The BigTechs Amazon and Tesla to conquer the insurance market

Today we are here with Ermal Kopani to discuss the commercial movements by Big Tech toward the insurance market.

Today, traditional insurance companies do not have to fight only with historical competition, but also the BigTech multinationals that aim to take their market share.

It could be a new frontier or a new way of experiencing insurance for customers.

What do you think Ermal?

Amazon has also started its business in the UK insurance market in Europe, and this has certainly not gone unnoticed.

We know very well that Amazon has a large global user base, so its market penetration could be huge.

Furthermore, Amazon has digital means of communication that are superior to competitors in the traditional insurance market, just think of the fact that most of the purchases and communications with customers are made through the smartphone.

Today the smartphone is a tool for information, which has now become an almost natural extension of the human being.

With the ability to communicate directly through its Apps and gigantic customer contact list, Amazon could not only aggressively penetrate the market but could also have 

an easier life when it comes to education about those types of insurance products less known to the retail public.

We can take the example of the insurance extension on the sale of products, such as insurance following the purchase of a smartphone.

In 2020 alone, the company sold 100 million police forces in Europe  and penetration into the sector has only just begun.

Not only Amazon but also other BigTechs have an interest in the insurance market, we can take the example of Tesla, one of the most capitalized companies in the world in the automotive sector.

Tesla is not just an electric car manufacturer, but like all BigTechs, one of its pillars is data management.

Driving a car like a Tesla means not only using a luxury means of transport but also allowing the company to transmit an enormous amount of data. The data can be processed to create mathematical models that can have exceptional feedback in the insurance field.

We know that the insurance business is based on probabilistic models, where the premium paid by customers must always be higher than that paid for insurance damages.

Now let’s try to think about the forecasting power that Tesla can have in customer profiling, given the fact that even the driving data can be tracked, confiscated, and processed.

Based on Big Data, the company could have an excellent forecast impact on the possibility of a customer causing accidents, for example based on driving style, consequently paying the premium proportionate to the risk of the customer profile.

Furthermore, the automatic driving systems for cars that the company is improving more and more are certainly more predictable than humans because they are based on specific algorithms.

While the human factor may be more prone to the risk of the unpredictability inherent in human nature, software that drives instead of the human, programmed by the company itself, is certainly more predictable.

This could greatly improve the margins between costs and profits. And this is the beating heart of the entire insurance sector. The world is ready to see a digitized and BigData-related insurance industry.