let it serve ever-larger companies. Amazon could also move into personal lines, especially because many owners of small businesses don't see a clear demarcation between their corporate and personal lives.

"Customers are going to have other insurance needs," says Karnina Szymanski, president of insurance at Bold Penguin, which was acquired earlier this year by American Family Insurance. "I'm not in the head of Amazon... but I think the possibilities are endless."



Paul Carroll

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Paul Carroll

Paul Carroll is the editor-in-chief of Insurance Thought Leadership.

He is also co-author of A Brief History of a Perfect Future: Inventing the Future We Can Proudly Leave Our Kids by 2050 and Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years and the author of a best-seller on IBM, published in 1993.

Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.


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