What’s Stopping Amazon From Becoming An Insurer?

PALM BEACH, Fla. - In the not-too-distant future, the life insurance industry could be challenged by companies that have never sold a life or annuity contract in the past. That was the word from Prudential’s top customer executive.

The companies most likely to challenge insurers would be those with access to tens of millions of customers, said Naveen Agarwal, Prudential senior vice president and chief customer officer. He spoke at today's session of the Insured Retirement Institute annual conference at The Breakers.

Agarwal joined Prudential from Silicon Valley two years ago. He gave some possible contenders for challengers in the life insurance space.

Apple, which launched the iPhone in 2007, has been in people’s pockets for 10 years.

When the company recently launched Apple Pay, the company also ended up in people’s wallets.

In Amazon’s case, the giant retailer is lending to small and midsize businesses, and the question now is what is stopping Amazon from becoming a bank, or perhaps an insurer?

“Could Amazon get there? Absolutely,” Agarwal said.

What if self-driving car manufacturers begin to insure the cars and the software that guides cars to their destination?

One of the biggest threats to insurance distribution is to ignore reality, he said.

Internet advisory algorithms known as roboadvisors are here to stay.

The question isn’t whether roboadvisors will supplant flesh-and-blood advisors, but how the data algorithms are integrated into advice dispensed by traditional advisors.

To retain a client family, traditional advisors are traditionally used to serving the head of household, but the children will be more familiar with and prefer to use an investment website.

Advisory practices need to prepare to serve both preferences living under the same roof, Agarwal said.

Data warehouses where billions of bits of product and customer information are stored have generally not worked, he said.

Some pieces of data are far more important than others and only 10 percent or 15 percent of variables account for the majority of the information that insurers use for underwriting and pricing.

Age, gender and whether a person smokes – just three variables – account for 90 percent of mortality information used to underwrite and price a life insurance contract, he said.

 

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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